ACC 560 Week 8 Quiz

ACC 560 Week 8 Quiz – Strayer NEW

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Week 8 Quiz 7: Chapter 11

TRUE-FALSE STATEMENTS

1. Inventories cannot be valued at standard cost in financial statements.

Ans: LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

2. Standard cost is the industry average cost for a particular item.

Ans: LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

3. A standard is a unit amount, whereas a budget is a total amount.

Ans: LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

4. Standard costs may be incorporated into the accounts in the general ledger.


5. An advantage of standard costs is that they simplify costing of inventories and reduce clerical costs.


6. Setting standard costs is relatively simple because it is done entirely by accountants.

Ans: LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Decision Modeling, AICPA PC: None, IMA: Cost Management

7. Normal standards should be rigorous but attainable.


8. Actual costs that vary from standard costs always indicate inefficiencies.

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Standard Costs and Balanced Scorecard


9. Ideal standards will generally result in favorable variances for the company.


10. Normal standards incorporate normal contingencies of production into the standards.


11. Once set, normal standards should not be changed during the year.


12. In developing a standard cost for direct materials, a price factor and a quantity factor must be considered.



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13. A direct labor price standard is frequently called the direct labor efficiency standard.


14. The standard predetermined overhead rate must be based on direct labor hours as the standard activity index.


15. Standard cost cards are the subsidiary ledger for the Work in Process account in a standard cost system.


16. A variance is the difference between actual costs and standard costs.


17. If actual costs are less than standard costs, the variance is favorable.


18. A materials quantity variance is calculated as the difference between the standard direct materials price and the actual direct materials price multiplied by the actual quantity of direct materials used.


19. An unfavorable labor quantity variance indicates that the actual number of direct labor hours worked was greater than the number of direct labor hours that should have been worked for the output attained.


20. Standard cost + price variance + quantity variance = Budgeted cost.


21. The overhead controllable variance relates primarily to fixed overhead costs.


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22. The overhead volume variance relates only to fixed overhead costs.


23. If production exceeds normal capacity, the overhead volume variance will be favorable.


24. There could be instances where the production department is responsible for a direct materials price variance.



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25. The starting point for determining the causes of an unfavorable materials price variance is the purchasing department.


26. The total overhead variance is the difference between actual overhead costs and overhead costs applied to work done.


27. Variance analysis facilitates the principle of "management by exception."


28. A credit to a Materials Quantity Variance account indicates that the actual quantity of direct materials used was greater than the standard quantity of direct materials allowed.


29. A standard cost system may be used with a job order cost system but not with a process cost system.


30. A debit to the Overhead Volume Variance account indicates that the standard hours allowed for the output produced was greater than the standard hours at normal capacity.


31. In concept, standards and budgets are essentially the same.


32. Standards may be useful in setting selling prices for finished goods.


33. The materials price standard is based on the purchasing department's best estimate of the cost of raw materials.


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34. The materials price variance is normally caused by the production department.


35. The use of an inexperienced worker instead of an experienced employee can result in a favorable labor price variance but probably an unfavorable quantity variance.


36. In using variance reports, top management normally looks carefully at every variance.

Ans: LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

37. The use of standard costs in inventory costing is prohibited in financial statements.



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a38. The overhead controllable variance is the difference between the actual overhead costs incurred and the budgeted costs for the standard hours allowed.


MULTIPLE CHOICE QUESTIONS

39. What is a standard cost?a. The total number of units times the budgeted amount expectedb. Any amount that appears on a budgetc. The total amount that appears on the budget for product costsd. The amount management thinks should be incurred to produce a good or service


40. A standard cost isa. a cost which is paid for a group of similar products.b. the average cost in an industry.c. a predetermined cost.d. the historical cost of producing a product last year.


41. The difference between a budget and a standard is thata. a budget expresses what costs were, while a standard expresses what costs should be.b. a budget expresses management's plans, while a standard reflects what actually

happened.c. a budget expresses a total amount, while a standard expresses a unit amount.d. standards are excluded from the cost accounting system, whereas budgets are generally

incorporated into the cost accounting system.


42. Standard costs may be used bya. universities.b. governmental agencies.c. charitable organizations.d. all of these.



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43. Which of the following statements is false?a. A standard cost is more accurate than a budgeted cost.b. A standard is a unit amount.c. In concept, standards and budgets are essentially the same.d. The standard cost of a product is equivalent to the budgeted cost per unit of product.


44. Budget data are not journalized in cost accounting systems with the exception ofa. the application of manufacturing overhead.b. direct labor budgets.c. direct materials budgets.d. cash budget data.

Ans: LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Budget Preparation

45. It is possible that a company's financial statements may report inventories ata. budgeted costs.b. standard costs.c. both budgeted and standard costs.d. none of these.

Ans: LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

46. A standard differs from a budget because a standarda. is a predetermined cost.b. contributes to management planning and control.c. is a unit amount.d. none of the above; a standard does not differ from a budget.


47. Marburg Co. expects direct materials cost of $6 per unit for 100,000 units (a total of $600,000 of direct materials costs). Marburg’s standard direct materials cost and budgeted direct materials cost is

Standard Budgeteda. $6 per unit $600,000 per yearb. $6 per unit $6 per unitc. $600,000 per year $6 per unitd. $600,000 per year $600,000 per year



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48. Using standard costsa. makes employees less “cost-conscious.”b. provides a basis for evaluating cost control.c. makes management by exception more difficult.d. increases clerical costs.


