Standard Costing and Variance Analysis PDF

Preview

Summary

Standard Costs and Variance AnalysisStandard Costs and Variance AnalysisSTANDARD COSTS AND VARIANCE ANALYSISSTANDARD COSTS AND VARIANCE ANALYSISTHEORIES:THEORIES:Standard cost systemStandard cost system A primaA primary purpory purpose of usinse of using a stang a standard codard cost system ist sys...

Description

Stand Stand

STANDARD STANDARD COSTS COSTS AND AND VARIANCE VARIANCE ANALYSIS ANALYSIS

A. B. C. D.

THEORIES: Standard cost system 1. A primary purpo purpose se of using a stan standard dard cost st system system si A. To To make make thin thinggs s easier for manage managers rs in in the the produc production facillity. ity. B. To provide a disstinct tinct m measure re of of cost cost ccoontrol. ntrol. C. To minimize th thee cost per unit of produc roduction. tion. D. b aand nd c are co corre rrect ct 2.

Which Which one oneof ofthe the fo following statem statements ents isis true true conc conc eerning rning standa standard rd costs? A. Standard Standard costs costs arare e estimates estimates of ofcosts costs attainable attainableonly under the the most most idea ideall conditions, conditions, bbut rarely rarely practicable. practicable B. Stand Standard ardcosts costs are are dif difficult ficultto touse usewith withaaproc proc ess-costing sting syst system. C. If properlly y used, used, stan standdards ards can help lp motivate employees. D. Unfav Unfavorabl orable variances, mate material rial in in amount, amount, shoul shoud be inves investigat tigateed, d, but but large large favorab favorable variances variancesneed neednot notbe beinvestigated investigated

3.

Which Which of of th the following is a purp purpose ose of of stan standdard ard costing? A. Determ mine ine “bbreakeven reakeven” produ production ction level B. Co Cont ntrrol ol co cost stss C. Eliminnate ate the theneed need for for subj subjectiv ectivee decisionss by by manageme management D. Alloc Allocate ate ccost ost with m more ore accurac accuracy

4.

When evaluaating ting the opera operating ting perfo performanc rmance managem management ent sometim sometimes es uses uses the the differenc difference between betweenexpected expectedand andactual actualperformance. performance.This Thisrefers refersto: to A . Man a ge m ent b y Devi a it on C. Ma na ge m ent by O b ej c ti ve B. Manaagemen ge ment by by Co Contr ntrooll D. Manaagemen gementt by by Excep Exceptio tionn

7.

To measurecontrollable pro production duction inefficiencies, inefficiencies,wh wh company companytotouse useininestablishing establishingthe thestandard standardhou ho product? A. Avera Average ge histo historical rical performance nce for for the the la la sstt severa sever B. Enginneering eering estimates tes based based on on id ideeal al perfo performan rman C. Enginneering eeri ng estimates es based based on on attaina attainable perfor D. The hour hourss per per unit unit that that would would be be requi requrred ed for for th t demand demand over over the the long long run run

8.

Which ofthe following statements statements ab aboout ut the selection selection A. Ideal standardss tend tend to to extra extract ct higher perform something something to tolive live up upto. to. B. Currently attainable standards may encourage op C. Cur Curren rently tly att attain ainabl able standards dis discou courag rage e performance performancepotential. potential. D. Ideal standard standardss demand demand maxim maximum efficiency cyww causing causingaadecline declineininperformance. performance

Standard Standardcosts costsvs. vs.budgeted budgetedcosts cost 9. A dif differ ferenc ence e bet betwee ween n sta standa ndard cos costs ts used for for representing representingthe thesame samemanufacturing manufacturingeffort effortcan canexist exisb A. standard ardcosts costs mus must be determined after the budg B. standard ard costs costs represe representntwhat whatcosts costsshould shouldbe be actual actual costs costs C. budgeted costs sts are are historical historicalcosts costs while while standa standa rrd D. budgeted costs sts include include so so me me “slack” “slack” or or “p “padding”

Standard setting 5. The The best best basis basis upon upon whi whch ch cost cost standard standard ss should should be be set set to to measuure re control controllable lable productio uctionn inefficiencies inefficiencies is is A. Engineeri ng stand standards ards based on ideal perfoormance rman ce B. No Norm rmal al cappaa city C. Enginneeri eeri ng standardds s based based on on attaina attainable perform performance ance D. Practic ctical al capacittyy 6.

