Question 1

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 was

Accepted Answer

A) $30,000 unfavorable. 
B) $45,000 unfavorable. 
C) $45,000 favorable. 
D) $30,000 favorable.

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

It is possible that a company's financial statements may report inventories at

Accepted Answer

A) budgeted costs. 
B) standard costs. 
C) both budgeted and standard costs. 
D) None of these answers are correct.

Question 4

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?

Accepted Answer

A) $48,600 U 
B) $4,860 U 
C) $3,960 F 
D) $900 U

Question 5

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 quantity variance is

Accepted Answer

A) $1,200 U. 
B) $1,200 F. 
C) $1,320 F. 
D) $1,320 U.

Question 6

The direct materials quantity standard should

Accepted Answer

A) exclude unavoidable waste. 
B) exclude quality considerations. 
C) allow for normal spoilage. 
D) always be expressed as an ideal standard.

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is not considered an advantage of using standard costs?

Accepted Answer

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."

Question 9

Using standard costs

Accepted Answer

A) makes employees less "cost-conscious." 
B) provides a basis for evaluating cost control. 
C) makes management by exception more difficult. 
D) increases clerical costs.

Question 10

An unfavorable labor quantity variance may be caused by

Accepted Answer

A) paying workers higher wages than expected. 
B) misallocation of workers. 
C) worker fatigue or carelessness. 
D) higher pay rates mandated by union contracts.

Question 11

Standard costs

Accepted Answer

A) 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 answers are correct.

Question 12

Use the following information for questions 
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

Accepted Answer

A) $ 12.00. 
B) $ 12.30. 
C) $15.60. 
D) $15.90.

Question 13

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?

Accepted Answer

A) $0.75 
B) $5.25 
C) $6.00 
D) $6.75

Question 14

Which of the following statements about standard costs is false?

Accepted Answer

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.

Question 15

The balanced scorecard approach

Accepted Answer

A) 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.

Question 16

Use the following information for questions 
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 is

Accepted Answer

A) $1.96. 
B) $2.00. 
C) $2.13 
D) $2.17

Question 17

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 was

Accepted Answer

A) $3,660 F. 
B) $3,600 U. 
C) $2,460 U. 
D) $3,660 U.

Question 18

A total materials variance is analyzed in terms of

Accepted Answer

A) price and quantity variances. 
B) buy and sell variances. 
C) quantity and quality variances. 
D) tight and loose variances.

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

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 was

Accepted Answer

A) $1,260 U. 
B) $4,860 U. 
C) $4,860 F. 
D) $3,600 U.

Exam 22: Standard Costs and Balanced Scorecard

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 was

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

It is possible that a company's financial statements may report inventories at

The direct materials quantity standard should

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

Which of the following is not considered an advantage of using standard costs?

Using standard costs

An unfavorable labor quantity variance may be caused by

Standard costs

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?

Which of the following statements about standard costs is false?

The balanced scorecard approach

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 was

A total materials variance is analyzed in terms of

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

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 was