CHAPTER 12 MULTIPLE CHOICE

Question 1

31. A standard cost is
    a. 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.

Answer 1

C

Question 2

31. A standard cost is
    a. 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.

Answer 2

C

Question 3

32. The difference between a budget and a standard is that
    a. 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.

Answer 3

C

Question 4

33. Standard costs may be used by
    a. universities.
    b. governmental agencies.
    c. charitable organizations.
    d. all of these.

Answer 4

D

Question 5

34. 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

Answer 5

A

Question 6

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

Answer 6

A

Question 7

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

Answer 7

B

Question 8

37. 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 stockholders is required.

Answer 8

A

Question 9

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

Answer 9

D

Question 10

39. 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.

Answer 10

c

Question 11

40. 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.”

Answer 11

c

Question 12

41. If a company is concerned with the potential negative effects of establishing standards, they should
    a. 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

Answer 12

b

Question 13

42. 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

Answer 13

d

Question 14

43. Ideal standards
    a. 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.

Answer 14

c

Question 15

44. The final decision as to what standard cost should be is the responsibility of
    a. the quality control engineer.
    b. the managerial accountants.
    c. the purchasing agent.
    d. management.

Answer 15

d

Question 16

45. The labour time requirements for standards may be determined by the
    a. sales manager.
    b. product manager.
    c. industrial engineers.
    d. payroll department manager.

Answer 16

c

Question 17

. The two levels that standards may be set at are

a. normal and fully efficient.
b. normal and ideal.
c. ideal and less efficient.
d. fully efficient and fully effective

Answer 17

b

Question 18

47. The most rigorous of all standards is the
    a. normal standard.
    b. realistic standard.
    c. ideal standard.
    d. conceivable standard.

Answer 18

c

Question 19

48. Most companies that use standards set them at
    a. the normal level.
    b. a conceivable level.
    c. the ideal level.
    d. last year’s level.

Answer 19

a

Question 20

49. A managerial accountant
    
    1. does not participate in the standard setting process.
    2. provides knowledge of cost behaviours in the standard setting process.
    3. provides input of historical costs to the standard setting process.
       a. 1
       b. 2
       c. 3
       d. 2 and 3

Answer 20

d

Question 21

50. The cost of freight-in
    a. 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.

Answer 21

a

Question 22

51. The direct materials quantity standard would not be expressed in
    a. kilograms.
    b. barrels.
    c. dollars.
    d. board metres.

Answer 22

c

Question 23

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

Answer 23

c

Question 24

53. The direct labour quantity standard is sometimes called the direct labour
    a. volume standard.
    b. effectiveness standard.
    c. efficiency standard.
    d. quality standard

Answer 24

c

Question 25

54. A manufacturing company would include setup and downtime in their direct a. materials price standard. b. materials quantity standard. c. labour price standard. d. labour quantity standard

Answer 25

d

Question 26

55. Allowance for spoilage is part of the direct a. materials price standard. b. materials quantity standard. c. labour price standard. d. labour quantity standard

Answer 26

b

Question 27

56. The total standard cost to produce one unit of product is shown a. 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

Answer 27

c

Question 28

57. An unfavourable materials quantity variance would occur if a. more materials are purchased than are used. b. actual kilograms of materials used were less than the standard kilograms llowed. c. actual labour hours used were greater than the standard labour hours allowed. d. actual kilograms of materials used were greater than the standard kilograms allowed.

Answer 28

d

Question 29

58. If actual direct material costs are greater than standard direct materials costs, it means that a. 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.

Answer 29

c

Question 30

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

Answer 30

b

Question 31

60. A total materials variance is analyzed in terms of a. price and quantity variances. b. buy and sell variances. c. quantity and quality variances. d. tight and loose variances.

Answer 31

b

Question 32

Use the following information for questions 61 and 62: A company developed the following per-unit standards for its product: 5 kilograms of direct materials at $3 per kilogram. Last month, 1,000 kilograms of direct materials were purchased for $2,900. Also last month, 700 kilograms of direct materials were used to produce 135 units. 61. What was the direct materials price variance for last month? a. $12,100 favourable b. $100 favourable c. $12,100 unfavourable d. $100 unfavourable 62. What was the direct materials quantity variance for last month? a. $75 unfavourable b. $75 favourable c. $900 unfavourable d. $900 favourable

Answer 32

b a

Question 33

63. The per-unit standards for direct labour are 3 direct labour hours at $15 per hour. If in producing 700 units, the actual direct labour cost was $31,175 for 2,150 direct labour hours worked, the total direct labour variance is a. $50 unfavourable. b. $325 favourable. c. $50 favourable. d. $325 unfavourable.

Answer 33

b

Question 34

64. The standard rate of pay is $15 per direct labour hour. If the actual direct labour payroll was $58,800 for 4,000 direct labour hours worked, the direct labour price (rate) variance is a. $1,200 unfavourable. b. $1,200 favourable. c. $1,500 unfavourable. d. $1,500 favourable.