No in incenti centive bonus w will ill be paid paid.. Mostvarian variances ces will be unfav unfavorab orable. le. Emplooyees yees will will be be stro stronngly gly motivated vated to to atta attain the th Costs Costs will will be be con controlled trolle d better betterthan than ifif low low eerr standa stand

Process Process costing costing 10. When When standard standardcosts costs are are used usedininaaprocess-costing process-costing involved involvedororused usedininthe thecost costreport reportatatstandard? standard A. Equivvalen alent unitts s are not used used.. B. Equivvalen alentt units units are arecompu computed ted using using aa “spe “speccial” ial” a C. The The actualequivalent uunits nits are multip multip llied ied by the the ss

A company em mploying ploying very verytight tight (high) sta standards in a standard standard cost costsystem system should shouldexpect expect that that

203

Stand Stand

D. The standard equivalent units are multip multipllied ied by the theactual actual cost cost pper unit. Normal Normal costing costing 11. The The fixed fixed ove overhead applicatio applicationn rate rate is aafunction function of of apredetermined “no “normal” rmal” activity activity level. level. If standard standardhours hoursallowed allowedforforgood goodoutput outputequal equalthis thispredetermined predeterminedactivity activitylevel levelforfora agiven giv period, period, the thevolume volumevariance variancewill willbe be A . Ze ro B. Fa Favo vorraabl ble C. Un Unfa favo vora ra ble D. Either favorable or unfavorable, depending on the budgeted overhe overhead. ad.

Types of standards 12. The absolutete minimum minimum cost cost possibl possibee under under the the best conceivvable able oper operating ating conditions tions is is a description descriptionofofwhich whichtype typeofofstandard? standard? A. Curre Currently ntlyattai attainabl nable eexpec ( xpected) C. Theo eore reti tica call B. N Noo rm al D. P ra cti ca l 13. Standards, Standards,which whichare aredifficult difficulttotoachieve achievedue ue d to to reasons reasons beyond beyond the theindividual individual performing performing the the task, task,are arethe theresult resultofoffirm firmusing usingwhich whichofofthe thefollowing followingmethods methodstotoestablish establishstandards? standards A. Idea eall Sta Stand ndar ards ds C. Pra Practi ctical Sta Stand ndard ardss B . La x S at nda rd s D. E mp l oye e St an d ar d s 14. Stand Standards ards that that represen represen t level s of oper operation ation that that can can be be attained ed with reasonab reasonable le effort effort are are called: A . Theo r etic a l sta nd a r d s C. Va ri a bel s tand ar ds B. Idea eall sta stand ndar ards ds D. Nor Normal mal sta standa ndards rds

Variances

A. B. C. D.

Tota Totall ove overhea rhead applica plication tion rate Volu Volume me of of total total ex ex ppenses enses at vario various us activi activity ty level level Varia Variable ble overhead ap applica plication ra rate te Fixed overhead aappli ppliccation ation rate

17. Assuming Assuming that that the the stand standard ard fixed fixed overhead overhead rate rate isis bas ab but butunused unusedproductive productivecapacity capacityisisindicated indicatedby bthe: the: A. Facto Factory ry overhead cost volu volume me var variiance ance B. Directlabo laborr costefficieency ncy varian ariance ce C. Directlabo laborr cost cost ratevaria variance nce D. Facto Factory ry overhe overhead ad cost cost con controllable variance 18. In In analyzing analyzing manufacturing manufacturing oovverhead erhead variances, variances,the thev the: A. Amou Amount nt shown shown in in the the fle fle xxible ible budget an andd the a overhead overheadcontrol control account account B. Predetermin termined ed overhead applicati application on rate and and th th actual actual hours hours worked worked C. Budg Budget et allowance ce based based on on standar standardd hours hours allo allo and andthe theamount amountbudgeted budgetedtotobe beapplied appliedduring duringthe th D. Actua Actuall amount spentt for for overhead overhead item items durin durin applied appliedto toproduction productionduring duringthe theperiod period 19. The vvarian ariance ce least significant significantfor forpurposes purposesofofcontroll contro A. Mateeririaall usa usage ge varia nce B. Varia Variable ble ooverhe verhead eff efficien iciency cy variance C. Fixed overhead sspend pending ing vvarian ariance ce D. Fixed overhead volume va varianc riancee

Stand Stand

D. The standard equivalent units are multip multipllied ied by the theactual actual cost cost pper unit.

A. B. C. D.

Normal Normal costing costing 11. The The fixed fixed ove overrhead head applicatio applicationn rate rate is aafunction function of of apredetermined “no “normal” rmal” activity activity level. level. If standard standardhours hoursallowed allowedforforgood goodoutput outputequal equalthis thispredetermined predeterminedactivity activitylevel levelforfora agiven giv period, period, the thevolume volumevariance variancewill willbe be A . Zero B. Favo vora r abl ble C. Un Unfa favo vora rabl ble D. Either favorable or unfavorable, depending on the budgeted overhe overhead. ad.

