Deck 11: Standard Costs and Operating Performance Measures

Question 1

Which of the following statements concerning practical standards is incorrect?

A) Practical standards can be used for product costing and cash budgeting.
B) Practical standards can be attained by the average worker.
C) When practical standards are used, there is no reason to adjust standards if an old machine is replaced by a newer, faster machine.
D) Under practical standards, large variances are less likely than under ideal standards.

Answer 1

C

Question 2

The standards that allow for no machine breakdowns or other work interruptions and that require peak efficiency at all times are referred to as:

A) normal standards.
B) practical standards.
C) ideal standards.
D) budgeted standards.

Answer 2

C

Question 3

Purchase of poor quality materials will generally result in a favorable materials price variance and an unfavorable labor rate variance.

Answer 3

False

Question 4

A favorable materials price variance coupled with an unfavorable material usage variance would most likely result from:

A) labor efficiency problems.
B) machine efficiency problems.
C) the purchase and use of higher than standard quality material.
D) the purchase and use of lower than standard quality material.

Question 5

Ideal standards can only be attained under the best circumstances and allow for no work interruptions.

Question 6

The general model for calculating a quantity variance is:

A) actual quantity of inputs used x (actual price - standard price).
B) standard price x (actual quantity of inputs used - standard quantity allowed for output).
C) (actual quantity of inputs used at actual price) - (standard quantity allowed for output at standard price).
D) actual price x (actual quantity of inputs used - standard quantity allowed for output).

Question 7

Management by exception means that a manager's attention is directed toward those parts of the organization where things are not proceeding according to plans.

Question 8

The standard direct labor rate should not include fringe benefits.

Question 9

An unfavorable materials quantity variance indicates that:

A) actual usage of material exceeds the standard material allowed for output.
B) standard material allowed for output exceeds the actual usage of material.
C) actual material price exceeds standard price.
D) standard material price exceeds actual price.

Question 10

The variable overhead efficiency variance measures how efficiently variable overhead resources were used.

Question 11

The production manager is usually held responsible for the labor efficiency variance.

Question 12

In standard costing, the standard quantity allowed refers to the output that should have been achieved based on the planned inputs for the period.

Question 13

All cost variances should be considered exceptions that require the attention of management.

Question 14

Whoever is responsible for the control of the denominator activity in the predetermined overhead rate should also be responsible for the variable overhead efficiency variance.

Question 15

The materials price variance should be computed:

A) when materials are purchased.
B) when materials are used in production.
C) based upon the amount of materials used in production when only a portion of materials purchased is actually used.
D) based upon the difference between the actual quantity of inputs and the standard quantity allowed for output times the standard price.

Question 16

The materials quantity variance is computed based on the amount of materials purchased during the period.

Question 17

From a standpoint of cost control, the most effective time to recognize materials price variances is when the materials are placed into production.

Question 18

In standard costing, practical standards can be used to forecast cash flows and to plan inventory, as well as to signal abnormal deviations in costs.

Question 19

Quantity standards indicate how much of an input should be used for manufacturing a unit of product or in providing a unit of service.

Question 20

Process Time is the only value-added component of Throughput Time.

Question 21

The following labor standards have been established for a particular product:

The following data pertain to operations concerning the product for the last month: What is the labor efficiency variance for the month?

A)$5,955 U
B) $9,240 U
C) $9,240 F
D) $6,090 U

Question 22

A labor efficiency variance resulting from the use of poor quality materials should be charged to:

A) the production manager.
B) the purchasing agent.
C) manufacturing overhead.
D) the engineering department.

Question 23

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

A) production manager.
B) sales manager.
C) purchasing manager.
D) engineering manager.

Question 24

Which of the following represents value-added time in the manufacturing cycle?

A) Inspection Time.
B) Queue Time.
C) Move Time.
D) Process Time.

Question 25

Which of the following represents value-added time in the manufacturing cycle?

A) Inspection time.
B) Queue time.
C) Move time.
D) Process time.

Question 26

Zellner Corporation is developing direct labor standards. A particular product requires 0.94 direct labor-hours per unit. The allowance for breaks and personal needs is 0.02 direct labor-hours per unit. The allowance for cleanup, machine downtime, and rejects is 0.10 direct labor-hours per unit. The standard direct labor-hours per unit should be:

A) 0.82
B) 0.92
C) 0.94
D) 1.06

Question 27

The Fletcher Company uses standard costing. The following data are available for October:
The standard quantity of material allowed for October production is:

A) 23,000 pounds
B) 24,000 pounds
C) 24,500 pounds
D) 25,000 pounds

Question 28

If the actual labor hours worked exceed the standard labor hours allowed, what type of variance will occur?

A) Favorable labor efficiency variance.
B) Favorable labor rate variance.
C) Unfavorable labor efficiency variance.
D) Unfavorable labor rate variance.

Question 29

The following materials standards have been established for a particular product:

The following data pertain to operations concerning the product for the last month: What is the materials quantity variance for the month?

A) $15,240 U
B)$6,350 U
C) $14,340 U
D) $5,975 U

Question 30

The following materials standards have been established for a particular product:

The following data pertain to operations concerning the product for the last month: What is the materials price variance for the month?