49. Using standard costsa. can make management planning more difficult.b. promotes greater economy.c. does not help in setting prices.d. weakens management control.



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50. If standard costs are incorporated into the accounting system,a. it may simplify the costing of inventories and reduce clerical costs.b. it can eliminate the need for the budgeting process.c. the accounting system will produce information which is less relevant than the

historical cost accounting system.d. approval of the shareholders is required.


51. Standard costsa. may show past cost experience.b. help establish expected future costs.c. are the budgeted cost per unit in the present.d. all of these.


52. Which of the following statements about standard costs is false?a. Properly set standards should promote efficiency.b. Standard costs facilitate management planning.c. Standards should not be used in "management by exception."d. Standard costs can simplify the costing of inventories.


53. Which of the following is not considered an advantage of using standard costs?a. Standard costs can reduce clerical costs.b. Standard costs can be useful in setting prices for finished goods.c. Standard costs can be used as a means of finding fault with performance.d. Standard costs can make employees "cost-conscious."


54. If a company is concerned with the potential negative effects of establishing standards, it shoulda. set loose standards that are easy to fulfill.b. offer wage incentives to those meeting standards.c. not employ any standards.d. set tight standards in order to motivate people.



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55. A standard which represents an efficient level of performance that is attainable under expected operating conditions is called a(n)a. ideal standard.b. loose standard.c. tight standard.d. normal standard.



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56. Ideal standardsa. are rigorous but attainable.b. are the standards generally used in a master budget.c. reflect optimal performance under perfect operating conditions.d. will always motivate employees to achieve the maximum output.


57. The final decision as to what standard costs should be is the responsibility ofa. the quality control engineer.b. the managerial accountants.c. the purchasing agent.d. management.


58. The labor time requirements for standards may be determined by thea. sales manager.b. product manager.c. industrial engineers.d. payroll department manager.


59. The two levels that standards may be set at area. normal and fully efficient.b. normal and ideal.c. ideal and less efficient.d. fully efficient and fully effective.


60. The most rigorous of all standards is thea. normal standard.b. realistic standard.c. ideal standard.d. conceivable standard.


61. Most companies that use standards set them ata. the normal level.b. a conceivable level.


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c. the ideal level.d. last year's level.



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62. A managerial accountant

1. does not participate in the standard setting process.2. provides knowledge of cost behaviors in the standard setting process.3. provides input of historical costs to the standard setting process.

a. 1b. 2c. 3d. 2 and 3


63. The cost of freight-ina. is to be included in the standard cost of direct materials.b. is considered a selling expense.c. should have a separate standard apart from direct materials.d. should not be included in a standard cost system.


64. The direct materials quantity standard would not be expressed ina. pounds.b. barrels.c. dollars.d. board feet.


65. The direct materials quantity standard shoulda. exclude unavoidable waste.b. exclude quality considerations.c. allow for normal spoilage.d. always be expressed as an ideal standard.


66. The direct labor quantity standard is sometimes called the direct labora. volume standard.b. effectiveness standard.c. efficiency standard.d. quality standard.



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67. A manufacturing company would include setup and downtime in their directa. materials price standard.b. materials quantity standard.c. labor price standard.d. labor quantity standard.



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68. Allowance for spoilage is part of the directa. materials price standard.b. materials quantity standard.c. labor price standard.d. labor quantity standard.


69. The total standard cost to produce one unit of product is showna. at the bottom of the income statement.b. at the bottom of the balance sheet.c. on the standard cost card.d. in the Work in Process Inventory account.


70. An unfavorable materials quantity variance would occur ifa. more materials were purchased than were used.b. actual pounds of materials used were less than the standard pounds allowed.c. actual labor hours used were greater than the standard labor hours allowed.d. actual pounds of materials used were greater than the standard pounds allowed.


71. Oxnard Industries produces a product that requires 2.6 pounds of materials per unit. The allowance for waste and spoilage per unit is .3 pounds and .1 pounds, respectively. The purchase price is $2 per pound, but a 2% discount is usually taken. Freight costs are $.10 per pound, and receiving and handling costs are $.07 per pound. The hourly wage rate is $12.00 per hour, but a raise which will average $.30 will go into effect soon. Payroll taxes are $1.20 per hour, and fringe benefits average $2.40 per hour. Standard production time is 1 hour per unit, and the allowance for rest periods and setup is .2 hours and .1 hours, respectively. The standard direct materials price per pound isa. $1.96.b. $2.00.c. $2.13d. $2.17

Ans: LO: 3, Bloom: AP, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

72. Oxnard Industries produces a product that requires 2.6 pounds of materials per unit. The allowance for waste and spoilage per unit is .3 pounds and .1 pounds, respectively. The purchase price is $2 per pound, but a 2% discount is usually taken. Freight costs are $.10


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per pound, and receiving and handling costs are $.07 per pound. The hourly wage rate is $12.00 per hour, but a raise which will average $.30 will go into effect soon. Payroll taxes are $1.20 per hour, and fringe benefits average $2.40 per hour. Standard production time is 1 hour per unit, and the allowance for rest periods and setup is .2 hours and .1 hours, respectively. The standard direct materials quantity per unit isa. 2.6 pounds.b. 2.7 pounds.c. 2.9 pounds.d. 3.0 pounds.