Answer 34

b

Question 35

65. The standard number of hours that should have been worked for the output attained is 8,000 direct labour hours and the actual number of direct labour hours worked was 8,400. If the direct labour price variance was $8,400 unfavourable, and the standard rate of pay was $18 per direct labour hour, what was the actual rate of pay for direct labour? a. $17.00 per direct labour hour b. $15.00 per direct labour hour c. $19.00 per direct labour hour d. $18.00 per direct labour hour

Answer 35

c

Question 36

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

Answer 36

a

Question 37

67. A favourable variance a. 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

Answer 37

b

Question 38

68. The total materials variance is equal to the a. 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.

Answer 38

d

Question 39

69. The total overhead budget variance is equal to the a. sum of the total materials variance and the total labour variance. b. difference between the total materials variance and the total labour variance. c. difference between the actual overhead costs and the overhead costs applied to the work done. d. total variance minus the spending variance and the volume variance.

Answer 39

c

Question 40

70. The total variance is $10,000. The total materials variance is $4,000. The total labour variance is twice the total overhead variance. What is the total overhead variance? a. $1,000 b. $2,000 c. $3,000 d. $4,000

Answer 40

b

Question 41

71. The formula for the materials price variance is a. (AQ × SP) – (SQ × SP). b. (AQ × AP) – (AQ × SP). c. (AQ × AP) – (SQ × SP). d. (AQ × SP) – (SQ × AP).

Answer 41

b

Question 42

72. The formula for the materials quantity variance is a. (SQ × AP) – (SQ × SP). b. (AQ × AP) – (AQ × SP). c. (AQ × SP) – (SQ × SP). d. (AQ × AP) – (SQ × SP).

Answer 42

c

Question 43

73. A company uses 3,150 kilograms of materials and exceeds the standard by 150 kilograms. The quantity variance is $900 unfavourable. What is the standard price? a. $2.00 b. $3.50 c. $4.00 d. $6.00

Answer 43

d

Question 44

74. A company purchases 130,000 kilograms of materials. The materials price variance is $26,000 favourable. What is the difference between the standard and actual price paid for the materials? a. $5.00 b. $0.20 c. $5.50 d. $0.25

Answer 44

b

Question 45

75. A company uses 40,000 kilograms of materials for which they paid $9.00 a kilogram. The materials price variance was $80,000 favourable. What is the standard price per kilogram? a. $2.00 b. $7.00 c. $10.00 d. $11.00

Answer 45

d

Question 46

76. If the materials price variance is $600 F and the materials quantity and labour variances are each $450 U, what is the total materials variance? a. $600 F b. $450 U c. $150 F d. $1,050 U

Answer 46

c

Question 47

80. The matrix approach to variance analysis a. 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.

Answer 47

d

Question 48

81. Labour efficiency is measured by the a. materials quantity variance. b. total labour variance. c. labour quantity variance. d. labour rate variance.

Answer 48

c

Question 49

82. An unfavourable labour quantity variance may be caused by a. paying workers higher wages than expected. b. paying workers a bonus at year-end. c. worker fatigue or carelessness. d. higher pay rates mandated by union contracts.

Answer 49

c

Question 50

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

Answer 50

b

Question 51

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

Answer 51

a

Question 52

85. If the labour quantity variance is unfavourable and the cause is inefficient use of direct labour, the responsibility rests with the a. sales department. b. production department. c. budget office. d. controller's department.

Answer 52

b

Question 53

86. An overhead fixed volume variance is calculated as the difference between normal capacity hours and standard hours allowed a. 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.

Answer 53

c

Question 54

87. Manufacturing overhead costs are applied to work in process on the basis of a. actual hours worked. b. standard hours allowed. c. ratio of actual variable to fixed costs. d. actual overhead costs incurred.

Answer 54

b

Question 55

88. 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 favourable if standard hours allowed for output are greater than the standard hours at normal capacity

Answer 55

b

Question 56

89. If the standard hours allowed are less than the standard hours at normal capacity, a. the overhead volume variance will be unfavourable. b. variable overhead costs will be under-applied. c. the overhead controllable variance will be favourable. d. variable overhead costs will be over-applied

Answer 56

a

Question 57

90. Which of the following statements about overhead variances is false? a. Standard hours allowed are used in calculating the spending variance. b. Standard hours allowed are used in calculating the volume variance. c. The spending variance pertains solely to fixed costs. d. The total overhead variance pertains to both variable and fixed costs.

Answer 57

c

Question 58

91. The overhead volume variance relates only to a. variable overhead costs. b. fixed overhead costs. c. both variable and fixed overhead costs. d. all manufacturing costs.

Answer 58

b

Question 59

92. The fixed overhead spending variance is calculated as the difference between actual overhead costs incurred and the budgeted a. 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.

Answer 59

a

Question 60

93. If the standard hours allowed are less than the standard hours at normal capacity, the volume variance a. cannot be calculated. b. will be favourable. c. will be unfavourable. d. will be greater than the spending variance.

