Question 1

Favorable standard cost variances are normally closed at the end of the period by:

Accepted Answer

A)  Crediting the variance account and debiting Cost of Goods Sold. 
B)  Debiting the variance account and crediting Cost of Goods Sold. 
C)  Debiting the variance account and crediting Work-in-Process. 
D)  Crediting the variance account and debiting Work-in-Process. 
A)  Crediting the variance account and debiting Cost of Goods Sold. 
B)  Debiting the variance account and crediting Cost of Goods Sold. 
C)  Debiting the variance account and crediting Work-in-Process. 
D)  Crediting the variance account and debiting Work-in-Process.

Question 2

In setting standard costs, management's expectations are that the standard costs will always be met.

Accepted Answer

A) True 
 B)False

Question 3

An important advantage of a standard cost system is that standard costs:

Accepted Answer

A)  Cause financial statements to be more comparable because different companies cost their inventories in the same manner. 
B)  Can be determined with great precision so that inventories are valued with complete accuracy. 
C)  Cause a lower net income, resulting in lower income taxes. 
D)  Focus attention on trouble spots and facilitate prompt corrective action. 
A)  Cause financial statements to be more comparable because different companies cost their inventories in the same manner. 
B)  Can be determined with great precision so that inventories are valued with complete accuracy. 
C)  Cause a lower net income, resulting in lower income taxes. 
D)  Focus attention on trouble spots and facilitate prompt corrective action.

Question 4

Accounting terminology
Listed below are seven technical accounting terms introduced or emphasized in this chapter:
Each of the following statements may (or may not) describe one of these technical terms. In the space provided beside each statement, indicate the accounting term described, or answer "None" if the statement does not correctly describe any of the terms.
______ (a) A materials variance which is the responsibility of the Purchasing Department.
______ (b) The variance which exists whenever actual production levels differ from normal levels.
______ (c) Unit costs expected to be incurred under normal conditions.
______ (d) A labor variance caused by a difference between standard and actual hours required to complete a task.
_____ (e) The variance caused by incurring more overhead costs than allowed for at a given level of production.
 $$\begin{array} { | l | l | } 
\hline \text { Labor rate variance } & \text { Labor efficiency variance } \
\hline \text { Volume variance } & \text { Materials price variance } \
\hline \text { Standard costs } & \text { Materials quantity variance } \
\hline \text { Overhead spending variance } & \
\hline
\end{array}$$

Accepted Answer

(a) Materials price variance (

Question 5

An unfavorable overhead volume variance results from:

Accepted Answer

A)  An unfavorable overhead spending variance. 
B)  Poor decisions made by the production manager. 
C)  Producing at levels of output which exceed normal output levels. 
D)  Producing at levels of output which fall short of normal output levels. 
A)  An unfavorable overhead spending variance. 
B)  Poor decisions made by the production manager. 
C)  Producing at levels of output which exceed normal output levels. 
D)  Producing at levels of output which fall short of normal output levels.

Question 6

The purchasing manager is often included in evaluating cost variances.

Accepted Answer

A) True 
 B)False

Question 7

A favorable variance occurs when actual costs are less than standard costs.

Accepted Answer

A) True 
 B)False

Question 8

If the standard quantity of materials is 84,500 units @ $0.15 per unit and the actual quantity is 95,000 units @ $0.12 per unit, then the materials quantity variance is:

Accepted Answer

A)  $2,850 Favorable. 
B)  $1,575 Unfavorable. 
C)  $1,275 Favorable. 
D)  $2,850 Unfavorable. 
A)  $2,850 Favorable. 
B)  $1,575 Unfavorable. 
C)  $1,275 Favorable. 
D)  $2,850 Unfavorable.

Question 9

Which statement is true regarding a standard cost system?

Accepted Answer

A)  Both actual and standard costs are used. 
B)  Only standard costs are used. 
C)  If variances occurred, then something negative in the operations has occurred. 
D)  Standards are used only when actual amounts are not available. 
A)  Both actual and standard costs are used. 
B)  Only standard costs are used. 
C)  If variances occurred, then something negative in the operations has occurred. 
D)  Standards are used only when actual amounts are not available.

Question 10

Under standard cost procedures, any differences between actual costs and standard costs are:

Accepted Answer

A)  Ignored until the end of the fiscal period, when they are shown in footnotes to the income statement. 
B)  Recorded in variance accounts. 
C)  Added to or subtracted from the standard cost amount immediately. 
D)  Treated as extraordinary production gains or losses. 
A)  Ignored until the end of the fiscal period, when they are shown in footnotes to the income statement. 
B)  Recorded in variance accounts. 
C)  Added to or subtracted from the standard cost amount immediately. 
D)  Treated as extraordinary production gains or losses.

Question 11

A material price variance is arrived at by taking standard quantity times actual price, less standard price.

Accepted Answer

A) True 
 B)False

Question 12

What is the standard cost for direct materials?

Accepted Answer

A)  $50. 
B)  $100. 
C)  $150. 
D)  $125. 
A)  $50. 
B)  $100. 
C)  $150. 
D)  $125.

Question 13

With respect to labor costs, Roman's production manager is responsible for:

Accepted Answer

A)  Any labor rate variance as well as any labor efficiency variance. 
B)  Only a labor rate variance. 
C)  Only a labor efficiency variance. 
D)  Only unfavorable labor variances. 
A)  Any labor rate variance as well as any labor efficiency variance. 
B)  Only a labor rate variance. 
C)  Only a labor efficiency variance. 
D)  Only unfavorable labor variances.

