Question 1

A spending variance results from incurring more overhead costs than allowed for the actual level of activity achieved.

Accepted Answer

A) True 
 B)False

Question 2

Standard cost systems variance computations
Livingston Corporation recently implemented a standard cost system. The company's cost accountant has provided the following data to perform a variance analysis for May:
Compute the following variances. 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: $___________
(e) Overhead spending variance: $___________
(f) Overhead volume variance: $___________
 \(\begin{array}{|l|l|}
\hline \text { Standard Cost Information } & \
\hline \text { Direct Material Standard Price } & \$ 12 \text { per pound } \
\hline \text { Standard Quantity Allowed Per Unit } & 4 \text { pounds per unit } \
\hline \text { Direct Labor Standard Rate } & \$ 7 \text { per hour } \
\hline \text { Standard Hours Allowed Per Unit } & 0.5 \text { hours per unit } \
\hline \text { Fixed Overhead Budgeted } & \$ 24,000 \text { per month } \
\hline \text { Normal Level of Production } & 12,000 \text { units per month } \
\hline \text { Variable Overhead Application Rate } & \$ 1.80 \text { per unit } \\hline \text { Fixed Overhead Application Rate } & \
\hline(\$ 24,000 / 12,000 \text { units }) & \$ 2.00 \text { per unit } \
\hline \text { Total Overhead Application Rate } & \$ 3.80 \text { per unit } \
\hline\\hline \text { Actual Cost Information } & \
\hline \text { Cost of Material Purchased \& Used } & \$ 429,000 \
\hline \text { Pounds of Material Purchased \& Used } & 39,000 \text { pounds } \
\hline \text { Cost of Direct Labor } & \$ 23,100 \
\hline \text { Hours of Direct Labor } & 4,200 \text { hours } \
\hline \text { Cost of Variable Overhead } & \$ 17,750 \
\hline \text { Cost of Fixed Overhead } & \$ 24,200 \
\hline \text { Actual Volume of Production } & 10,400 \text { units } \
\hline
\end{array}\)

Accepted Answer

(a) 39,000 F (b) 31,

Question 3

In most companies using standard cost procedures, the costs charged to Work-in-Process, Finished Goods, and Cost of Goods Sold are the actual costs, not the standard costs.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is not an accurate budgeted amount for an output level of 90,000 units?

Accepted Answer

A)  Total overhead cost, $86,900 
B)  Total manufacturing costs, $183,150 
C)  Direct materials, $39,375 
D)  Direct labor, $49,500 
A)  Total overhead cost, $86,900 
B)  Total manufacturing costs, $183,150 
C)  Direct materials, $39,375 
D)  Direct labor, $49,500

Question 5

In a standard cost system, finished goods are reported in:

Accepted Answer

A)  The balance sheet at standard cost. 
B)  The balance sheet at actual cost. 
C)  The income statement at standard cost. 
D)  The income statement at actual cost. 
A)  The balance sheet at standard cost. 
B)  The balance sheet at actual cost. 
C)  The income statement at standard cost. 
D)  The income statement at actual cost.

Question 6

The direct labor efficiency variance for the period was:

Accepted Answer

A)  $360 favorable. 
B)  $360 unfavorable. 
C)  $320 favorable. 
D)  $320 unfavorable. 
A)  $360 favorable. 
B)  $360 unfavorable. 
C)  $320 favorable. 
D)  $320 unfavorable.

Question 7

Standard cost system materials variances
Levron Corporation manufactures a line of cosmetics. The standard price of the ingredients in its beauty cream is $7 per ounce; the standard amount of material allowed per jar is 1.25 ounces. During December, 5,300 jars were produced, requiring 6,784 ounces of ingredients at a total direct materials cost of $37,312.
(a) Calculate the materials price variance for December. Indicate whether it is favorable (F) or unfavorable (U). $___________.
(b) Who is responsible for this variance? _________.
(c) Calculate the materials quantity variance for December. Indicate whether it is favorable (F) or unfavorable (U). $___________.
(d) What is Levron Corporation's total materials variance for December? Indicate whether it is favorable (F) or unfavorable (U). $___________.

Accepted Answer

(a) 10,176 F (b) Pur

Question 8

In a standard cost system actual costs are recorded in Material, Direct Labor, and Overhead accounts, but standard costs are charged to Work-in-Process.

Accepted Answer

A) True 
 B)False

Question 9

Smith's actual manufacturing costs for May totaled $72,000, whereas budgeted manufacturing costs (at standard) were $80,000. A comparison of the budgeted costs and actual amounts:

Accepted Answer

A)  Is not significant unless the budgeted and actual figures are based upon the same level of production. 
B)  Demonstrates that Smith's Manufacturing Department operated very efficiently during May. 
C)  Indicates that production cost per unit was 10% below budgeted cost per unit. 
D)  Indicates that Smith produced only 90% of the number of units budgeted for production in May. 
A)  Is not significant unless the budgeted and actual figures are based upon the same level of production. 
B)  Demonstrates that Smith's Manufacturing Department operated very efficiently during May. 
C)  Indicates that production cost per unit was 10% below budgeted cost per unit. 
D)  Indicates that Smith produced only 90% of the number of units budgeted for production in May.