Answer 60

c

Question 61

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

Answer 61

c

Question 62

95. The spending variance relates to a. fixed overhead costs. b. variable overhead costs. c. both fixed and variable overhead costs. d. all manufacturing costs.

Answer 62

c

Question 63

96. The difference between fixed overhead budgeted and overhead applied is the a. budget variance. b. spending variance. c. total overhead variance. d. volume variance

Answer 63

d

Question 64

97. The fixed overhead variance that indicates whether plant facilities were efficiently used is the a. budget variance. b. efficiency variance. c. spending variance. d. volume variance.

Answer 64

d

Question 65

98. Each of the following may cause an unfavourable variable budget variance except a. higher than expected use of indirect materials. b. greater than expected use of indirect labour. c. increases in indirect manufacturing costs. d. inefficient use of direct labour

Answer 65

d

Question 66

99. The difference between actual overhead costs and overhead costs applied is the a. budget variance. b. spending variance. c. total overhead variance. d. volume variance.

Answer 66

c

Question 67

100. Variance reports are a. external financial reports. b. Revenue Canada tax reports. c. internal reports for management. d. all of these.

Answer 67

c

Question 68

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

Answer 68

b

Question 69

102. All of the following variances are reported to the production department except the a. labour price variance. b. materials price variance. c. overhead controllable variance. d. labour price and materials price variances.

Answer 69

b

Question 70

103. The costing of inventories at standard cost for external financial statement reporting purposes is a. not permitted. b. preferable to reporting at actual costs. c. in accordance with generally accepted accounting principles if significant differences exist between actual costs and standard costs. d. in accordance with generally accepted accounting principles if significant differences do not exist between actual and standard costs.

Answer 70

d

Question 71

104. Which of the following could cause a debit balance in the direct material price variance accounts? a. Paying more than the standard price per unit for direct material b. Paying less than the standard price per unit for direct material c. Using more than the standard quantity of direct material d. Using less than the standard quantity of direct material

Answer 71

a

Question 72

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

Answer 72

a

Question 73

106. In income statements prepared for management under a standard cost accounting system, each of the following are reported at actual amounts except a. sales. b. selling expenses. c. gross profit. d. cost of goods sold.

Answer 73

d

Question 74

*107. If 20,000 kilograms of direct materials are purchased for $14,400 on account and the standard cost is $.70 per kilogram, the journal entry to record the purchase is a. Raw Materials Inventory 14,400 Accounts Payable 14,400 b. Work In Process Inventory 14,400 Accounts Payable 14,000 Materials Quantity Variance 400 c. Raw Materials Inventory 14,400 Accounts Payable 14,000 Materials Price Variance 400 d. Raw Materials Inventory 14,000 Materials Price Variance 400 Accounts Payable 14,400

Answer 74

d

Question 75

* 108. A standard cost system may be used with a. job order costing only. b. process costing only. c. activity-based costing. d. either job order or process costing.

Answer 75

d

Question 76

* 109. The materials price variance is recorded a. at the end of the accounting period. b. when materials are purchased. c. when materials are issued to production. d. at the beginning of the accounting period.

Answer 76

b

Question 77

* 110. Each of the following accounts is recorded at standard cost except a. Factory Labour. b. Raw Materials Inventory. c. Wages Payable. d. Work in Process Inventory.

Answer 77

c

Question 78

EKPN Co. Produces wooden boxes. The company’s standards per box require 6 boards, each costing $10 per board, and half of an hour of direct labour. The standard labour rate is $15 per hour. In August, EKPN Co. Purchased 12,000 boards for a total cost of $123,000. It used 11,500 boards to manufacture 1,900 boxes. Total labour hours were 1,000 hours, and total labour costs were $16,250. 111. What was the materials price variance for August? a. $3,000 F b. $3,000 U c. $ 8,000 F d. $8,000 U

Answer 78

b

Question 79

EKPN Co. Produces wooden boxes. The company’s standards per box require 6 boards, each costing $10 per board, and half of an hour of direct labour. The standard labour rate is $15 per hour. In August, EKPN Co. Purchased 12,000 boards for a total cost of $123,000. It used 11,500 boards to manufacture 1,900 boxes. Total labour hours were 1,000 hours, and total labour costs were $16,250. 112. What was the material quantity variance for August? a. $5,000 U b. $5,000 F c. $1,000 U d. $1,000 F

Answer 79

c

Question 80

EKPN Co. Produces wooden boxes. The company’s standards per box require 6 boards, each costing $10 per board, and half of an hour of direct labour. The standard labour rate is $15 per hour. In August, EKPN Co. Purchased 12,000 boards for a total cost of $123,000. It used 11,500 boards to manufacture 1,900 boxes. Total labour hours were 1,000 hours, and total labour costs were $16,250 113. What was the labour quantity variance for August? a. $750 F b. $750 U c. $13,500 F d. $13,500 U

