Chapter 11 - test bank of managerial accounting book PDF

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CHAPTER 11 STANDARD COSTS AND BALANCED SCORECARD SUMMARY OF QUESTIONS BY LEARNING OBJECTIVES AND BLOOM’S TAXONOMY I t e m

L O

BT I t e m

L O

BT

1. 2. 3. 4. 5. 6. 7. 8.

1 1 1 1 2 3 3 3

K K C K C C K C

9. 10. 11. 12. 13. 14. 15. 16.

3 3 3 3 3 3 3 3

C K C K K C K K

39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. 51. 52. 53. 54. 55. 56. 57. 58. 59. 60. 61. 62. 63. 64. 65. 66. 67. 68. 69.

1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3

K K C C C K K K K K K C C C C C K K K K K K K C K C C K C C K

70. 71. 72. 73. 74. 75. 76. 77. 78. 79. 80. 81. 82. 83. 84. 85. 86. 87. 88. 89. 90. 91. 92. 93. 94. 95. 96. 97. 98. 99. 100.

3 3 3 3 3 3 3 3 3 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4

I t e m

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I t e m

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4 5 6 9 9 9 1 2

C K C C C C K K

4 4 5 5 5 5 5 5 5 6 6 6 7 7 7 7 7 7 8 8 8 8 8 9 9 9 9 9 9 10 10

AP AP K K K AP AP C AP K K C C K K K AP AP K K K K K AP C AP AP AP AP C K

I t e m

L O

BT

True-False Statements 17. 18. 19. 20. 21. 22. 23. 24.

3 4 4 4 4 4 4 4

C K C K K K C C

25. 26. 27. 28. 29. 30. sg 31. sg 32.

sg

33. 3 34. 4 sg 35. 4 sg 36. 6 sg 37. 7 sg 38. 10

sg

K K C K K K

Multiple Choice Questions C 101. 4 AP 132. AP 102. 4 AP 133. AP 103. 4 AP 134. AP 104. 4 AP 135. AP 105. 4 AP 136. K 106. 4 AP 137. K 107. 4 C 138. K 108. 4 C 139. AP 109. 4 C 140. K 110. 4 C 141. C 111. 4 C 142. AP 112. 4 C 143. C 113. 4 AP 144. C 114. 4 AP 145. K 115. 4 AP 146. AP 116. 4 AP 147. AP 117. 4 AP 148. C 118. 4 AP 149. AP 119. 4 AP 150. AP 120. 4 AP 151. AP 121. 4 AP 152. K 122. 4 AP 153. K 123. 4 AP 154. C 124. 4 AP a155. K 125. 4 AP a156. AP 126. 4 AP a157. AP 127. 4 AP a158. K 128. 4 AP a159. K 129. 4 AP a160. AP 130. 4 AP a161. AP 131. 4 AP a162. FOR INSTRUCTOR USE ONLY

a

163. 164. a 165. a 166. a 167. a 168. a 169. a 170. a 171. a 172. a 173. a 174. a 175. a 176. a 177. a 178. a 179. st 180. st 181. st 182. sg 183. sg 184. st 185. sg 186. sg 187. sg,a 188. st,a 189. sg,a 190. a

10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 2 3 3 4 4 4 4 6 9 10 10

AP AP AP AP K C C K K K K C C AP AP AP AP K K K K K K C K K K K

11 - 2

Test Bank for Managerial Accounting, Sixth Edition

Brief Exercises 191. 192. sg st a

1 3

AP AP

193. 194.

4 4

AP AP

195. 196.

a

5 10

AP AP

10 9

a

197. 198.

a

AP AP

199. 9 200. 10

a a

AP AP

This question also appears in the Study Guide. This question also appears in a self-test at the student companion website. This question covers a topic in an appendix to the chapter.

SUMMARY OF QUESTIONS BY LEARNING OBJECTIVES AND BLOOM’S TAXONOMY Exercises 201 1,3 202 3 203 3,4 204 4 205 4 206 4

A A A A A A

207. 208. 209. 210. 211. 212.

4 4 4 4 5 4,5

AP AP AP AP AP AN

229. 230.

1 3

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231. 232.

4 4

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239.

1-5

K

a

213. 4,5,10 a 214. 4,5,10 a 215. 4,5,10 a 216. 4,6,9 a 217. 4,9 a 218. 4,9

AN AP AP AP AP AP

a

219. 4,9 220. 5,10 a 221. 5,10 a 222. 5,10 223. 6 224. 7 a

AP AP AP AP AP AP

a

225. 9 226. 9,10 a 227. 5,10 a 228. 10 a

AP AP AP AP

Completion Statements 233. 234.

4 5

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235. 236.

5 6

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a

237. 238.

a

10 10

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Matching Short-Answer Essay 240. 241.

1 4

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242. 243.

4 8

244. 245.

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K K

SUMMARY OF LEARNING OBJECTIVES BY QUESTION TYPE I t e m T y p e I t e m

T y p e I t e m

1. 2. 3.