73. Oxnard Industries produces a product that requires 2.6 pounds of materials per unit. The allowance for waste and spoilage per unit is .3 pounds and .1 pounds, respectively. The purchase price is $2 per pound, but a 2% discount is usually taken. Freight costs are $.10 per pound, and receiving and handling costs are $.07 per pound. The hourly wage rate is $12.00 per hour, but a raise which will average $.30 will go into effect soon. Payroll taxes are $1.20 per hour, and fringe benefits average $2.40 per hour. Standard production time is 1 hour per unit, and the allowance for rest periods and setup is .2 hours and .1 hours, respectively. The standard direct labor rate per hour is

a. $ 12.00.b. $ 12.30.c. $15.60.d. $15.90.


74. Oxnard Industries produces a product that requires 2.6 pounds of materials per unit. The allowance for waste and spoilage per unit is .3 pounds and .1 pounds, respectively. The purchase price is $2 per pound, but a 2% discount is usually taken. Freight costs are $.10 per pound, and receiving and handling costs are $.07 per pound. The hourly wage rate is $12.00 per hour, but a raise which will average $.30 will go into effect soon. Payroll taxes are $1.20 per hour, and fringe benefits average $2.40 per hour. Standard production time is 1 hour per unit, and the allowance for rest periods and setup is .2 hours and .1 hours, respectively. The standard direct labor hours per unit isa. 1 hour.b. 1.1 hours.c. 1.2 hours.d. 1.3 hours.



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75. The standard direct materials quantity does not include allowances fora. unavoidable waste.b. normal spoilage.c. unexpected spoilage.d. all of the above are included.


76. Allowances should not be made in the direct labor quantity standard fora. wasted time.b. rest periods.c. cleanup.d. machine downtime.


77. The standard predetermined overhead rate used in setting the standard overhead cost is determined by dividinga. budgeted overhead costs by an expected standard activity index.b. actual overhead costs by an expected standard activity index.c. budgeted overhead costs by actual activity.d. actual overhead costs by actual activity.


78. Hofburg’s standard quantities for 1 unit of product include 2 pounds of materials and 1.5 labor hours. The standard rates are $2 per pound and $7 per hour. The standard overhead rate is $8 per direct labor hour. The total standard cost of Hofburg’s product isa. $14.50.b. $17.00.c. $22.50.d. $26.50.


79. Which of the following statements is true?a. Variances are the differences between total actual costs and total standard costs.b. When actual costs exceed standard costs, the variance is favorable.c. An unfavorable variance results when actual costs are decreasing but standards are not

changed.d. All of the above are true.


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80. Unfavorable materials price and quantity variances are generally the responsibility of thePrice Quantity

a. Purchasing department Purchasing Departmentb. Purchasing department Production Departmentc. Production department Production Departmentd. Production Department Purchasing Department


81. Scorpion Production Company planned to use 1 yard of plastic per unit budgeted at $81 a yard. However, the plastic actually cost $80 per yard. The company actually made 3,900 units, although it had planned to make only 3,300 units. Total yards used for production were 3,960. How much is the total materials variance?a. $48,600 Ub. $4,860 Uc. $3,960 Fd. $900 U


82. If actual direct materials costs are greater than standard direct materials costs, it means thata. actual costs were calculated incorrectly.b. the actual unit price of direct materials was greater than the standard unit price of direct

materials.c. the actual unit price of raw materials or the actual quantities of raw materials used was

greater than the standard unit price or standard quantities of raw materials expected.d. the purchasing agent or the production foreman is inefficient.


83. If actual costs are greater than standard costs, there is a(n)a. normal variance.b. unfavorable variance.c. favorable variance.d. error in the accounting system.


84. A total materials variance is analyzed in terms of


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a. price and quantity variances.b. buy and sell variances.c. quantity and quality variances.d. tight and loose variances.


85. A company developed the following per-unit standards for its product: 2 pounds of direct materials at $4 per pound. Last month, 1,500 pounds of direct materials were purchased for $5,700. The direct materials price variance for last month wasa. $5,700 favorable.b. $300 favorable.c. $150 favorable.d. $300 unfavorable.


86. The per-unit standards for direct materials are 2 gallons at $4 per gallon. Last month, 11,200 gallons of direct materials that actually cost $42,400 were used to produce 6,000 units of product. The direct materials quantity variance for last month wasa. $3,200 favorable.b. $2,400 favorable.c. $3,200 unfavorable.d. $5,600 unfavorable.


87. The purchasing agent of the Poplin, Inc. ordered materials of lower quality in an effort to economize on price. What variance will most likely result?a. Favorable materials quantity varianceb. Favorable total materials variancec. Unfavorable materials price varianced. Unfavorable labor quantity variance


88. The per-unit standards for direct labor are 2 direct labor hours at $15 per hour. If in producing 1,800 units, the actual direct labor cost was $48,000 for 3,000 direct labor hours worked, the total direct labor variance isa. $1,800 unfavorable.b. $6,000 favorable.c. $3,750 unfavorable.d. $6,000 unfavorable.


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89. The standard rate of pay is $20 per direct labor hour. If the actual direct labor payroll was $117,600 for 6,000 direct labor hours worked, the direct labor price (rate) variance isa. $2,400 unfavorable.b. $2,400 favorable.c. $3,000 unfavorable.d. $3,000 favorable.