Answer 80

b

Question 81

EKPN Co. Produces wooden boxes. The company’s standards per box require 6 boards, each costing $10 per board, and half of an hour of direct labour. The standard labour rate is $15 per hour. In August, EKPN Co. Purchased 12,000 boards for a total cost of $123,000. It used 11,500 boards to manufacture 1,900 boxes. Total labour hours were 1,000 hours, and total labour costs were $16,250. 114. What was the labour price variance? a. $1,250 U b. $1,250 F c. $4,250 F d. $4,250 U

Answer 81

a

Question 82

EKPN Co. Produces wooden boxes. The company’s standards per box require 6 boards, each costing $10 per board, and half of an hour of direct labour. The standard labour rate is $15 per hour. In August, EKPN Co. Purchased 12,000 boards for a total cost of $123,000. It used 11,500 boards to manufacture 1,900 boxes. Total labour hours were 1,000 hours, and total labour costs were $16,250. 115. What was the total labour variance for August? a. $1.25 F b. $1.25 U c. $2,000 F d. $2,000 U

Answer 82

d

Question 83

116. Blue Fin Co. produces a product requiring 10 kilograms of material at $1.50 per kilogram. Blue Fin produced 10,000 products during 2009 resulting in a $30,000 unfavourable materials quantity variance. How much direct material did Blue Fin use during 2009? a. 120,000 kilograms b. 100,000 kilograms c. 200,000 kilograms d. 145,000 kilograms

Answer 83

a

Question 84

117. Wild West Inc. produces a product requiring 3 direct labour hours at $20.00 per hour. During January, 2,000 products are produced using 6,300 direct labour hours. Wild West’s actual payroll during January was $122,850. What is the labour quantity variance? a. $2,850 U b. $6,000 F c. $3,150 F d. $6,000 U

Answer 84

d

Question 85

118. Which of the following statements describes the customer perspective in the balanced scorecard? a. It establishes which people should be targeted as potential customers. b. It evaluates the profitability of specific customers rather than the profitability of specific products or services. c. It evaluates how well the company is performing from the viewpoint of those people who buy and use its products or services. d. It evaluates which customers are not profitable and should be dropped.

Answer 85

c

Question 86

119. Which of the following would be an objective for the internal process perspective? a. Profit per employee b. Customer retention c. Training hours d. Planning accuracy

Answer 86

d

Question 87

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

Answer 87

b

Question 88

121. When analyzing period end variance reports, if a variance amount is small the manager should: a. Consider the variance within normal terms and ignore it for that period. b. Combine all such small variances and if they show a larger variance, investigate them then. c. Consider investigating the variance as there may be undetected swings in the intervening period that require investigation. d. Focus his or her attention on more material variances.

Answer 88

c

Question 89

122. A favourable variance in a cost report: a. Is a positive result for a manager. b. Is a negative result for a manager. c. Can be ignored especially if it is a minor amount. d. Should be investigated along with any negative variances.

Answer 89

d

Question 90

123. If standard cost reports emphasize meeting predetermined standards: a. There should be non-financial performance measures available to management to supplement the cost reports. b. Management can control the department properly with standard cost reports. c. The budget process should be sufficient to support management’s performance. d. All members of the team will be able to properly identify critical variance issues.

Answer 90

a

Question 91

124. A problem with placing excessive emphasis on labour efficiency can be: a. Material costs get ignored. b. Pressure can be put on workers to work unsafely. c. Overhead costs can be improperly estimated. d. Work in progress and finished goods inventories can build up beyond acceptable levels.

Answer 91

d

Question 92

125. A good system of standard costing always: a. Ensures that the right staff are to blame if there are negative variances. b. Ensures that the right staff are both rewarded and blamed when there are positive or negative variances. c. Avoids excessive detail in examining small variances. d. Considers the impact of morale on all those who utilize the reporting system.

Answer 92

d

Question 93

126. When a company implements a balanced scorecard approach in its business: a. It must ensure that it focuses on every aspect of its operations. b. It must ensure that only one or two areas is seen as the focus. c. It must establish performance measures that are focused on the specific strategy of the company. d. It must never supplant the traditional accounting information that is available to management.

Answer 93

c

Question 94

127. In designing a balanced scorecard approach for its operations, a company should: a. Seek to determine as much detail as possible from its activities. b. Be readily available as a discussion tool between management and shareholders. c. Attempt to link performance measures on a cause and effect basis. d. Eliminate any financial results as these will be dealt with in.

Answer 94

c

Question 95

128. One problem with standard cost reports is: a. They can only be read effectively by trained accountants. b. The are often prepared well after the events that give rise to them. c. Not everyone in the organization can agree on their use. d. They allow for shareholders to ask difficult questions from management.

