Question

1.

Price (rate) variance is:

a.the difference between the actual and standard unit price of an input multiplied by the standard input.

b.the difference between the actual and standard unit price of an input multiplied by the number of inputs used.

c.the difference between the actual and standard input used multiplied by the standard unit price of the input.

d.the difference between the actual and standard input used multiplied by the actual unit price of the input.

2.

Which of the following equations is used to determine standard hours allowed?

a.Standard Hours Allowed = Unit Labor Standard × Actual Output

b.Standard Hours Allowed = Unit Labor Standard × Standard Output

c.Standard Hours Allowed = Unit Labor Actual × Standard Output

d.Standard Hours Allowed = Unit Labor Actual × Actual Output

3.

Which of the following variances is the difference between actual fixed overhead and budgeted fixed overhead?

a.The fixed overhead spending variance

b.The fixed overhead efficiency variance

c.The fixed overhead volume variance

d.The fixed overhead capacity variance

4.

Material usage variance is:

a.the difference between actual and standard price multiplied by actual input.

b.the difference between actual and standard input multiplied by standard price.

c.the difference between actual and standard input multiplied by actual price.

d.the difference between actual and standard price multiplied by standard input.

5.

Gamma Inc. manufactures Product X using a single raw material. The standard quantity of input for the month of February was 3,000 units of raw material for 1,000 units of Product X. The actual output for the month of February was 1,500 units. Compute the standard quantity of raw material for actual output (SQ) of Product X.

a.1,500 units

b.1,500 units

c.4,500 units

d.3,000 units

6.

Which of the following is true of control limits?

a.Control limits identify variances that fall outside an acceptable range.

b.Control limits should be based only on past experience and intuition.

c.The lower control limit is the standard plus the allowable deviation.

d.The upper control limit is the standard minus the allowable deviation.

Answer 1

1. Price rate difference is the difference between the actual and standard unit price of an input multiplied by the actual number of inputs used.

Therefore, option b is the correct answer.

2. Standard hours allowed is the number of hours of production time that should have been used during an accounting period, which is based on the actual number of units produced, multiplied by the standard hours per unit.

Therefore, option a is the correct answer.

3. The fixed overhead spending variance is the difference between actual and budgeted fixed overhead costs.

Therefore, option a is the correct answer.

4. Material usage variance is the difference between actual and standard input multiplied by standard price.

Therefore, option b is the correct answer.

5.

First of all we need to calculate standard quantity of Raw Material per finished goods

Standard quantity of Raw Material per finished goods = Total units Raw Material Used/Total Finished goods

= 4,500/1,500 = 3 units

Standard quantity of raw material for actual output (SQ) of Product X = Actual Quantity * Standard quantity of Raw Material per finished goods

=1,500 units * 3 =4,500 units

Therefore, option c is the correct answer.

6. Control limits are used to detect signals in process data that indicate that a process is not in control and, therefore, not operating predictably.

Control limits, also known as natural process limits, are horizontal lines drawn on a statistical process control chart, usually at a distance of ±3 standard deviations of the plotted statistic from the statistic's mean.

Therefore from above definition it is clear that control limits identify variances that fall outside an acceptable range.

Therefore, option a is the correct answer.