90. The standard number of hours that should have been worked for the output attained is 6,000 direct labor hours and the actual number of direct labor hours worked was 6,300. If the direct labor price variance was $3,150 unfavorable, and the standard rate of pay was $9 per direct labor hour, what was the actual rate of pay for direct labor?a. $8.50 per direct labor hourb. $7.50 per direct labor hourc. $9.50 per direct labor hourd. $9.00 per direct labor hour


91. Which one of the following statements is true?a. If the materials price variance is unfavorable, then the materials quantity variance must

also be unfavorable.b. If the materials price variance is unfavorable, then the materials quantity variance must

be favorable.c. Price and quantity variances move in the same direction. If one is favorable, the others

will be as well.d. There is no correlation of favorable or unfavorable for price and quantity variances.


92. Variances from standards area. expressed in total dollars.b. expressed on a per-unit basis.c. expressed on a percentage basis.d. all of these.


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93. A favorable variancea. is an indication that the company is not operating in an optimal manner.b. implies a positive result if quality control standards are met.c. implies a positive result if standards are flexible.d. means that standards are too loosely specified.


94. The total materials variance is equal to thea. materials price variance.b. difference between the materials price variance and materials quantity variance.c. product of the materials price variance and the materials quantity variance.d. sum of the materials price variance and the materials quantity variance.


95. Information on Jayhawk's direct labor costs for the month of August is as follows:Actual rate $10Standard hours 11,000Actual hours 10,000Direct labor price variance—unfavorable $4,000

What was the standard rate for August?a. $9.96 c. $10.40b. $9.60 d. $10.04



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96. The total variance is $35,000. The total materials variance is $14,000. The total labor variance is twice the total overhead variance. What is the total overhead variance?a. $3,500b. $7,000c. $10,500d. $14,000


97. The formula for the materials price variance isa. (AQ × SP) – (SQ × SP).b. (AQ × AP) – (AQ × SP).c. (AQ × AP) – (SQ × SP).d. (AQ × SP) – (SQ × AP).

Ans: LO: 4, Bloom: K, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

98. The formula for the materials quantity variance isa. (SQ × AP) – (SQ × SP).b. (AQ × AP) – (AQ × SP).c. (AQ × SP) – (SQ × SP).d. (AQ × AP) – (SQ × SP).

Ans: LO: 4, Bloom: K, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

99. A company uses 8,400 pounds of materials and exceeds the standard by 300 pounds. The quantity variance is $1,800 unfavorable. What is the standard price?a. $2b. $4c. $6d. Cannot be determined from the data provided.


100. A company purchases 20,000 pounds of materials. The materials price variance is $4,000 favorable. What is the difference between the standard and actual price paid for the materials?a. $1.00b. $0.20c. $5.00


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d. Cannot be determined from the data provided.


101. A company uses 20,000 pounds of materials for which it paid $6.00 a pound. The materials price variance was $15,000 unfavorable. What is the standard price per pound?a. $0.75b. $5.25c. $6.00d. $6.75


102. If the materials price variance is $3,600 F and the materials quantity and labor variances are each $2,700 U, what is the total materials variance?a. $3,600 Fb. $2,700 Uc. $900 Fd. $4,050 U


103. Edgar, Inc. has a materials price standard of $2.00 per pound. Six thousand pounds of materials were purchased at $2.20 a pound. The actual quantity of materials used was 6,000 pounds, although the standard quantity allowed for the output was 5,400 pounds.

Edgar, Inc.'s materials price variance isa. $120 U.b. $1,200 U.c. $1,080 U.d. $1,200 F.



Edgar, Inc.'s materials quantity variance isa. $1,200 U.


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b. $1,200 F.c. $1,320 F.d. $1,320 U.



Edgar, Inc.'s total materials variance isa. $2,400 U.b. $2,400 F.c. $2,520 U.d. $2,520 F.


106. The standard quantity allowed for the units produced was 4,500 pounds, the standard price was $2.50 per pound, and the materials quantity variance was $375 favorable. Each unit uses 1 pound of materials. How many units were actually produced?a. 4,350b. 4,500c. 11,625d. 4,650


107. The matrix approach to variance analysisa. will yield slightly different variances than the formula approach.b. is more accurate than the formula approach.c. does not separate the price and quantity variance calculations.d. provides a convenient structure for determining each variance.


108. Labor efficiency is measured by thea. materials quantity variance.b. total labor variance.c. labor quantity variance.d. labor rate variance.


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109. An unfavorable labor quantity variance may be caused bya. paying workers higher wages than expected.b. misallocation of workers.c. worker fatigue or carelessness.d. higher pay rates mandated by union contracts.


110. The investigation of materials price variance usually begins in thea. first production department.b. purchasing department.c. controller's office.d. accounts payable department.


111. The investigation of a materials quantity variance usually begins in thea. production department.b. purchasing department.c. sales department.d. controller's department.


112. If the labor quantity variance is unfavorable and the cause is inefficient use of direct labor, the responsibility rests with thea. sales department.b. production department.c. budget office.d. controller's department.



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113. Monster Company produces a product requiring 3 direct labor hours at $16.00 per hour. During January, 2,000 products are produced using 6,300 direct labor hours. Monster’s actual payroll during January was $98,280. What is the labor quantity variance?a. $2,280 Ub. $4,800 Fc. $2,520 Fd. $4,800 U


114. A company developed the following per-unit standards for its product: 2 gallons of direct materials at $8 per gallon. Last month, 3,000 gallons of direct materials were purchased for $22,800. The direct materials price variance for last month wasa. $22,800 favorable.b. $600 favorable.c. $1,200 favorable.d. $1,200 unfavorable.


