Standard Costs and Variance Analysis MCQs

The purpose of identifying manufacturing variances and assigning their responsibility to a person/department should be to

Use the knowledge about the variances to promote learning and continuous improvement in the manufacturing operations.
Trace the variances to finished goods so that the inventory can be properly valued at year-end.
Determine the proper cost of the products produced so that selling prices can be adjusted accordingly.
Pinpoint fault for operating problems in the organization.

A difference between standard costs used for cost control and the budgeted costs of the same manufacturing effort can exist because

Standard costs represent what costs should be, whereas budgeted costs are expected actual costs.
Budgeted costs are historical costs, whereas standard costs are based on engineering studies.
Budgeted costs include some slack, whereas standard costs do not.
Standard costs include some slack, whereas budgeted costs do not.

In a responsibility accounting system, a feedback report that focuses on the difference between budgeted amounts and actual amounts is an example of ...

Management by exception.
Assessing blame.
Granting rewards to successful managers.
Ignoring other variables for which the budgeted goals were met.

Which of the following factors should not be considered when deciding whether to investigate a variance?

Magnitude of the variance.
Trend of the variances over time.
Likelihood that an investigation will eliminate future occurrences of the variance.
Whether the variance is favorable or unfavorable.

Which of the following management practices involves concentrating on areas that deserve attention and placing less attention on areas operating as ex...

Management by objectives.
Responsibility accounting.
Bench marking.
Management by exception.

Use of a standard cost system can include all of the following advantages except that it

Assists in performance evaluation.
Emphasizes qualitative characteristics.
Permits development of flexible budgeting.
Allows employees to better understand what is expected of them.

Use of a standard cost system can include all of the following advantages except that it

Assists in performance evaluation.
Emphasizes qualitative characteristics.
Permits development of flexible budgeting.
Allows employees to better understand what is expected of them.

The controller of a company holds a monthly meeting where any department that has a 10% unfavorable variance to budget must explain the variance and d...

Activity-based management.
Cost management.
Continuous improvement.
Management by exception.

The benefits of management by exception reporting include all of the following except a reduction in

Reports/production costs.
Information overload.
Reliance on advance planning.
Unfocused management actions.

Within a performance monitoring system, which of the following is the least valid reason for calculating variances between actual performance and budg...

Allowing managers to take early corrective action.
Identifying the manager who is responsible for not achieving desired results.
Identifying efficient practices that can be transferred to other areas of the company.
Improving future performance forecasts.

Jay Company uses a standard cost system. During the past year, the variances from standard were significant. Jay is considering whether to allocate t...

All of the variances are favorable and are written off directly to cost of goods sold.
All of the variances are unfavorable and are written off directly to cost of goods sold.
All of the variances are favorable and are allocated among cost of goods sold and ending inventory accounts.
All of the variances are unfavorable and are allocated among cost of goods sold and ending inventory accounts

Which one of the following is the least likely reason that variances are computed within a performance monitoring system?

To trigger organization learning.
To make continuous improvements.
To verify the accuracy of standards.
To alert management to existing problems.

Which one of the following statements about management by exception is least likely to be correct?

Managers can focus efforts on the most critical areas.
It is especially useful when directed at controllable items
It could result in changing a process altogether.
Positive variances need not be investigated.

A standard cost system is often used in variance analysis because standard costs

Include past inefficiencies and take into account expected future changes.
Exclude past inefficiencies and take into account expected future changes
Include past inefficiencies and exclude expected future changes.
Exclude past inefficiencies and exclude expected future changes.

Simson Companyâ€™s master budget shows straight-line depreciation on factory equipment of $258,000. The master budget was prepared at an annual p...

$19,475
$20,425
$20,500
$21,500

Barnes Corporation expected to sell 150,000 board games during the month of November, and the companyâ€™s master budget contained the following d...

$225,000
$270,000
$420,000
$510,000

A static budget

Drops the current month or quarter and adds a future month or a future quarter as the current month or quarter is completed.
Presents a statement of expectations for a period but does not present a firm commitment.
Presents the plan for only one level of activity and does not adjust to changes in the level of activity.
Presents the plan for a range of activity so that the plan can be adjusted for changes in activity.

When preparing a performance report for a cost center using flexible budgeting techniques, the planned cost column should be based on the

Budgeted amount in the original budget prepared before the beginning of the year.
Actual amount for the same period in the preceding year.
Budget adjusted to the actual level of activity for the period being reported.
Budget adjusted to the planned level of activity for the period being reported.

Selo Imports uses flexible budgeting for the control of costs. The company’s annual master budget includes $324,000 for fixed production supervisory...