17. Assuming Assuming that that the the stand standard ard fixed fixed overhead overhead rate rate isis bas ab but butunused unusedproductive productivecapacity capacityisisindicated indicatedby bthe: the: A. Facto Factory ry overhead cost volu volume me var variiance ance B. Directlabo laborr costefficieency ncy varian ariance ce C. Directlabo laborr cost cost ratevaria variance nce D. Facto Factory ry overhe overhead ad cost cost con controllable variance

Types of standards 12. The absolutete minimum minimum cost cost possibl possibee under under the the best conceivvable able oper operating ating conditions tions is is a description descriptionofofwhich whichtype typeofofstandard? standard? A. Curre Currently ntlyattai attainabl nable eexpec ( xpected) C. Theo eore reti ca call B. N Noo rm al D. P Prra cti ca l

18. In In analyzing analyzing manufacturing manufacturing oovverhead erhead variances, variances,the thev the: A. Amou Amount nt shown shown in in the the fle fle xxible ible budget an andd the a overhead overheadcontrol control account account B. Predetermin termined ed overhead applicati application on rate and and th th actual actual hours hours worked worked C. Budg Budget et allowance ce based based on on standar standardd hours hours allo allo and andthe theamount amountbudgeted budgetedtotobe beapplied appliedduring duringthe th D. Actua Actuall amount spentt for for overhead overhead item items durin durin applied appliedto toproduction productionduring duringthe theperiod period

13. Standards, Standards,which whichare aredifficult difficulttotoachieve achievedue ue d to to reasons reasons beyond beyond the theindividual individual performing performing the the task, task,are arethe theresult resultofoffirm firmusing usingwhich whichofofthe thefollowing followingmethods methodstotoestablish establishstandards? standards A. Idea eall Sta Stand ndar ards ds C. Pra Practi ctical Sta Stand ndard ardss B . La x S at nda rd s D. E mp l oye e St an d ar d s 14. Stand Standards ards that that represen represen t level s of oper operation ation that that can can be be attained ed with reasonab reasonable le effort effort are are called: A . Theo r etic a l sta nd a r ds C. Va ri a bel s tand ar ds B. Idea eall sta stand ndar ards ds D. Nor Normal mal sta standa ndards rds

19. The vvarian ariance ce least significant significantfor forpurposes purposesofofcontroll contro A. Mateeririaall usa usage ge varia nce B. Varia Variable ble ooverhe verhead eff efficien iciency cy variance C. Fixed overhead sspend pending ing vvarian ariance ce D. Fixed overhead volume va varianc riancee

Variances Generic variances variances 15. When When performing performing inp input/output ut/output variance variance ana ana lysis lysis inin standard standard costing, costing, “stan “stan ddard ard hours allowed” isis aameans means of of measuring measuring A. Stand Standard ard outpu utputt at at sta sta ndard hour hourss C. Actua Actuall output at standard hhours ours B . S at n da dar d out ppuu t at aaccut a l ho ur ur s D . A cctt ua l oouu t pu t a t a c t ua l ho ur ur s Two Two way way variances variances Volume variance variance 16. A company company use usess aa two-way two-way analys analysis is for overhea overheadd variancess:: volume. The Thevolume volumevariance varianceisis based basedoon the

Tota Totall ove overhea rheadd applica plication tion rate Volu Volume me of of total total ex ex ppenses enses at vario various us activi activity ty level level Varia Variable ble overhead ap applica plication ra rate te Fixed overhead aappli ppliccation ation rate

20 20.. The The va varia riance nce most mostuseful usefulininevaluating evaluatingplant plantutilization utilizatio A. Varia Variable ble ooverhe verhead spe spendin ndingg varia variance nce B. Fixedoverh overhead ead spend pending ing vvarian ariance. ce. C. Varia Variable ble overhead eff efficien iciency varia variance nce D. Fixed overhead volume va varianc riancee Four Four way way variances variances 21. The The choice choice of of production production volu volumme e as as aadenominator denominatorfo fo A. Has no effect ffect on on the thefixed fixed factory factory overh overhead rate

budg budget et (contro (controllabl llable) e) and

204

Stand

B. Has an effect on the variable factory overhead ratefor applying costs to production C. Has no effect on the fixed facto ry overhead budget varian ce D. Has no effect on the fixedfactory overhead production volume variance 22. The budgeted overhead costs for standard hours allowed and the overhead costs applied to product are the same amount A. for both variable an d fixed overhead costs. B. only when standard hours allowed is less than normal capacity. C. for variable overhead costs. D. for fixed overhead costs . Responsibility for variances 23. Which department is customarily held responsible for an unfavorable materials usage variance? A. Quality con tr ol C. Pur chasi ng B. Engin eerin g D. Production