Question 10

Standard cost system overhead variances
Rogers Manufacturing produces a component part used throughout the computer industry. Variable overhead is allocated to production at a rate of $5 per unit. The company's monthly fixed overhead costs average $30,000. Normal output levels average 40,000 units per month. During April, Rogers produced 50,000 units and incurred actual overhead costs of $280,000.
(a) Total overhead applied to production in April amounted to $__________.
(b) Total overhead budgeted in April for the level of output achieved amounted to $__________.
(c) April's overhead spending variance was $___________ (favorable/unfavorable).
(d) April's overhead volume variance was $___________ (favorable/unfavorable).
(e) For which of Rogers' two overhead variances is the production manager held responsible?

Accepted Answer

(a) 287,500 (b) 280,

Question 11

A favorable materials price variance indicates that actual prices paid in acquiring materials were more than standard prices.

Accepted Answer

A) True 
 B)False

Question 12

Standard costs are typically reviewed once per year.

Accepted Answer

A) True 
 B)False

Question 13

In evaluating cost variances, the accounting department determines whether variances are favorable or unfavorable.

Accepted Answer

A) True 
 B)False

Question 14

An unfavorable overhead volume variance indicates that:

Accepted Answer

A)  Total fixed overhead has exceeded the standard amount budgeted. 
B)  Variance overhead per unit has exceeded the standard amount budgeted. 
C)  Actual production was less than the normal volume of output. 
D)  Actual production was more than the normal volume of output. 
A)  Total fixed overhead has exceeded the standard amount budgeted. 
B)  Variance overhead per unit has exceeded the standard amount budgeted. 
C)  Actual production was less than the normal volume of output. 
D)  Actual production was more than the normal volume of output.

Question 15

When standard costs are used in a cost accounting system:

Accepted Answer

A)  A favorable cost variance results when standard amounts are less than actual costs. 
B)  Cost variances are shown in the year-end balance sheet as assets, if favorable, or as liabilities, if unfavorable. 
C)  Costs charged to the Work-in-Process Inventory, Finished Goods Inventory, and Cost of Goods Sold accounts are actual costs. 
D)  Costs charged to the Work-in-Process Inventory, Finished Goods Inventory, and Cost of Goods Sold accounts are at standard costs. 
A)  A favorable cost variance results when standard amounts are less than actual costs. 
B)  Cost variances are shown in the year-end balance sheet as assets, if favorable, or as liabilities, if unfavorable. 
C)  Costs charged to the Work-in-Process Inventory, Finished Goods Inventory, and Cost of Goods Sold accounts are actual costs. 
D)  Costs charged to the Work-in-Process Inventory, Finished Goods Inventory, and Cost of Goods Sold accounts are at standard costs.

Question 16

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 total materials cost 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 17

In setting standards, management's level of performance expectation must be something less than ideal.

Accepted Answer

A) True 
 B)False

Question 18

A good standard cost system should always generate unfavorable variances.

Accepted Answer

A) True 
 B)False

Question 19

The materials quantity variance for Maple Company for June is:

Accepted Answer

A)  $990 favorable. 
B)  $520 unfavorable. 
C)  $490 unfavorable. 
D)  $520 favorable. 
A)  $990 favorable. 
B)  $520 unfavorable. 
C)  $490 unfavorable. 
D)  $520 favorable.

Question 20

A supervisor's salary is an example of:

Accepted Answer

A)  Direct labor. 
B)  Variable factory overhead. 
C)  A standard cost. 
D)  Fixed manufacturing costs. 
A)  Direct labor. 
B)  Variable factory overhead. 
C)  A standard cost. 
D)  Fixed manufacturing costs.

Exam 24: Standard Cost Systems

A spending variance results from incurring more overhead costs than allowed for the actual level of activity achieved.

In most companies using standard cost procedures, the costs charged to Work-in-Process, Finished Goods, and Cost of Goods Sold are the actual costs, not the standard costs.

Which of the following is not an accurate budgeted amount for an output level of 90,000 units?

In a standard cost system, finished goods are reported in:

The direct labor efficiency variance for the period was:

In a standard cost system actual costs are recorded in Material, Direct Labor, and Overhead accounts, but standard costs are charged to Work-in-Process.

Smith's actual manufacturing costs for May totaled $72,000, whereas budgeted manufacturing costs (at standard) were $80,000. A comparison of the budgeted costs and actual amounts:

A favorable materials price variance indicates that actual prices paid in acquiring materials were more than standard prices.

Standard costs are typically reviewed once per year.

In evaluating cost variances, the accounting department determines whether variances are favorable or unfavorable.

An unfavorable overhead volume variance indicates that:

When standard costs are used in a cost accounting system:

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 total materials cost variance is:

In setting standards, management's level of performance expectation must be something less than ideal.

A good standard cost system should always generate unfavorable variances.

The materials quantity variance for Maple Company for June is:

A supervisor's salary is an example of:

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

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