115. The per-unit standards for direct materials are 2 pounds at $5 per pound. Last month, 11,200 pounds of direct materials that actually cost $53,000 were used to produce 6,000 units of product. The direct materials quantity variance for last month wasa. $4,000 favorable.b. $3,000 favorable.c. $4,000 unfavorable.d. $7,000 unfavorable.


116. The per-unit standards for direct labor are 1.5 direct labor hours at $15 per hour. If in producing 2,400 units, the actual direct labor cost was $46,000 for 3,000 direct labor hours worked, the total direct labor variance isa. $2,400 unfavorable.b. $8,000 favorable.c. $5,000 unfavorable.d. $8,000 unfavorable.



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117. The standard rate of pay is $12 per direct labor hour. If the actual direct labor payroll was $47,040 for 4,000 direct labor hours worked, the direct labor price (rate) variance isa. $960 unfavorable.b. $960 favorable.c. $1,200 unfavorable.d. $1,200 favorable.


118. The standard number of hours that should have been worked for the output attained is 10,000 direct labor hours and the actual number of direct labor hours worked was 10,500. If the direct labor price variance was $10,500 unfavorable, and the standard rate of pay was $12 per direct labor hour, what was the actual rate of pay for direct labor?a. $11 per direct labor hourb. $9 per direct labor hourc. $13 per direct labor hourd. $12 per direct labor hour


119. A company purchases 12,000 pounds of materials. The materials price variance is $6,000 favorable. What is the difference between the standard and actual price paid for the materials?a. $1.00b. $.50c. $2.00d. $6.00


120. A company uses 40,000 gallons of materials for which they paid $7.00 a gallon. The materials price variance was $80,000 favorable. What is the standard price per gallon?a. $2b. $5c. $7d. $9


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121. All Urban Company produces a product requiring 4 pounds of material costing $3.50 per pound. During December, All Urban purchased 4,200 pounds of material for $14,112 and used the material to produce 500 products. What was the materials price variance for December?a. $560 Fb. $588 Fc. $112 Ud. $672 U


122. Shipp, Inc. manufactures a product requiring two pounds of direct material. During 2013, Shipp purchases 24,000 pounds of material for $99,200 when the standard price per pound is $4. During 2013, Shipp uses 22,000 pounds to make 12,000 products. The standard direct material cost per unit of finished product isa. $8.27.b. $9.01.c. $8.00.d. $8.53.


123. Clark Company manufactures a product with a standard direct labor cost of two hours at $18.00 per hour. During July, 2,000 units were produced using 4,200 hours at $18.30 per hour. The labor quantity variance wasa. $3,660 F.b. $3,600 U.c. $2,460 U.d. $3,660 U.



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124. Clark Company manufactures a product with a standard direct labor cost of two hours at $18.00 per hour. During July, 2,000 units were produced using 4,200 hours at $18.30 per hour. The labor price variance wasa. $1,260 U.b. $4,860 U.c. $4,860 F.d. $3,600 U.


125. A company developed the following per unit materials standards for its product: 3 pounds of direct materials at $5 per pound. If 12,000 units of product were produced last month and 37,500 pounds of direct materials were used, the direct materials quantity variance wasa. $4,500 favorable.b. $7,500 unfavorable.c. $4,500 unfavorable.d. $7,500 favorable.


126. The standard direct labor cost for producing one unit of product is 5 direct labor hours at a standard rate of pay of $20. Last month, 15,000 units were produced and 73,500 direct labor hours were actually worked at a total cost of $1,350,000. The direct labor quantity variance wasa. $30,000 unfavorable.b. $45,000 unfavorable.c. $45,000 favorable.d. $30,000 favorable.


127. Atkins, Inc. produces a product requiring 8 pounds of material at $1.50 per pound. Atkins produced 10,000 units of this product during 2013 resulting in a $30,000 unfavorable materials quantity variance. How many pounds of direct material did Atkins use during 2013?a. 100,000 poundsb. 80,000 poundsc. 160,000 poundsd. 125,000 pounds


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128. Dillon has a standard of 1.5 pounds of materials per unit, at $6 per pound. In producing 2,000 units, Dillon used 3,100 pounds of materials at a total cost of $18,135. Dillon's total variance isa. $450 F.b. $135 U.c. $465 U.d. $600 U.


129. Dillon has a standard of 1.5 pounds of materials per unit, at $6 per pound. In producing 2,000 units, Dillon used 3,100 pounds of materials at a total cost of $18,135. Dillon's materials price variance isa. $135 U.b. $465 F.c. $600 F.d. $1,050 F.


130. Dillon has a standard of 1.5 pounds of materials per unit, at $6 per pound. In producing 2,000 units, Dillon used 3,100 pounds of materials at a total cost of $18,135. Dillon's materials quantity variance isa. $135 F.b. $465 U.c. $600 U.d. $1,050 U.


131. Dillon has a standard of 2 hours of labor per unit, at $12 per hour. In producing 2,000 units, Dillon used 3,850 hours of labor at a total cost of $46,970. Dillon's total labor variance isa. $1,030 U.b. $800 U.c. $-1,030 F.d. $1,930 F.


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132. Dillon has a standard of 2 hours of labor per unit, at $12 per hour. In producing 2,000 units, Dillon used 3,850 hours of labor at a total cost of $46,970. Dillon's labor price variance isa. $770 U.b. $800 U.c. $1,030 F.d. $1,930 F.