$350 favorable.
$350 unfavorable.
$1,000 unfavorable.
$1,000 favorable.

Red Rock Company uses flexible budgeting for cost control. Red Rock produced 10,800 units of product during October, incurring indirect materials cost...

$13,000
$13,500
$13,975
$11,700

Flexible budgets

Provide for external factors affecting company profitability.
Are used to evaluate capacity use.
Are budgets that project costs based on anticipated future improvements.
Accommodate changes in activity levels.

The difference between the actual amounts and the flexible budget amounts for the actual output achieved is the

Production volume variance.
Flexible budget variance.
Sales volume variance.
Standard cost variance.

A manufacturing firm planned to manufacture and sell 100,000 units of product during the year at a variable cost per unit of $4.00 and a fixed cost pe...

$85,000 favorable.
$35,000 unfavorable.
$5,000 favorable.
$5,000 unfavorable.

An advantage of using a flexible budget compared to a static budget is that, in a flexible budget,

Shortfalls in planned production are clearly presented.
Standards can easily be changed to adjust to changing circumstances.
Fixed cost variances are more clearly presented.
Budgeted costs for a given output level can be compared with actual costs for the same level of output.

A major disadvantage of a static budget is that

It is more difficult to develop than a flexible budget.
It is made for only one level of activity.
Variances tend to be smaller than when flexible budgeting is used.
Variances are more difficult to compute than when flexible budgeting is used.

Arkin Co.’s controller has prepared a flexible budget for the year just ended, adjusting the original static budget for the unexpected large increas...

Both revenue variances and cost variances would be favorable.
Revenue variances would be favorable and cost variances would be unfavorable.
Revenue variances would be unfavorable and cost variances would be favorable.
Both revenue variances and cost variances would be unfavorable.

Which one of the following statements is correct concerning a flexible budget cost formula? Variable costs are stated

Per unit and fixed costs are stated in total.
In total and fixed costs are stated per unit.
In total and fixed costs are stated in total.
Per unit and fixed costs are stated per unit.

The monthly sales volume of Shugart Corporation varies from 7,000 units to 9,800 units over the course of a year. Management is currently studying ant...

Static Static
Static Flexible
Flexible Static
Flexible Flexible

Teeny Toddlers is a 4- toys. To maintain competitive prices, control of costs is critical. Management has considered moving production overseas, but s...

Unfavorable variances are more likely to occur.
Employees who participate in setting standards may be more efficient.
Standard costs will help management in uncovering potential cost problems.
Standard costing permits management by exception, which should save some time.

Which one of the following will allow a better use of standard costs and variance analysis to help improve managerial decision-making?

Set standards with the help of line personnel directly involved in the process.
Do not differentiate between variable and fixed overhead in calculating overhead variances.
Use standard costs only for inventory valuation.
Use the prior year’s average actual cost as the current year’s standard.

A plan that is created using budgeted revenue and costs but is based on the actual units of output is known as a

Continuous budget.
Flexible budget.
Strategic plan.
Static budget.

A method of budgeting in which the cost of each program must be justified, starting with the one most vital to the company, is

Flexible budgeting
Zero-based budgeting.
Continuous budgeting.
Probabilistic budgeting.

Comparing actual results with a budget based on achieved volume is possible with the use of a

Monthly budget.
Master budget.
Rolling budget
Flexible budget

The use of standard costs in the budgeting process signifies that an organization has most likely implemented a

Flexible budget.
Capital budget.
Zero-based budget.
Static budget.

A manufacturing firm has certain peak seasons; namely the Christmas season, the summer season, and the last 2 weeks of February. During these periods ...

Flexible budgeting.
Static budgeting.
Zero-based budgeting.
Project budgeting.

Country Ovens is a family restaurant chain. Due to an unexpected road construction project, traffic passing by the Country Ovens restaurant in New to...

Zero-based budget.
Rolling budget.
Activity-based budget.
Flexible budget.

An organization’s revenues and variable costs vary significantly with seasonal weather conditions. This variability has frustrated management’s at...

Zero-based budgeting.
Continuous budgeting.
Flexible budgeting
Project budgeting.

Gooding bicycles has begun using budgeting to evaluate performance. Budgets were prepared for the current year based on anticipated sales of 40,000 un...

Zero-based budgeting.
Continuous budgeting.
Static budgeting.
Flexible budgeting.

Under a standard cost system, the materials efficiency variances are the responsibility of

Production and industrial engineering.
Purchasing and industrial engineering.
Purchasing and sales.
Sales and industrial engineering.