Variance analysis 24. Which of the following should be least considered when deciding whether to investigate a variance? A. Whether the variance is favorable or unfavorable B. Significance of the variance C. Cost of investigatingthe variance D. Trend of the variances over time Total materials variance 25. If the total materials variance (actual cost of materials used comparedwith the standard cost of the standard amount of materials required) for a given operation is favorable, why must thi

position of a production process ona learning curve? A. Mater ia ls mix C. L B. Materia ls pric e D. L 27. Which of the following is the most probable reason unfavorable labor rate variance and a favorable labore A. The mix of workers assigned to the particular job higherly paid, experienced individuals. B. The mix of workers assigned to the particular job new, relatively low paid, unskilled workers. C. Because of the productive schedule, workers fro to assist in this particular process. D. Defective materials cause d more labor to be used Two-way overhead variance 28. The budget for a given cost during a given period w period was P1,440,000. Considering these facts, it done a better than expected job in controlling the cos A. The cost isvariable andactual production was 90 B. The cost is variableand actual production equale C. The cost isvariable and actual productionwas 80 D. The cost isdiscretionary fixedcost and actual pro Budget variance 29. The budget variance for fixed factory overhead for th expected-activity levels would be the A . Sa me e x cep t f or nor ma l v ol u m e C. S B. Same except for practical capacity D. S

Stand

B. Has an effect on the variable factory overhead ratefor applying costs to production C. Has no effect on the fixed facto ry overhead budget variance D. Has no effect on the fixedfactory overhead production volume variance

position of a production process ona learning curve? A. Mater ia ls mix C. L B. Materia ls price D. L

22. The budgeted overhead costs for standard hours allowed and the overhead costs applied to product are the same amount A. for both variable an d fixed overhead costs. B. only when standard hours allowed is less than normal capacity. C. for variable overhead costs. D. for fix ed overhead costs.

27. Which of the following is the most probable reason unfavorable labor rate variance and a favorable labore A. The mix of workers assigned to the particular job higherly paid, experienced individuals. B. The mix of workers assigned to the particular job new, relatively low paid, unskilled workers. C. Because of the productive schedule, workers fro to assist in this particular process. D. Defective materials cause d more labor to be used

Responsibility for variances 23. Which department is customarily held responsible for an unfavorable materials usage variance? A. Quality con tr ol C. Pur chasi ng B. Engineerin g D. Production

Two-way overhead variance 28. The budget for a given cost during a given period w period was P1,440,000. Considering these facts, it done a better than expected job in controlling the cos A. The cost isvariable andactual production was 90 B. The cost is variableand actual production equale C. The cost isvariable and actual productionwas 80 D. The cost isdiscretionary fixedcost and actual pro

Variance analysis 24. Which of the following should be least considered when deciding whether to investigate a variance? A. Whether the variance is favorable or unfavorable B. Significance of the variance C. Cost of investigatingthe variance D. Trend of the variances over time

Budget variance 29. The budget variance for fixed factory overhead for th expected-activity levels would be the A . Sa me e x cep t f or nor ma l v ol u m e C. S B. Same except for practical capacity D. S

Total materials variance 25. If the total materials variance (actual cost of materials used comparedwith the standard cost of the standard amount of materials required) for a given operation is favorable, why must thi variance be further evaluated as to price and usage? A. There is no need to further evaluate the total materials variance if it is favorable B. Generally accepted accounting principles require that all variances be analyzed in three stages C. All variances must appearin the annual report to equity owners for proper disclosure D. To allow management to evaluate the efficency of the purchasing and production functions

Volume variance 30. You have leased a 5,000-gallon storage tank for P5,0 of liquid in the tank during the month. The cost of s P1.00 per gallon based on 5,000 gallon capacity. Th was P1,000 more (P.25 x 4,000) in total than if you tank. Which variance is being described? A. Variable-overhead efficiency variance B. Fixed-overhead spendingvariance C. Variable-overhead spending variance

Labor variances 26. Which of the following unfavorable cost variances would be directly affected by the relative

205

Stand

D. Fixed-overhead volume variance 31. Favorable fixed overhead volume variance occurs if: A. There si a favorable labor efficiency variance B. Thereis a favorable labor rate variance C. Production is less than planned D. Production is greater than plan ned

PROBLE...