133. Dillon has a standard of 2 hours of labor per unit, at $12 per hour. In producing 2,000 units, Dillon used 3,850 hours of labor at a total cost of $46,970. Dillon's labor quantity variance isa. $770 U.b. $770 F.c. $1,800 F.d. $1,930 F.


134. Which one of the following describes the total overhead variance?a. The difference between what was actually incurred and the flexible budget amountb. The difference between what was actually incurred and overhead appliedc. The difference between the overhead applied and the flexible budget amountd. The difference between what was actually incurred and the total production budget


135. Manufacturing overhead costs are applied to work in process on the basis ofa. actual hours worked.b. standard hours allowed.


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c. ratio of actual variable to fixed costs.d. actual overhead costs incurred.


136. The total overhead variance is the difference between thea. actual overhead costs and overhead costs applied based on standard hours allowed.b. actual overhead costs and overhead costs applied based on actual hours.c. overhead costs applied based on actual hours and overhead costs applied based on

standard hours allowed.d. the actual overhead costs and the standard direct labor costs.


137. The predetermined overhead rate for Zane Company is $5, comprised of a variable overhead rate of $3 and a fixed rate of $2. The amount of budgeted overhead costs at normal capacity of $150,000 was divided by normal capacity of 30,000 direct labor hours, to arrive at the predetermined overhead rate of $5. Actual overhead for June was $9,500 variable and $6,050 fixed, and standard hours allowed for the product produced in June was 3,000 hours. The total overhead variance isa. $3,050 F.b. $550 F.c. $550 U.d. $3,050 U.


138. The predetermined overhead rate for Zane Company is $5, comprised of a variable overhead rate of $3 and a fixed rate of $2. The amount of budgeted overhead costs at normal capacity of $150,000 was divided by normal capacity of 30,000 direct labor hours, to arrive at the predetermined overhead rate of $5. Actual overhead for June was $8,900 variable and $5,400 fixed, and 1,500 units were produced. The direct labor standard is 2 hours per unit produced. The total overhead variance is


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a. $1,800 F.b. $700 F.c. $700 U.d. $1,800 U.


139. Which of the following is true?a. The form, content, and frequency of variance reports vary considerably among

companies.b. The form, content, and frequency of variance reports do not vary among companies.c. The form and content of variance reports vary considerably among companies, but the

frequency is always weekly.d. The form and content of variance reports are consistent among companies, but the

frequency varies.


140. Denmark Corporation’s variance report for the purchasing department reports 1,000 units of material A purchased and 2,400 units of material B purchased. It also reports standard prices of $2 for Material A and $3 for Material B. Actual prices reported are $2.10 for Material A and $2.80 for Material B. Denmark should report a total price variance ofa. $380 F.b. $340 F.c. $340 U.d. $380 U.


141. When is a variance considered to be 'material'?a. When it is large compared to the actual costb. When it is infrequentc. When it is unfavorabled. When it could have been controlled more effectively


142. Variance reports area. external financial reports.


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b. SEC financial reports.c. internal reports for management.d. all of these.


143. In using variance reports, management looks fora. total assets invested.b. significant variances.c. competitors’ costs in comparison to the company's costs.d. more efficient ways of valuing inventories.

Ans: LO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

144. Parnell Company prepared its income statement for internal use. How would amounts for cost of goods sold and variances appear?a. Cost of goods sold would be at actual costs, and variances would be reported

separately.b. Cost of goods sold would be combined with the variances, and the net amount reported

at standard cost.c. Cost of goods sold would be at standard costs, and variances would be reported

separately.d. Cost of goods sold would be combined with the variances, and the net amount reported

at actual cost.

Ans: LO: 7, Bloom: C, Difficulty: Easy, Min: 2, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

145. Alex Co. prepared its income statement for management using a standard cost accounting system. Which of the following appears at the “standard” amount?a. Salesb. Selling expensesc. Gross profitd. Cost of goods sold


146. The costing of inventories at standard cost for external financial statement reporting purposes isa. not permitted.b. preferable to reporting at actual costs.c. in accordance with generally accepted accounting principles if significant differences

exist between actual and standard costs.d. in accordance with generally accepted accounting principles if significant differences

do not exist between actual and standard costs.


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147. Income statements prepared internally for management often show cost of goods sold at standard cost and variances area. separately disclosed.b. deducted as other expenses and revenues.c. added to cost of goods sold.d. closed directly to retained earnings.


148. In Zero Company’s income statement, they report gross profit of $55,000 at standard and the following variances:

Materials price $ 420 FMaterials quantity 600 FLabor price 420 ULabor quantity 1,000 FOverhead 900 F

Zero would report actual gross profit ofa. $51,660.b. $52,500.c. $57,500.d. $58,340.


149. In Zero Company’s income statement, they report actual gross profit of $52,500 and the following variances:

Materials price $ 420 FMaterials quantity 600 FLabor price 420 ULabor quantity 1,000 FOverhead 900 F

Zero would report gross profit at standard ofa. $46,660.b. $47,500.c. $55,000.d. $53,340.



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150. The balanced scorecarda. incorporates financial and nonfinancial measures in an integrated system.b. is based on financial measures.c. is based on nonfinancial measures.d. does not use financial or nonfinancial measures.