Answer 95

b

Question 96

129. In a standard cost variance report: a. The largest unfavourable variance is the one that will impact on the company the most. b. The largest positive variance can be scanned and cleared the quickest. c. The trend or pattern of variances on a period-to-period basis should be monitored. d. Management must set predetermined variance limits that will dictate what variances must be investigated

Answer 96

c

Question 97

130. Which of the following would generally not be a cause to adjust standard cost rates in a service industry? a. Wage rate increase for the cleaners b. Electricity charges from the municipality c. Salary increases for management d. Cleaning supplies increases from suppliers

Answer 97

c

Question 98

32. The difference between a budget and a standard is that a. 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.

Answer 98

C

Question 99

33. Standard costs may be used by a. universities. b. governmental agencies. c. charitable organizations. d. all of these.

Answer 99

D

Question 100

34. 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

Answer 100

A

Question 101

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

Answer 101

A

Question 102

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

Answer 102

B

Question 103

37. 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 stockholders is required.

Answer 103

A

Question 104

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

Answer 104

D

Question 105

39. 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.

Answer 105

c

Question 106

40. 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."

Answer 106

c

Question 107

41. If a company is concerned with the potential negative effects of establishing standards, they should a. 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

Answer 107

b

Question 108

42. 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

Answer 108

d

Question 109

43. Ideal standards a. 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.

Answer 109

c

Question 110

44. The final decision as to what standard cost should be is the responsibility of a. the quality control engineer. b. the managerial accountants. c. the purchasing agent. d. management.

Answer 110

d

Question 111

45. The labour time requirements for standards may be determined by the a. sales manager. b. product manager. c. industrial engineers. d. payroll department manager.

Answer 111

c

Question 112

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

Answer 112

b

Question 113

47. The most rigorous of all standards is the a. normal standard. b. realistic standard. c. ideal standard. d. conceivable standard.

Answer 113

c

Question 114

48. Most companies that use standards set them at a. the normal level. b. a conceivable level. c. the ideal level. d. last year's level.

Answer 114

a

Question 115

49. A managerial accountant 1. does not participate in the standard setting process. 2. provides knowledge of cost behaviours in the standard setting process. 3. provides input of historical costs to the standard setting process. a. 1 b. 2 c. 3 d. 2 and 3

Answer 115

d

Question 116

50. The cost of freight-in a. 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.

Answer 116

a

Question 117

51. The direct materials quantity standard would not be expressed in a. kilograms. b. barrels. c. dollars. d. board metres.

Answer 117

c

Question 118

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

Answer 118

c

Question 119

53. The direct labour quantity standard is sometimes called the direct labour a. volume standard. b. effectiveness standard. c. efficiency standard. d. quality standard

Answer 119

c

Question 120

54. A manufacturing company would include setup and downtime in their direct a. materials price standard. b. materials quantity standard. c. labour price standard. d. labour quantity standard

Answer 120

d

Question 121

55. Allowance for spoilage is part of the direct a. materials price standard. b. materials quantity standard. c. labour price standard. d. labour quantity standard

Answer 121

b

Question 122

56. The total standard cost to produce one unit of product is shown a. 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

Answer 122

c

Question 123

57. An unfavourable materials quantity variance would occur if a. more materials are purchased than are used. b. actual kilograms of materials used were less than the standard kilograms llowed. c. actual labour hours used were greater than the standard labour hours allowed. d. actual kilograms of materials used were greater than the standard kilograms allowed.

Answer 123

d

Question 124

58. If actual direct material costs are greater than standard direct materials costs, it means that a. 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.

Answer 124

c

Question 125

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

Answer 125

b

Question 126

60. A total materials variance is analyzed in terms of a. price and quantity variances. b. buy and sell variances. c. quantity and quality variances. d. tight and loose variances.

Answer 126

b

Question 127

Use the following information for questions 61 and 62: A company developed the following per-unit standards for its product: 5 kilograms of direct materials at $3 per kilogram. Last month, 1,000 kilograms of direct materials were purchased for $2,900. Also last month, 700 kilograms of direct materials were used to produce 135 units. 61. What was the direct materials price variance for last month? a. $12,100 favourable b. $100 favourable c. $12,100 unfavourable d. $100 unfavourable 62. What was the direct materials quantity variance for last month? a. $75 unfavourable b. $75 favourable c. $900 unfavourable d. $900 favourable

Answer 127

b a

Question 128

63. The per-unit standards for direct labour are 3 direct labour hours at $15 per hour. If in producing 700 units, the actual direct labour cost was $31,175 for 2,150 direct labour hours worked, the total direct labour variance is a. $50 unfavourable. b. $325 favourable. c. $50 favourable. d. $325 unfavourable.

Answer 128

b

Question 129

64. The standard rate of pay is $15 per direct labour hour. If the actual direct labour payroll was $58,800 for 4,000 direct labour hours worked, the direct labour price (rate) variance is a. $1,200 unfavourable. b. $1,200 favourable. c. $1,500 unfavourable. d. $1,500 favourable.

