Question 1

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 is

Accepted Answer

A)  $3,050 F. 
B)  $550 F. 
C)  $550 U. 
D)  $3,050 U.

Question 2

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 3

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 4

The standard direct materials quantity does not include allowances for

Accepted Answer

A)  unavoidable waste. 
B)  normal spoilage. 
C)  unexpected spoilage. 
D)  all of the above are included.

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

The budgeted overhead costs for standard hours allowed and the overhead costs applied to the product are the same amount

Accepted Answer

A)  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.

Question 7

The direct materials quantity standard would not be expressed in

Accepted Answer

A)  pounds. 
B)  barrels. 
C)  dollars. 
D)  board feet.

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

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.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

If a company is concerned with the potential negative effects of establishing standards, it should

Accepted Answer

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.

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Normal standards should be rigorous but attainable.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

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?

Accepted Answer

A)  Favorable materials quantity variance 
B)  Favorable total materials variance 
C)  Unfavorable materials price variance 
D)  Unfavorable labor quantity variance

Question 16

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 is

Accepted Answer

A)  $2,400 unfavorable. 
B)  $2,400 favorable. 
C)  $3,000 unfavorable. 
D)  $3,000 favorable.

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is true?

Accepted Answer

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.

Question 19

The overhead volume variance relates only to fixed overhead costs.

Accepted Answer

A) True 
 B)False

Question 20

Use the following information for questions 
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 is

Accepted Answer

A)  $8,000 favorable. 
B)  $11,000 favorable. 
C)  $5,000 favorable. 
D)  $10,000 favorable.

Exam 11: Standard Costs and Balanced Scorecard

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

The standard direct materials quantity does not include allowances for

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

The budgeted overhead costs for standard hours allowed and the overhead costs applied to the product are the same amount

The direct materials quantity standard would not be expressed in

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

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.

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

If a company is concerned with the potential negative effects of establishing standards, it should

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

Normal standards should be rigorous but attainable.

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

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?

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 is

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

Which of the following is true?

The overhead volume variance relates only to fixed overhead costs.