TF TF TF

4. 31. 39.

TF TF MC

40. 41. 42.

5. 32.

TF TF

48. 49.

MC MC

50. 51.

6. 7. 8. 9. 10. 11. 12.

TF TF TF TF TF TF TF

13. 14. 15. 16. 17. 33. 55.

TF TF TF TF TF TF MC

56. 57. 58. 59. 60. 61. 62.

T y p e I t e m

T y p e I t e m

Learning Objective 1 MC 43. MC 46. MC 44. MC 47. MC 45. MC 191. Learning Objective 2 MC 52. MC 54. MC 53. MC 180. Learning Objective 3 MC 63. MC 70. MC 64. MC 71. MC 65. MC 72. MC 66. MC 73. MC 67. MC 74. MC 68. MC 75. MC 69. MC 76.

T y p e I t e m

T y pe I t e m

T y pe

MC MC BE

201. 229. 239.

Ex C Ma

240. 244.

SA SA

77. 78. 181. 182. 192. 201. 202.

MC MC MC MC BE Ex Ex

203. 230.

Ex C

MC MC MC MC MC MC MC MC MC

FOR INSTRUCTOR USE ONLY

Standard Costs and Balanced Scorecard

Learning Objective 4 MC 111. MC 125. MC 112. MC 126. MC 113. MC 127. MC 114. MC 128. MC 115. MC 129. MC 116. MC 130. MC 117. MC 131. MC 118. MC 132. MC 119. MC 133. MC 120. MC 183. MC 121. MC 184. MC 122. MC 185. MC 123. MC 186. MC 124. MC 193.

18. 19. 20. 21. 22. 23. 24. 25. 34. 35. 79. 80. 81. 82.

TF TF TF TF TF TF TF TF TF TF MC MC MC MC

83. 84. 85. 86. 87. 88. 89. 90. 91. 92. 93. 94. 95. 96.

MC MC MC MC MC MC MC MC MC MC MC MC MC MC

97. 98. 99. 100. 101. 102. 103. 104. 105. 106. 107. 108. 109. 110.

26. 134. 135. 136.

TF MC MC MC

137. 138. 139. 140.

MC MC MC MC

195. 211. 212. 213.

27. 36.

TF TF

141. 142.

MC MC

143. 187.

37. 144.

TF MC

145. 146.

MC MC

147. 148.

150.

MC

151.

MC

152.

28. 29. 30.

TF TF TF

155. 156. 157.

MC MC MC

158. 159. 160.

Learning Objective 5 BE 214. Ex 222. Ex 215. Ex 226. Ex 220. Ex 227. Ex 221. Ex 228. Learning Objective 6 MC 216. Ex 236. MC 223. Ex Learning Objective 7 MC 149. MC MC 224. Ex Learning Objective 8 MC 153. MC 154. Learning Objective 9a MC 188. MC 216. MC 198. BE 217. MC 199. BE 218.

172. 173. 174. 175. 176. 177.

Learning Objective 10a MC 178. MC 200. MC 179. MC 213. MC 189. MC 214. MC 190. MC 215. MC 196. BE 220. MC 197. BE 221.

38. 161. 162. 163. 164. 165.

TF MC MC MC MC MC

166. 167. 168. 169. 170. 171.

MC MC MC MC MC MC

Note: TF = True-False MC = Multiple Choice MA = Matching

MC MC MC MC MC MC MC MC MC MC MC MC MC BE

194. 203. 204. 205. 206. 207. 208. 209. 210. 212. 213. 214. 215. 216.

BE Ex Ex Ex Ex Ex Ex Ex Ex Ex Ex Ex Ex Ex

Ex Ex Ex Ex

234. 235.

C C

MC

243.

K

Ex Ex Ex

219. 225. 226.

Ex Ex Ex

BE Ex Ex Ex Ex Ex

222. 226. 227. 228. 237. 238.

Ex Ex Ex Ex C C

217. 218. 219. 231. 232. 233. 241. 242. 245.