Answer 129

b

Question 130

65. The standard number of hours that should have been worked for the output attained is 8,000 direct labour hours and the actual number of direct labour hours worked was 8,400. If the direct labour price variance was $8,400 unfavourable, and the standard rate of pay was $18 per direct labour hour, what was the actual rate of pay for direct labour? a. $17.00 per direct labour hour b. $15.00 per direct labour hour c. $19.00 per direct labour hour d. $18.00 per direct labour hour

Answer 130

c

Question 131

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

Answer 131

a

Question 132

67. A favourable variance a. 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

Answer 132

b

Question 133

68. The total materials variance is equal to the a. 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.

Answer 133

d

Question 134

69. The total overhead budget variance is equal to the a. sum of the total materials variance and the total labour variance. b. difference between the total materials variance and the total labour variance. c. difference between the actual overhead costs and the overhead costs applied to the work done. d. total variance minus the spending variance and the volume variance.

Answer 134

c

Question 135

70. The total variance is $10,000. The total materials variance is $4,000. The total labour variance is twice the total overhead variance. What is the total overhead variance? a. $1,000 b. $2,000 c. $3,000 d. $4,000

Answer 135

b

Question 136

71. The formula for the materials price variance is a. (AQ × SP) – (SQ × SP). b. (AQ × AP) – (AQ × SP). c. (AQ × AP) – (SQ × SP). d. (AQ × SP) – (SQ × AP).

Answer 136

b

Question 137

72. The formula for the materials quantity variance is a. (SQ × AP) – (SQ × SP). b. (AQ × AP) – (AQ × SP). c. (AQ × SP) – (SQ × SP). d. (AQ × AP) – (SQ × SP).

Answer 137

c

Question 138

73. A company uses 3,150 kilograms of materials and exceeds the standard by 150 kilograms. The quantity variance is $900 unfavourable. What is the standard price? a. $2.00 b. $3.50 c. $4.00 d. $6.00

Answer 138

d

Question 139

74. A company purchases 130,000 kilograms of materials. The materials price variance is $26,000 favourable. What is the difference between the standard and actual price paid for the materials? a. $5.00 b. $0.20 c. $5.50 d. $0.25

Answer 139

b

Question 140

75. A company uses 40,000 kilograms of materials for which they paid $9.00 a kilogram. The materials price variance was $80,000 favourable. What is the standard price per kilogram? a. $2.00 b. $7.00 c. $10.00 d. $11.00

Answer 140

d

Question 141

76. If the materials price variance is $600 F and the materials quantity and labour variances are each $450 U, what is the total materials variance? a. $600 F b. $450 U c. $150 F d. $1,050 U

Answer 141

c

Question 142

80. The matrix approach to variance analysis a. 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.

Answer 142

d

Question 143

81. Labour efficiency is measured by the a. materials quantity variance. b. total labour variance. c. labour quantity variance. d. labour rate variance.

Answer 143

c

Question 144

82. An unfavourable labour quantity variance may be caused by a. paying workers higher wages than expected. b. paying workers a bonus at year-end. c. worker fatigue or carelessness. d. higher pay rates mandated by union contracts.

Answer 144

c

Question 145

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

Answer 145

b

Question 146

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

Answer 146

a

Question 147

85. If the labour quantity variance is unfavourable and the cause is inefficient use of direct labour, the responsibility rests with the a. sales department. b. production department. c. budget office. d. controller's department.

Answer 147

b

Question 148

86. An overhead fixed volume variance is calculated as the difference between normal capacity hours and standard hours allowed a. 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.

Answer 148

c

Question 149

87. Manufacturing overhead costs are applied to work in process on the basis of a. actual hours worked. b. standard hours allowed. c. ratio of actual variable to fixed costs. d. actual overhead costs incurred.

Answer 149

b

Question 150

88. 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 favourable if standard hours allowed for output are greater than the standard hours at normal capacity

Answer 150

b

Question 151

89. If the standard hours allowed are less than the standard hours at normal capacity, a. the overhead volume variance will be unfavourable. b. variable overhead costs will be under-applied. c. the overhead controllable variance will be favourable. d. variable overhead costs will be over-applied

Answer 151

a

Question 152

90. Which of the following statements about overhead variances is false? a. Standard hours allowed are used in calculating the spending variance. b. Standard hours allowed are used in calculating the volume variance. c. The spending variance pertains solely to fixed costs. d. The total overhead variance pertains to both variable and fixed costs.

Answer 152

c

Question 153

91. The overhead volume variance relates only to a. variable overhead costs. b. fixed overhead costs. c. both variable and fixed overhead costs. d. all manufacturing costs.

Answer 153

b

Question 154

92. The fixed overhead spending variance is calculated as the difference between actual overhead costs incurred and the budgeted a. 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.

Answer 154

a

Question 155

93. If the standard hours allowed are less than the standard hours at normal capacity, the volume variance a. cannot be calculated. b. will be favourable. c. will be unfavourable. d. will be greater than the spending variance.

Answer 155

c

Question 156

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

Answer 156

c

Question 157

95. The spending variance relates to a. fixed overhead costs. b. variable overhead costs. c. both fixed and variable overhead costs. d. all manufacturing costs.