151. Which is not one of the four most commonly used perspectives on a balanced scorecard?a. The financial perspectiveb. The customer perspectivec. The external process perspectived. The learning and growth perspective


152. The balanced scorecard approacha. uses only financial measures to evaluate performance.b. uses rather vague, open statements when setting objectives in order to allow managers

and employees flexibility.c. normally sets the financial objectives first, and then sets the objectives in the other

perspectives to accomplish the financial objectives.d. evaluates performance using about 10 different perspectives in order to effectively

incorporate all areas of the organization.


153. The customer perspective of the balanced scorecard approacha. is the most traditional view of the company.b. evaluates the internal operating processes critical to the success of the organization.c. evaluates how well the company develops and retains its employees.d. evaluates the company from the viewpoint of those people who buy its products or

services.


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154. The perspectives included in the balanced scorecard approach include all of the following except thea. internal process perspective.b. capacity utilization perspective.c. learning and growth perspective.d. customer perspective.


a155. If 10,000 pounds of direct materials are purchased for $9,300 on account and the standard cost is $.90 per pound, the journal entry to record the purchase isa. Raw Materials Inventory........................................................ 9,300

Accounts Payable.......................................................... 9,300b. Work In Process Inventory.................................................... 9,300

Accounts Payable.......................................................... 9,000Materials Quantity Variance......................................... 300

c. Raw Materials Inventory........................................................ 9,300Accounts Payable.......................................................... 9,000Materials Price Variance............................................... 300

d. Raw Materials Inventory........................................................ 9,000Materials Price Variance........................................................ 300

Accounts Payable.......................................................... 9,300


a156. Debit balances in variance accounts representa. unfavorable variances.b. favorable variances.c. favorable for price variances; unfavorable for quantity variances.d. favorable for quantity variances; unfavorable for price variances.


a157. If a company purchases raw materials on account for $19,830 when the standard cost is $18,900, it willa. debit Materials Price Variance for $930.b. credit Materials Price Variance for $930.c. debit Materials Quantity Variance for $930.d. credit Material Quantity Variance for $930.


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a158. If a company issues raw materials to production at a cost of $18,900 when the standard cost is $18,300, it willa. debit Materials Price Variance for $600.b. credit Materials Price Variance for $600.c. debit Materials Quantity Variance for $600.d. credit Material Quantity Variance for $600.


a159. If a company incurs direct labor cost of $82,000 when the standard cost is $84,000, it willa. debit Labor Price Variance for $2,000.b. credit Labor Price Variance for $2,000.c. debit Labor Quantity Variance for $2,000.d. credit Labor Quantity Variance for $2,000.


a160. If a company assigns factory labor to production at a cost of $84,000 when standard cost is $80,000, it willa. debit Labor Price Variance for $4,000.b. credit Labor Price Variance for $4,000.c. debit Labor Quantity Variance for $4,000.d. credit Labor Quantity Variance for $4,000.


a161. The overhead variances measure whether overhead costs

Are Effectively Managed Were Used Effectivelya. Controllable Controllable and Volumeb. Controllable Volumec. Controllable and Volume Controllabled. Volume Controllable


a162. The overhead volume variance is


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a. actual overhead less overhead budgeted for actual hours.b. actual overhead less overhead budgeted for standard hours allowed.c. overhead budgeted for actual hours less applied overhead.d. the fixed overhead rate times the difference between normal capacity hours and

standard hours allowed.


a163. Budgeted overhead for Cinnabar Industries at normal capacity of 30,000 direct labor hours is $6 per hour variable and $4 per hour fixed. In May, $310,000 of overhead was incurred in working 31,500 hours when 32,000 standard hours were allowed. The overhead controllable variance isa. $5,000 favorable.b. $2,000 favorable.c. $10,000 favorable.d. $10,000 unfavorable.


a164. Budgeted overhead for Cinnabar Industries at normal capacity of 30,000 direct labor hours is $6 per hour variable and $4 per hour fixed. In May, $310,000 of overhead was incurred in working 31,500 hours when 32,000 standard hours were allowed. The overhead volume variance isa. $8,000 favorable.b. $11,000 favorable.c. $5,000 favorable.d. $10,000 favorable.


a165. Budgeted overhead for Haft, Inc. at normal capacity of 60,000 direct labor hours is $3 per hour variable and $2 per hour fixed. In May, $310,000 of overhead was incurred in working 63,000 hours when 64,000 standard hours were allowed. The overhead controllable variance isa. $5,000 favorable.b. $2,000 favorable.c. $10,000 favorable.d. $10,000 unfavorable.



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a166. Budgeted overhead for Haft, Inc. at normal capacity of 60,000 direct labor hours is $3 per hour variable and $2 per hour fixed. In May, $310,000 of overhead was incurred in working 63,000 hours when 64,000 standard hours were allowed. The overhead volume variance isa. $8,000 favorable.b. $11,000 favorable.c. $5,000 favorable.d. $10,000 favorable.


a167. An overhead volume variance is calculated as the difference between normal capacity hours and standard hours alloweda. times the total predetermined overhead rate.b. times the predetermined variable overhead rate.c. times the predetermined fixed overhead rate.d. divided by actual number of hours worked.


a168. Which of the following statements is false?a. The overhead volume variance indicates whether plant facilities were used efficiently

during the period.b. The costs that cause the overhead volume variance are usually controllable costs.c. The overhead volume variance relates solely to fixed costs.d. The overhead volume variance is favorable if standard hours allowed for output are

greater than the standard hours at normal capacity.


a169. If the standard hours allowed are less than the standard hours at normal capacity,a. the overhead volume variance will be unfavorable.b. variable overhead costs will be underapplied.c. the overhead controllable variance will be favorable.d. variable overhead costs will be overapplied.