Blaster, Inc., a manufacturer of portable radios, purchases the components from subcontractors to use to assemble into a complete radio. Each radio re...

$450 unfavorable.
$450 favorable.
$500 favorable.
$600 unfavorable.

Blaster, Inc., a manufacturer of portable radios, purchases the components from subcontractors to use to assemble into a complete radio. Each radio re...

$1,450 unfavorable.
$1,450 favorable.
$4,350 unfavorable.
$4,350 favorable.

Garland Company uses a standard cost system. The standard for each finished unit of product allows for 3 pounds of plastic at $0.72 per pound. During ...

$117 unfavorable.
$123 unfavorable.
$135 unfavorable.
$150 unfavorable.

ChemKing uses a standard costing system in the manufacture of its single product. The 35,000 Fact Pattern:units of direct materials in inventory were ...

$2.00
$2.50
$3.00
$5.00

ChemKing uses a standard costing system in the manufacture of its single product. The 35,000 Fact Pattern:units of direct materials in inventory were ...

12,000 units.
12,500 units.
23,000 units.
25,000 units.

A favorable materials price variance coupled with an unfavorable materials usage variance most likely results from

Machine efficiency problems.
Product mix production changes.
The purchase and use of higher-than-standard quality materials.
The purchase of lower than standard quality materials.

Tower Company planned to produce 3,000 units of its single product, Titactium, during November. The standard specifications for one unit of Titactium ...

More materials were purchased than were used.
More materials were used than were purchased.
The actual cost of materials was less than the standard cost.
The actual usage of materials was less than the standard allowed.

David Rogers, purchasing manager at Fairway Manufacturing Corporation, was able to acquire a large quantity of direct materials from a new supplier at...

Purchasing manager.
Inventory supervisor.
Vice president of production.
Engineering manager.

Price variances and efficiency variances can be key to the performance measurement within a company. In evaluating the performance within a company, a...

Performance of the workers using the material.
Actions of the purchasing department.
Design of the product.
Sales volume of the product.

Todco planned to produce 5,000 units of its single product, Teragram, during November. The standard specifications for one unit of Teragram include te...

Which one of the following variances is most controllable by the production control supervisor?

Materials price variance.
Materials usage variance.
Variable overhead spending variance.
Fixed overhead budget variance.

In a standard cost system, the investigation of an unfavorable materials usage variance should begin with the

Production manager only.
Plant controller only.
Purchasing manager only
Production manager or the purchasing manager.

Under a standard cost system, the materials price variances are usually the responsibility of the

Production manager.
Cost accounting manager.
Sales manager.
Purchasing manager.

When items are transferred from stores to production, an accountant debits work-in-process and credits materials accounts. During production, a materi...

Accountability for materials lost during production.
A means of safeguarding assets in the custody of the system.
Compliance with GAAP.
Information for use in controlling the cost of production.

Which of the following is least likely to cause an unfavorable materials quantity (usage) variance?

Materials that do not meet specifications.
Machinery that has not been maintained properly.
Labor that possesses skills equal to those required by the standards.
Scheduling of substantial overtime.

Which department is typically responsible for a materials price variance?

Engineering.
Production
Purchasing.
Sales.

Fleece Company uses a standard-costing system in relation to its manufacture of scarves. Each finished scarf contains 1.5 yards of direct materials. H...

$2.25
$3.00
$3.75
$4.00

A manufacturer of radios purchases components from subcontractors for assembly into complete radios. Each radio requires three units each of Part X, w...

$2,900 unfavorable.
$2,900 favorable.
$8,700 unfavorable.
$8,700 favorable.

A manufacturer of radios purchases components from subcontractors for assembly into complete radios. Each radio requires three units each of Part X, w...

$26,100
$27,000
$29,000
$36,000

A company has a raw material price variance that is unfavorable. An analysis of this variance indicates that the company’s only available supplier o...

Negatively evaluate the performance of the purchasing manager.
Negatively evaluate the performance of the production manager.
Change the raw material price standard.
Ask the production manager to lower the material usage standard to compensate for higher material costs.

Frisco Company recently purchased 108,000 units of raw material for $583,200. Three units of raw materials are budgeted for use in each finished good ...

$6,050 unfavorable.
$9,920 favorable.
$10,800 unfavorable.
$10,800 favorable.

A company isolates its raw material price variance in order to provide the earliest possible information to the manager responsible for the variance. ...

$9,600 unfavorable.
$9,800 unfavorable.
$10,000 unfavorable.
$20,000 unfavorable.