Answer 157

c

Question 158

96. The difference between fixed overhead budgeted and overhead applied is the a. budget variance. b. spending variance. c. total overhead variance. d. volume variance

Answer 158

d

Question 159

97. The fixed overhead variance that indicates whether plant facilities were efficiently used is the a. budget variance. b. efficiency variance. c. spending variance. d. volume variance.

Answer 159

d

Question 160

98. Each of the following may cause an unfavourable variable budget variance except a. higher than expected use of indirect materials. b. greater than expected use of indirect labour. c. increases in indirect manufacturing costs. d. inefficient use of direct labour

Answer 160

d

Question 161

99. The difference between actual overhead costs and overhead costs applied is the a. budget variance. b. spending variance. c. total overhead variance. d. volume variance.

Answer 161

c

Question 162

100. Variance reports are a. external financial reports. b. Revenue Canada tax reports. c. internal reports for management. d. all of these.

Answer 162

c

Question 163

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

Answer 163

b

Question 164

102. All of the following variances are reported to the production department except the a. labour price variance. b. materials price variance. c. overhead controllable variance. d. labour price and materials price variances.

Answer 164

b

Question 165

103. The costing of inventories at standard cost for external financial statement reporting purposes is a. not permitted. b. preferable to reporting at actual costs. c. in accordance with generally accepted accounting principles if significant differences exist between actual costs and standard costs. d. in accordance with generally accepted accounting principles if significant differences do not exist between actual and standard costs.

Answer 165

d

Question 166

104. Which of the following could cause a debit balance in the direct material price variance accounts? a. Paying more than the standard price per unit for direct material b. Paying less than the standard price per unit for direct material c. Using more than the standard quantity of direct material d. Using less than the standard quantity of direct material

Answer 166

a

Question 167

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

Answer 167

a

Question 168

106. In income statements prepared for management under a standard cost accounting system, each of the following are reported at actual amounts except a. sales. b. selling expenses. c. gross profit. d. cost of goods sold.

Answer 168

d

Question 169

*107. If 20,000 kilograms of direct materials are purchased for $14,400 on account and the standard cost is $.70 per kilogram, the journal entry to record the purchase is a. Raw Materials Inventory 14,400 Accounts Payable 14,400 b. Work In Process Inventory 14,400 Accounts Payable 14,000 Materials Quantity Variance 400 c. Raw Materials Inventory 14,400 Accounts Payable 14,000 Materials Price Variance 400 d. Raw Materials Inventory 14,000 Materials Price Variance 400 Accounts Payable 14,400

Answer 169

d

Question 170

* 108. A standard cost system may be used with a. job order costing only. b. process costing only. c. activity-based costing. d. either job order or process costing.

Answer 170

d

Question 171

* 109. The materials price variance is recorded a. at the end of the accounting period. b. when materials are purchased. c. when materials are issued to production. d. at the beginning of the accounting period.

Answer 171

b

Question 172

* 110. Each of the following accounts is recorded at standard cost except a. Factory Labour. b. Raw Materials Inventory. c. Wages Payable. d. Work in Process Inventory.

Answer 172

c

Question 173

EKPN Co. Produces wooden boxes. The company’s standards per box require 6 boards, each costing $10 per board, and half of an hour of direct labour. The standard labour rate is $15 per hour. In August, EKPN Co. Purchased 12,000 boards for a total cost of $123,000. It used 11,500 boards to manufacture 1,900 boxes. Total labour hours were 1,000 hours, and total labour costs were $16,250. 111. What was the materials price variance for August? a. $3,000 F b. $3,000 U c. $ 8,000 F d. $8,000 U

Answer 173

b

Question 174

EKPN Co. Produces wooden boxes. The company’s standards per box require 6 boards, each costing $10 per board, and half of an hour of direct labour. The standard labour rate is $15 per hour. In August, EKPN Co. Purchased 12,000 boards for a total cost of $123,000. It used 11,500 boards to manufacture 1,900 boxes. Total labour hours were 1,000 hours, and total labour costs were $16,250. 112. What was the material quantity variance for August? a. $5,000 U b. $5,000 F c. $1,000 U d. $1,000 F

Answer 174

c

Question 175

EKPN Co. Produces wooden boxes. The company’s standards per box require 6 boards, each costing $10 per board, and half of an hour of direct labour. The standard labour rate is $15 per hour. In August, EKPN Co. Purchased 12,000 boards for a total cost of $123,000. It used 11,500 boards to manufacture 1,900 boxes. Total labour hours were 1,000 hours, and total labour costs were $16,250 113. What was the labour quantity variance for August? a. $750 F b. $750 U c. $13,500 F d. $13,500 U

Answer 175

b

Question 176

EKPN Co. Produces wooden boxes. The company’s standards per box require 6 boards, each costing $10 per board, and half of an hour of direct labour. The standard labour rate is $15 per hour. In August, EKPN Co. Purchased 12,000 boards for a total cost of $123,000. It used 11,500 boards to manufacture 1,900 boxes. Total labour hours were 1,000 hours, and total labour costs were $16,250. 114. What was the labour price variance? a. $1,250 U b. $1,250 F c. $4,250 F d. $4,250 U