Question 14

James's materials price variance for June is:

Accepted Answer

A)  $3,150 unfavorable. 
B)  $3,150 favorable. 
C)  $3,210 unfavorable. 
D)  $3,210 favorable. 
A)  $3,150 unfavorable. 
B)  $3,150 favorable. 
C)  $3,210 unfavorable. 
D)  $3,210 favorable.

Question 15

The journal entry to record the cost of direct materials used in June includes each of the following except:

Accepted Answer

A)  A debit to Work-in-Process Inventory of $77,700. 
B)  A credit to Materials Price Variance of $3,210. 
C)  A credit to Direct Materials Inventory of $77,700. 
D)  A debit to Materials Quantity Variance of $1,480. 
A)  A debit to Work-in-Process Inventory of $77,700. 
B)  A credit to Materials Price Variance of $3,210. 
C)  A credit to Direct Materials Inventory of $77,700. 
D)  A debit to Materials Quantity Variance of $1,480.

Question 16

The materials quantity variance for James's June operations is:

Accepted Answer

A)  $3,150 favorable. 
B)  $3,210 unfavorable. 
C)  $1,480 unfavorable. 
D)  $3,210 favorable. 
A)  $3,150 favorable. 
B)  $3,210 unfavorable. 
C)  $1,480 unfavorable. 
D)  $3,210 favorable.

Question 17

Caesar, Inc. purchased and used 47,600 pounds of goods to produce an actual quantity of 15,300 units. Each unit required 3 pounds of goods. The quantity variance was $10,200 unfavorable and the price variance was $7,140 unfavorable. What was the actual price and the standard price per pound?

Accepted Answer

The actual quantity

Question 18

Compute the following cost variances for job no. 007. Indicate whether each variance is favorable (F) or unfavorable (U).
a. Materials price variance: $___________
b. Materials quantity variance: $___________
c. Labor rate variance: $___________
d. Labor efficiency variance: $___________

Accepted Answer

a. 41 U
b.

Question 19

Standard costs actually are ideal costs per unit.

Accepted Answer

A) True 
 B)False

Question 20

Factory overhead variances are usually recorded when:

Accepted Answer

A)  Overhead is applied to work-in-process. 
B)  Goods are finished and transferred to finished goods inventory. 
C)  Goods are sold. 
D)  Actual factory overhead costs are incurred. 
A)  Overhead is applied to work-in-process. 
B)  Goods are finished and transferred to finished goods inventory. 
C)  Goods are sold. 
D)  Actual factory overhead costs are incurred.

Exam 24: Standard Cost Systems

Favorable standard cost variances are normally closed at the end of the period by:

In setting standard costs, management's expectations are that the standard costs will always be met.

An important advantage of a standard cost system is that standard costs:

An unfavorable overhead volume variance results from:

The purchasing manager is often included in evaluating cost variances.

A favorable variance occurs when actual costs are less than standard costs.

If the standard quantity of materials is 84,500 units @ $0.15 per unit and the actual quantity is 95,000 units @ $0.12 per unit, then the materials quantity variance is:

Which statement is true regarding a standard cost system?

Under standard cost procedures, any differences between actual costs and standard costs are:

A material price variance is arrived at by taking standard quantity times actual price, less standard price.

What is the standard cost for direct materials?

With respect to labor costs, Roman's production manager is responsible for:

James's materials price variance for June is:

The journal entry to record the cost of direct materials used in June includes each of the following except:

The materials quantity variance for James's June operations is:

Caesar, Inc. purchased and used 47,600 pounds of goods to produce an actual quantity of 15,300 units. Each unit required 3 pounds of goods. The quantity variance was $10,200 unfavorable and the price variance was $7,140 unfavorable. What was the actual price and the standard price per pound?

Compute the following cost variances for job no. 007. Indicate whether each variance is favorable (F) or unfavorable (U). a. Materials price variance: $___________ b. Materials quantity variance: $___________ c. Labor rate variance: $___________ d. Labor efficiency variance: $___________

Standard costs actually are ideal costs per unit.

Factory overhead variances are usually recorded when:

Accounting: Information for Decision Making

Basic Financial Statements

The Accounting Cycle: Capturing Economic Events

The Accounting Cycle: Accruals and Deferrals

The Accounting Cycle: Reporting Financial Results

Merchandising Activities

Financial Assets

Inventories and the Cost of Goods Sold

Plant and Intangible Assets

Liabilities

Stockholders Equity: Paid-In Capital

Income and Changes in Retained Earnings

Statement of Cash Flows

Financial Statement Analysis

Global Business and Accounting

Management Accounting: a Business Partner

Job Order Cost Systems and Overhead Allocations

Process Costing

Costing and the Value Chain

Cost-Volume-Profit Analysis

Incremental Analysis

Responsibility Accounting and Transfer Pricing

Operational Budgeting

Rewarding Business Performance

Capital Budgeting

Forms of Business Organization

The Time Value of Money: Future Amounts and Present Values Answer Key

Filters

Compute the following cost variances for job no. 007. Indicate whether each variance is favorable (F) or unfavorable (U). a. Materials price variance: $_____ b. Materials quantity variance: $_ c. Labor rate variance: $_ d. Labor efficiency variance: $_____