a170. Which of the following statements about overhead variances is false?FOR INSTRUCTOR USE ONLY

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a. Standard hours allowed are used in calculating the controllable variance.b. Standard hours allowed are used in calculating the volume variance.c. The controllable variance pertains solely to fixed costs.d. The total overhead variance pertains to both variable and fixed costs.


a171. The overhead volume variance relates only toa. variable overhead costs.b. fixed overhead costs.c. both variable and fixed overhead costs.d. all manufacturing costs.


a172. What does the controllable variance measure?a. Whether a company incurred more or less fixed overhead costs compared to the

amount of overhead appliedb. Whether a company incurred more or less overhead costs than allowedc. The efficiency of using variable overhead resourcesd. Whether the production manager is able to control the production facility


a173. The overhead controllable variance is calculated as the difference between actual overhead costs incurred and the budgeteda. overhead costs for the standard hours allowed.b. overhead costs applied to the product.c. overhead costs at the normal level of activity.d. fixed overhead costs.


a174. If the standard hours allowed are less than the standard hours at normal capacity, the volume variancea. cannot be calculated.b. will be favorable.c. will be unfavorable.d. will be greater than the controllable variance.


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a175. The budgeted overhead costs for standard hours allowed and the overhead costs applied to the product are the same amounta. for both variable and fixed overhead costs.b. only when standard hours allowed are less than normal capacity.c. for variable overhead costs.d. for fixed overhead costs.


a176. The following information was taken from the annual manufacturing overhead cost budget of Fergie Manufacturing.

Variable manufacturing overhead costs $92,400Fixed manufacturing overhead costs $55,440Normal production level in labor hours 30,800Normal production level in units 5,775Standard labor hours per unit 4

During the year, 5,600 units were produced, 18,340 hours were worked, and the actual manufacturing overhead was $151,200. Actual fixed manufacturing overhead costs equaled budgeted fixed manufacturing overhead costs. Overhead is applied on the basis of direct labor hours. Fergie's total overhead rate isa. $2.40.b. $4.00.c. $6.40.d. $6.53.



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During the year, 5,600 units were produced, 18,340 hours were worked, and the actual manufacturing overhead was $151,200. Actual fixed manufacturing overhead costs equaled budgeted fixed manufacturing overhead costs. Overhead is applied on the basis of direct labor hours. Fergie's total overhead variance is

a. $1,680 U.b. $6,160 U.c. $7,840 U.d. $22,400 U.




During the year, 5,600 units were produced, 18,340 hours were worked, and the actual manufacturing overhead was $151,200. Actual fixed manufacturing overhead costs equaled budgeted fixed manufacturing overhead costs. Overhead is applied on the basis of direct labor hours. Fergie's controllable overhead variance is


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a. $1,680 U.b. $6,160 U.c. $7,840 U.d. $22,400 U.




During the year, 5,600 units were produced, 18,340 hours were worked, and the actual manufacturing overhead was $151,200. Actual fixed manufacturing overhead costs equaled budgeted fixed manufacturing overhead costs. Overhead is applied on the basis of direct labor hours. Fergie's volume overhead variance isa. $1,680 U.b. $6,160 U.c. $7,840 U.d. $22,400 U.


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180. All of the following are advantages of standard costs except theya. facilitate management planning.b. are useful in setting selling prices.c. simplify costing in inventories.d. increase net income.


181. Standards based on the optimum level of performance under perfect operating conditions area. attainable standards.b. ideal standards.c. normal standards.d. practical standards.


182. The direct materials price standard should include an amount for all of the following excepta. receiving costs.b. storing costs.c. handling costs.d. normal spoilage costs.



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183. The standard unit cost is used in the calculation of which of the following variances?

Materials Price Variance Materials Quantity Variancea. No Nob. No Yesc. Yes Nod. Yes Yes


184. The difference between the actual labor rate multiplied by the actual labor hours worked and the standard labor rate multiplied by the standard labor hours is thea. total labor variance.b. labor price variance.c. labor quantity variance.d. labor efficiency variance.


185. The formula for the labor price variance isa. (AH) x (SR) less (SH) x (SR).b. (AH) x (AR) less (AH) x (SR).c. (AH) x (AR) less (SH) x (SR).d. (AH) x (SR) less (AH) x (SR).


186. Which department is usually responsible for a labor price variance attributable to misallocation of workers?a. Quality controlb. Purchasingc. Engineeringd. Production


187. In reporting variances,a. promptness is relatively unimportant.b. management normally investigates all variances.c. the reports should facilitate management by exception.d. the reports are not departmentalized.



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a188. A standard cost system may be used inJob Order Costing Process Costing

a. No Nob. Yes Noc. No Yesd. Yes Yes



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a189. The formula for computing the overhead volume variance isa. fixed overhead rate times (actual hours less standard hours allowed).b. variable overhead rate times (actual hours less standard hours allowed).c. fixed overhead rate times (normal capacity hours less standard hours allowed).d. variable overhead rate times (normal capacity hours less standard hours allowed).


a190. The overhead controllable variance is the difference between thea. budgeted overhead based on standard hours allowed and the overhead applied to

production.b. budgeted overhead based on standard hours allowed and budgeted overhead based on

actual hours worked.c. actual overhead and the overhead applied to production.d. actual overhead and budgeted overhead based on standard hours allowed.



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ACC 560 Week 8 Quiz

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