Richter Company has an unfavorable materials efficiency (usage) variance for a particular month. Which one of the following is least likely to be the ...

Inadequate training of the direct labor employees.
Poor performance of the shipping employees.
Poor design of the production process or product.
Poor quality of the raw materials.

During the month of May, Tyler Company experienced a significant unfavorable material efficiency variance in the production of its single product at o...

Inferior materials were purchased.
Actual production was lower than planned production
Workers used were less skilled than expected.
Replacement production equipment had just been installed.

TwoCo established a standard direct material cost of $20 per finished unit for its main product. The standard is calculated using direct materials of ...

$10,000 unfavorable.
$20,000 unfavorable.
$30,000 unfavorable.
$32,400 favorable.

Bettis Company began business on January 1 of the current year. The firm’s standard cost system allows for 4 yards of fabric at $1.55 per yard for e...

72,800 yards.
74,900 yards.
80,800 yards.
82,900 yards.

The inventory control supervisor at Wilson Manufacturing Corporation reported that a large quantity of a part purchased for a special order that was n...

Sales manager.
Inventory supervisor.
Production manager
Vice president of production.

Under a standard cost system, direct labor price variances are usually not attributable to

Union contracts approved before the budgeting cycle.
Labor rate predictions.
The use of a single average standard rate.
The assignment of different skill levels of workers than planned.

The static budget for the month of May was for 9,000 units with direct materials at $15 per unit. Direct labor was budgeted at 45 minutes per unit fo...

Favorable direct materials usage variance of $7,500.
Favorable direct labor efficiency variance of $1,275.
Unfavorable direct labor efficiency variance of $1,275.
Unfavorable direct labor price variance of $1,275.

An unfavorable direct labor efficiency variance could be caused by a(n)

Unfavorable variable overhead spending variance.
Unfavorable direct materials usage variance.
Unfavorable fixed overhead volume variance.
Favorable variable overhead spending variance.

Tub Co. uses a standard cost system. The following information pertains to direct labor for product B for the month of October: Standard hours allowed...

1,800
1,810
2,190
2,200

"A company manufactures one product and has a standard cost system. In April the company had the following experience:" ...

$760,000 favorable.
$760,000 unfavorable.
$240,000 unfavorable.
$156,000 favorable.

"A company manufactures one product and has a standard cost system. In April the company had the following experience:" ...

$156,000 favorable.
$240,000 favorable.
$240,000 unfavorable.
$760,000 unfavorable.

"A company manufactures one product and has a standard cost system. In April the company had the following experience:" ...

$240,000 favorable.
$156,000 unfavorable.
$156,000 favorable.
$40,000 unfavorable.

One of the items produced by a manufacturer of lawn and garden tools is a chain saw. The direct labor standard for assembling and testing a chain saw...

$2,240 favorable.
$2,240 unfavorable.
$3,840 favorable.
$5,600 unfavorable.

One of the items produced by a manufacturer of lawn and garden tools is a chain saw. The direct labor standard for assembling and testing a chain saw...

$2,240 unfavorable.
$5,600 favorable.
$5,600 unfavorable.
$6,090 favorable.

A manager prepared the following table by which to analyze labor costs for the month:Actual Hours at Actual Rate $10,000Actual Hours at Standard Rate ...

Labor efficiency variance.
Labor rate variance.
Volume variance.
Labor spending variance.

The total budgeted direct labor cost of a company for the month was set at $75,000 when 5,000 units were planned to be produced. The following standar...

$4,200 unfavorable.
$3,000 unfavorable.
$2,220 unfavorable.
$1,200 unfavorable.

Normal Company produced 600 units of one of its products last year. The standard for labor hours allowed was 2 hours per unit at a standard rate of $...

$7,134
$7,200
$7,380
$7,626

Bell Co. manufactures a single product with a standard direct labor cost of 2 hours at $10.00 per hour. During November, 1,500 units were produced re...

$2,050
$2,000
$1,250
$1,200

In which of the following variances is the standard unit cost used in the calculations?

Both the direct materials usage variance and the direct materials price variance.
The direct materials usage variance but not the direct materials price variance.
The direct labor price variance but not the direct labor efficiency variance.
The direct labor efficiency variance but not the direct labor rate variance.

Pane Company’s direct labor costs for April are as follows: Standard direct labor hours 42,000 Actual direct labor hours 41,200 Total direct labo...

$44,496 unfavorable.
$49,440 unfavorable.
$49,440 favorable.
$50,400 favorable.

Lake’s direct labor costs for the month of May are as follows: Standard direct labor hours allowed 12,500 Actual direct labor rate $8.25 Actual d...