C

BE = Brief Exercise Ex = Exercise

FOR INSTRUCTOR USE ONLY

C = Completion SA = Short Answer

11 - 3

Ex Ex Ex C C C K K K

11 - 4

Test Bank for Managerial Accounting, Sixth Edition

CHAPTER LEARNING OBJECTIVES 1. Distinguish between a standard and a budget. Both standards and budgets are predetermined costs. The primary difference is that a standard is a unit amount, whereas a budget is a total amount. A standard may be regarded as the budgeted cost per unit of product. 2. Identify the advantages of standard costs. Standard costs offer a number of advantages. They (a) facilitate management planning, (b) promote greater economy (c) are useful in setting selling prices, (d) contribute to management control, (e) permit "management by exception," and (f) simplify the costing of inventories and reduce clerical costs. 3. Describe how companies set standards. The direct materials price standard should be based on the delivered cost of raw materials plus an allowance for receiving and handling. The direct materials quantity standard should establish the required quantity plus an allowance for waste and spoilage. The direct labor price standard should be based on current wage rates and anticipated adjustments such as COLAs. It also generally includes payroll taxes and fringe benefits. Direct labor quantity standards should be based on required production time plus an allowance for rest periods, cleanup, machine setup, and machine downtime. For manufacturing overhead, a standard predetermined overhead rate is used. It is based on an expected standard activity index such as standard direct labor hours or standard machine hours. 4. State the formulas for determining direct materials and direct labor variances. The formulas for direct materials variances are: (Actual quantity × Actual price) – (Standard quantity × Standard price) = Total materials variance (Actual quantity × Actual price) – (Actual quantity × Standard price) = Materials price variance (Actual quantity × Standard price) – (Standard quantity × Standard price) = Materials quantity variance The formulas for the direct labor variances are: (Actual hours × Actual rate) – (Standard hours × Standard rate) = Total labor variance (Actual hours × Actual rate) – (Actual hours × Standard rate) = Labor price variance (Actual hours × Standard rate) – (Standard hours × Standard rate) = Labor quantity variance

5. State the formula for determining the total manufacturing overhead variance. The formula for the total manufacturing overhead variance is: (Actual overhead) – (Overhead applied at standard hours allowed) = Total overhead variance

6. Discuss the reporting of variances. Variances are reported to management in variance reports. The reports facilitate management by exception by highlighting significant differences. 7. Prepare an income statement for management under a standard costing system. Under a standard costing system, an income statement prepared for management will report cost of goods sold at standard cost and then disclose each variance separately, 8. Describe the balanced scorecard approach to performance evaluation. The balanced scorecard incorporates financial and nonfinancial measures in an integrated system that links performance measurement and a company’s strategic goals. It employs four perspectives: financial, customer, internal processes, and learning and growth. Objectives are set within each of these perspectives that link to objectives within the other perspectives. a

9. Identify the features of a standard cost accounting system. In a standard cost accounting system, companies journalize and post standard costs, and they maintain separate variance accounts in the ledger.

FOR INSTRUCTOR USE ONLY

Standard Costs and Balanced Scorecard a

10.

11 - 5

Compute overhead controllable and volume variance. The total overhead variance is generally analyzed through a price variance and a quantity variance. The name usually given to the price variance is the overhead controllable variance. The quantity variance is referred to as the overhead volume variance.

TRUE-FALSE STATEMENTS 1.

Inventories cannot be valued at standard cost in financial statements.

Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

2.

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

Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

3.

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

Ans: T, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

4.

Standard costs may be incorporated into the accounts in the general ledger.

Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

5.

An advantage of standard costs is that they simplify costing of inventories and reduce clerical costs.

Ans: T, LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

6.

Setting standard costs is relatively simple because it is done entirely by accountants.

Ans: F, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Decision Modeling, AICPA PC: None, IMA: Cost Management

7.

Normal standards should be rigorous but attainable.

Ans: T, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

8.

Actual costs that vary from standard costs always indicate inefficiencies.

Ans: F, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

9.

Ideal standards will generally result in favorable variances for the company.

Ans: F, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

10.

Normal standards incorporate normal contingencies of production into the standards.

Ans: T, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

11.

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

Ans: F, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

12.

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

Ans: T, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

FOR INSTRUCTOR USE ONLY

11 - 6 13.

Test Bank for Managerial Accounting, Sixth Edition A direct labor price standard is frequently called the direct labor efficiency standard.

Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

14.

The standard predetermined overhead rate must be based on direct labor hours as the standard activity index.

Ans: F, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

15.

Standard cost cards are the subsidiary ledger for the Work in Process account in a standard cost system.

Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

16.

A variance is the difference between actual costs and standard costs.

Ans: T, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

17.

If actual costs are less than standard costs, the variance is favorable.

Ans: T, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

18.

A materials quantity variance is calculated as the difference between the standard direct materials price and the actual direct materials price multiplied by the actual quantity of direct materials used.

Ans: F, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

19.

An unfavorable labor quantity variance indicates that the actual number of direct labor hours worked was greater than the number of direct labor hours that should have been worked for the output attained.

Ans: T, LO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

20.

Standard cost + price variance + quantity variance = Budgeted cost.

Ans: F, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

21.

The overhead controllable variance relates primarily to fixed overhead costs.

Ans: F, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

22.

The overhead volume variance relates only to fixed overhead costs.

Ans: T, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

23.

If production exceeds normal capacity, the overhead volume variance will be favorable.

Ans: T, LO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

24.

There could be instances where the production department is responsible for a direct materials price variance.

Ans: T, LO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

FOR INSTRUCTOR USE ONLY

Standard Costs and Balanced Scorecard 25.

11 - 7

The starting point for determining the causes of an unfavorable materials price variance is the purchasing department.

Ans: T, LO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

26.

The total overhead variance is the difference between actual overhead costs and overhead costs applied to work done.

Ans: T, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

27.

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

Ans: T, LO: 6, Bloom: C, D...