Answer 176

a

Question 177

EKPN Co. Produces wooden boxes. The company’s standards per box require 6 boards, each costing $10 per board, and half of an hour of direct labour. The standard labour rate is $15 per hour. In August, EKPN Co. Purchased 12,000 boards for a total cost of $123,000. It used 11,500 boards to manufacture 1,900 boxes. Total labour hours were 1,000 hours, and total labour costs were $16,250. 115. What was the total labour variance for August? a. $1.25 F b. $1.25 U c. $2,000 F d. $2,000 U

Answer 177

d

Question 178

116. Blue Fin Co. produces a product requiring 10 kilograms of material at $1.50 per kilogram. Blue Fin produced 10,000 products during 2009 resulting in a $30,000 unfavourable materials quantity variance. How much direct material did Blue Fin use during 2009? a. 120,000 kilograms b. 100,000 kilograms c. 200,000 kilograms d. 145,000 kilograms

Answer 178

a

Question 179

117. Wild West Inc. produces a product requiring 3 direct labour hours at $20.00 per hour. During January, 2,000 products are produced using 6,300 direct labour hours. Wild West’s actual payroll during January was $122,850. What is the labour quantity variance? a. $2,850 U b. $6,000 F c. $3,150 F d. $6,000 U

Answer 179

d

Question 180

118. Which of the following statements describes the customer perspective in the balanced scorecard? a. It establishes which people should be targeted as potential customers. b. It evaluates the profitability of specific customers rather than the profitability of specific products or services. c. It evaluates how well the company is performing from the viewpoint of those people who buy and use its products or services. d. It evaluates which customers are not profitable and should be dropped.

Answer 180

c

Question 181

119. Which of the following would be an objective for the internal process perspective? a. Profit per employee b. Customer retention c. Training hours d. Planning accuracy

Answer 181

d

Question 182

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

Answer 182

b

Question 183

121. When analyzing period end variance reports, if a variance amount is small the manager should: a. Consider the variance within normal terms and ignore it for that period. b. Combine all such small variances and if they show a larger variance, investigate them then. c. Consider investigating the variance as there may be undetected swings in the intervening period that require investigation. d. Focus his or her attention on more material variances.

Answer 183

c

Question 184

122. A favourable variance in a cost report: a. Is a positive result for a manager. b. Is a negative result for a manager. c. Can be ignored especially if it is a minor amount. d. Should be investigated along with any negative variances.

Answer 184

d

Question 185

123. If standard cost reports emphasize meeting predetermined standards: a. There should be non-financial performance measures available to management to supplement the cost reports. b. Management can control the department properly with standard cost reports. c. The budget process should be sufficient to support management’s performance. d. All members of the team will be able to properly identify critical variance issues.

Answer 185

a

Question 186

124. A problem with placing excessive emphasis on labour efficiency can be: a. Material costs get ignored. b. Pressure can be put on workers to work unsafely. c. Overhead costs can be improperly estimated. d. Work in progress and finished goods inventories can build up beyond acceptable levels.

Answer 186

d

Question 187

125. A good system of standard costing always: a. Ensures that the right staff are to blame if there are negative variances. b. Ensures that the right staff are both rewarded and blamed when there are positive or negative variances. c. Avoids excessive detail in examining small variances. d. Considers the impact of morale on all those who utilize the reporting system.

Answer 187

d

Question 188

126. When a company implements a balanced scorecard approach in its business: a. It must ensure that it focuses on every aspect of its operations. b. It must ensure that only one or two areas is seen as the focus. c. It must establish performance measures that are focused on the specific strategy of the company. d. It must never supplant the traditional accounting information that is available to management.

Answer 188

c

Question 189

127. In designing a balanced scorecard approach for its operations, a company should: a. Seek to determine as much detail as possible from its activities. b. Be readily available as a discussion tool between management and shareholders. c. Attempt to link performance measures on a cause and effect basis. d. Eliminate any financial results as these will be dealt with in.

Answer 189

c

Question 190

128. One problem with standard cost reports is: a. They can only be read effectively by trained accountants. b. The are often prepared well after the events that give rise to them. c. Not everyone in the organization can agree on their use. d. They allow for shareholders to ask difficult questions from management.

Answer 190

b

Question 191

129. In a standard cost variance report: a. The largest unfavourable variance is the one that will impact on the company the most. b. The largest positive variance can be scanned and cleared the quickest. c. The trend or pattern of variances on a period-to-period basis should be monitored. d. Management must set predetermined variance limits that will dictate what variances must be investigated

Answer 191

c

Question 192

130. Which of the following would generally not be a cause to adjust standard cost rates in a service industry? a. Wage rate increase for the cleaners b. Electricity charges from the municipality c. Salary increases for management d. Cleaning supplies increases from suppliers

Answer 192

c