$7.69
$7.80
$8.25
$8.81

Bolt Co. uses a standard-cost system. Bolt’s direct labor information for July is as follows: Standard hours allowed for actual production 3,000 A...

2,780
2,800
3,200
3,220

Daniel Corporation’s direct labor costs for June were as follows: Actual direct labor hours 32,000 Standard direct labor hours 33,600 Direct labor r...

$154,560
$154,880
$167,680
$168,000

A company has a direct labor price variance that is favorable. Of the following, the most serious concern the company may have about this variance is ...

The circumstances giving rise to the favorable variance will not continue in the future.
The production manager may not be using human resources as efficiently as possible.
The cause of the favorable variance may result in other larger unfavorable variances in the value-chain.
Actual production is less than budgeted production.

MinnOil performs oil changes and other minor maintenance services (e.g., tire pressure checks) for cars. The company advertises that all services are...

$6.55 42.00
$6.67 42.71
$7.45 42.00
$7.50 38.00

Lee Manufacturing uses a standard cost system with overhead applied based on direct labor hours. The manufacturing budget for the production of 5,000...

9,900
10,100
11,900
12,100

Randall Company uses standard costing and flexible budgeting and is evaluating its direct labor. The flexible budget variance can usually be broken do...

Direct labor rate variance and direct labor efficiency variance.
Direct labor cost variance and direct labor volume variance.
Direct labor rate variance and direct labor volume variance.
Direct labor cost variance and direct labor efficiency variance.

A company had a total labor variance of $15,000 favorable and a labor efficiency variance of $18,000 unfavorable. The labor price variance was

$3,000 favorable.
$3,000 unfavorable.
$33,000 favorable.
$33,000 unfavorable.

The accounting records of Foster Corporation reveal a favorable labor efficiency variance for the period just ended. Which of the following comments b...

2 and 5 only.
1, 3, and 4 only.
4 and 5 only.
5 only.

Sleep-Fine Company is a mattress manufacturer. The company has a standard direct labor rate of $25 per hour, 75 direct labor employees, and 50 indirec...

$15,000 unfavorable.
$27,500 unfavorable.
$15,000 favorable.
$27,500 favorable.

Baxter Corporation’s master budget calls for the production of 5,000 units of product monthly. The master budget includes indirect labor of $144,000...

$1,900 unfavorable.
$700 favorable.
$1,900 favorable.
$700 unfavorable.

The efficiency variance for either direct labor or materials can be divided into

Spending variance and yield variance.
Yield variance and price variance.
Volume variance and mix variance.
Yield variance and mix variance.

A materials or labor yield variance equals

The difference between the standard total quantity of inputs and the actual total quantity of inputs times the weighted-average expected price for inputs.
The actual total quantity of inputs times the difference between the weighted-average budgeted price for inputs and the weighted-average expected price for inputs.
The difference between the standard total quantity of inputs and the actual total quantity of inputs times the weighted-average actual price for inputs.
The difference between the standard total quantity of inputs and the actual total quantity of inputs times the weighted-average budgeted price for inputs.

The labor mix and labor yield variances together equal the

Total labor variance.
Labor rate variance.
Labor efficiency variance.
Sum of the labor efficiency and overhead efficiency variances.

1452Conroy, Inc., manufactures a product by mixing two materials as shown by the following standards for one unit of finished goods. 1. Material A: ...

$0
$5,000 unfavorable.
$5,000 favorable
$5,350 unfavorable

If overhead is applied on the basis of units of output, the variable overhead efficiency variance will be

Zero.
Favorable, if output exceeds the budgeted level.
Unfavorable, if output is less than the budgeted level
A function of the direct labor efficiency variance.

Variable overhead is applied on the basis of standard direct labor hours. If, for a given period, the direct labor efficiency variance is unfavorable...

Favorable.
Unfavorable.
The same amount as the labor efficiency variance.
Indeterminable because it is not related to the labor efficiency variance.

Variable overhead is applied on the basis of standard direct labor hours. If, for a given period, the direct labor efficiency variance is unfavorable...

Favorable.
Unfavorable.
Zero.
The same amount as the direct labor efficiency variance.

Baltimore Products has an estimated practical capacity of 90,000 machine hours, and each unit requires two machine hours. The following data apply to...

A wage hike granted to a production supervisor.
A newly imposed initiative to reduce finished goods inventory levels.
Acceptance of an unexpected sales order.
Temporary employment of workers with lower skill levels than originally anticipated.

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Standard Costs and Variance Analysis MCQs