Question

STANDARD COSTING

MULTIPLE CHOICE

1. A primary purpose of using a standard cost system is
   1. to make things easier for managers in the production facility.
   2. to provide a distinct measure of cost control.
   3. to minimize the cost per unit of production.
   4. b and c are correct.

2. The standard cost card contains quantities and costs for
   1. direct material only.
   2. direct labor only.
   3. direct material and direct labor only.
   4. direct material, direct labor, and overhea

3. In a standard cost system, Work in Process Inventory is ordinarily debited with
   1. actual costs of material and labor and a predetermined overhead cost for overhead.
   2. standard costs based on the level of input activity (such as direct labor hours worked).
   3. standard costs based on production output.
   4. actual costs of material, labor, and overhea

4. A large labor efficiency variance is prorated to which of the following at year-end?

        WIP     FG

Cost of Goods Sold Inventory        Inventory

1. no              no         no
2. no              yes        yes
3. yes             no         no
4. yes             yes        yes  

5. At the end of a period, a significant material quantity variance should be
   1. closed to Cost of Goods Sold.
   2. allocated among Raw Material, Work in Process, Finished Goods, and Cost of Goods Sold.
   3. allocated among Work in Process, Finished Goods, and Cost of Goods Sold.
   4. carried forward as a balance sheet account to the next perio  

6. When computing variances from standard costs, the difference between actual and standard price multiplied by actual quantity used yields a a. combined price-quantity variance.
   2. price variance.
   3. quantity variance.
   4. mix variance.  

7. A company would most likely have an unfavorable labor rate variance and a favorable labor efficiency variance if
   1. the mix of workers used in the production process was more experienced than the normal mix.
   2. the mix of workers used in the production process was less experienced than the normal mix.
   3. workers from another part of the plant were used due to an extra heavy production schedule.
   4. the purchasing agent acquired very high quality material that resulted in less spoilage.
8. If actual direct labor hours (DLHs) are less than standard direct labor hours allowed and overhead is applied on a DLH basis, a(n)
   1. favorable variable overhead spending variance exists.
   2. favorable variable overhead efficiency variance exists.
   3. favorable volume variance exists.
   4. unfavorable volume variance exists.  

9. The standard predominantly used in Western cultures for motivational purposes is a(n) ____ standard.
   1. expected annual
   2. Ideal
   3. Practical
   4. Theoretical  

10. Which of the following standards can commonly be reached or slightly exceeded by workers in a motivated work environment?

Ideal            Practical          Expected annual

1. no        no             no
2. no        yes            yes
3. yes       yes            no
4. no        yes            no

           

11. A company has a favorable variable overhead spending variance, an unfavorable variable overhead efficiency variance, and underapplied variable overhead at the end of a period. The journal entry to record these variances and close the variable overhead control account will show which of the following?

VOH spending          VOH efficiency         

variance    variance           VMOH

1. debit            credit       credit
2. credit           debit        credit
3. debit            credit       debit
4. credit           debit        debit   

12. Bailey Corporation. incurred 2,300 direct labor hours to produce 600 units of product. Each unit should take 4 direct labor hours. Bailey Corporation applies variable overhead to production on a direct labor hour basis. The variable overhead efficiency variance a. will be unfavorable.
    2. will be favorable.
    3. will depend upon the capacity measure selected to assign overhead to production.
    4. is impossible to determine without additional information.

13. A variable overhead spending variance is caused by
    1. using more or fewer actual hours than the standard hours allowed for the production achieved.
    2. paying a higher/lower average actual overhead price per unit of the activity base than the standard price allowed per unit of the activity base.
    3. larger/smaller waste and shrinkage associated with the resources involved than expected.
    4. both b and c are causes.   

14. Which of the following are considered controllable variances?

VOH spending Total overhead budget            Volume

1. yes                yes              yes
2. no                 no               yes
3. no                 yes              no
4. yes                yes              no  

15. A company may set predetermined overhead rates based on normal, expected annual, or theoretical capacity. At the end of a period, the fixed overhead spending variance would a. be the same regardless of the capacity level selected.
    2. be the largest if theoretical capacity had been selected.
    3. be the smallest if theoretical capacity had been selected.
    4. not occur if actual capacity were the same as the capacity level selecte

16. The variance least significant for purposes of controlling costs is the
    1. material quantity variance.
    2. variable overhead efficiency variance.
    3. fixed overhead spending variance.
    4. fixed overhead volume variance.

17. Fixed overhead costs are
    1. best controlled on a unit-by-unit basis of products produced.
    2. mostly incurred to provide the capacity to produce and are best controlled on a total basis at the time they are originally negotiated.
    3. constant on a per-unit basis at all different activity levels within the relevant range.
    4. best controlled as to spending during the production process.  

18. The variance most useful in evaluating plant utilization is the
    1. variable overhead spending variance.
    2. fixed overhead spending variance.
    3. variable overhead efficiency variance.
    4. fixed overhead volume variance.  

19. A favorable fixed overhead volume variance occurs if
    1. there is a favorable labor efficiency variance.
    2. there is a favorable labor rate variance.
    3. production is less than planned.
    4. production is greater than planne  

20. The fixed overhead application rate is a function of a predetermined activity level. If standard hours allowed for good output equal the predetermined activity level for a given period, the volume variance will be a. zero.
    2. favorable.
    3. unfavorable.
    4. either favorable or unfavorable, depending on the budgeted overhea d

Answer 1

1. Option,to provide a distinct measure of cost control.

2. Option, direct material, direct labor, and overhea d

3. Option, standard costs based on production output.

4.Option, debit            credit       credit

5. Option,will be favorable.

6. Option, both b and c are causes.   

7. Option,yes                yes              no  

8. Option,a. be the same regardless of the capacity level selected.

9. Option,fixed overhead volume variance.

10. Option,mostly incurred to provide the capacity to produce and are best controlled on a total basis at the time they are originally negotiated.

11. Option, fixed overhead volume variance

12. Option, production is greater than planned

13.Option, zero