A) $14,850 U
B) $8,250 U
C) $8,640 U
D) $2,860 F

Question 31

If variable overhead is applied on the basis of direct labor-hours and the variable overhead rate variance is favorable, then:

A) actual variable overhead rate exceeded the standard rate.
B) standard variable overhead rate exceeded the actual rate.
C) actual direct labor-hours exceeded the standard direct labor-hours allowed for the actual output.
D) standard direct labor-hours allowed for the actual output exceeded the actual hours.

Question 32

Daughdrill Corporation is developing direct labor standards. The basic direct labor wage rate is $10.95 per hour. Employment taxes are 9% of the basic wage rate. Fringe benefits are $4.00 per direct labor-hour. The standard rate per direct labor-hour should be:

A) $5.96
B) $4.99
C) $10.95
D) $15.94

Question 33

Manufacturing Cycle Efficiency (MCE) is computed as:

A) Throughput Time Delivery Cycle Time
B) Process Time Delivery Cycle Time
C) Value-Added Time Throughput Time
D) Value-Added Time

Question 34

A favorable labor rate variance indicates that

A) actual hours exceed standard hours.
B) standard hours exceed actual hours.
C) the actual rate exceeds the standard rate.
D) the standard rate exceeds the actual rate.

Question 35

In October, 5,000 meters of raw material were purchased at an actual cost of $4.50 per meter. During October, 4,850 meters of the raw material were used to produce 2,400 units of the completed product. Standards call for 2 meters of the raw material for each unit of the completed product. The standard price of the raw material is $4.70 per meter. The materials variances for October were:

A) Choice A
B) Choice B
C) Choice C
D) Choice D

Question 36

Misemer Corporation is developing standards for its products. One product requires an input that is purchased for $57.00 per kilogram from the supplier. By paying cash, the company gets a discount of 8% off this purchase price. Shipping costs from the supplier's warehouse amount to $3.60 per kilogram. Receiving costs are $0.26 per kilogram. The standard price per kilogram of this input should be:

A) $57.70
B) $56.30
C) $65.42
D) $57.00

Question 37

Mcgann Corporation is developing standards for its products. Each unit of output of the product requires 0.53 kilogram of a particular input. The allowance for waste and spoilage is 0.06 kilogram of this input for each unit of output. The allowance for rejects is 0.12 kilogram of this input for each unit of output. The standard quantity in kilograms of this input per unit of output should be:

A) 0.53
B) 0.35
C) 0.71
D) 0.47

Question 38

A favorable materials price variance coupled with an unfavorable material usage variance would MOST likely result from:

A) problems with processing machines.
B) the purchase of low quality materials.
C) problems with labor efficiency.
D) changes in the product mix.

Question 39

Cox Company's direct material costs for the month of January were as follows:
For January there was a favorable direct materials quantity variance of:

A) $3,360
B) $3,375
C) $3,400
D) $3,800

Question 40

Discover Motor Company uses a standard cost system to collect costs related to the production of its toothpick motors. The direct labor standard for each toothpick motor is 1.25 hours at a standard cost of $9.50 per hour.
During the month of May, Discover's toothpick motor production used 5,900 direct labor-hours at a total direct labor cost of $54,575. This resulted in production of 4,800 toothpick motors for May. What is Discover's labor efficiency variance for the month of May?

A) $950 favorable
B) $1,475 favorable
C) $8,975 unfavorable
D) $10,450 unfavorable

Question 41

Kissack Corporation produces large commercial doors for warehouses and other facilities. In the most recent month, the company budgeted production of 4,000 doors. Actual production was 4,300 doors. According to standards, each door requires 9.3 machine-hours. The actual machine-hours for the month were 40,430 machine-hours. The budgeted supplies cost is $6.20 per machine-hour. The actual supplies cost for the month was $234,614. The variable overhead efficiency variance for supplies cost is:

A) $2,728 F
B) $2,728 U
C) $13,324 U
D) $13,324 F

Question 42

Keppler Corporation applies manufacturing overhead to products on the basis of standard machine-hours. The company's cost formula for variable overhead cost is $4.90 per machine-hour. The actual variable overhead cost for the month was $25,160. The original budget for the month was based on 5,000 machine-hours. The company actually worked 5,320 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 5,220 machine-hours. What was the variable overhead efficiency variance for the month?

A) $1,078 unfavorable
B) $490 unfavorable
C) $418 favorable
D) $908 favorable

Question 43

Aase Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company has provided the following data for the most recent month:
What was the total of the variable overhead rate and fixed manufacturing overhead budget variances for the month?

A) $2,040 favorable
B) $600 unfavorable
C) $2,640 favorable
D) $600 favorable

Question 44

Bullins Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company has provided the following data for the most recent month:
What was the fixed manufacturing overhead budget variance for the month?

A) $4,000 unfavorable
B) $1,440 favorable
C) $1,440 unfavorable
D) $4,000 favorable

Question 45

In a certain standard costing system the following results occurred last period: labor rate variance, $1,000 U; labor efficiency variance, $2,800 F; and the actual labor rate was $0.20 more per hour than the standard labor rate. The number of actual direct labor-hours used last period was:

A) 9,000
B) 5,400
C) 5,000
D) 4,800

Question 46

In a recent period 12,250 units were made and there was a favorable labor efficiency variance of $22,500. If 41,000 labor-hours were worked and the standard wage rate was $12 per labor-hour, the standard hours allowed per unit of output is closest to:

A) 3.19
B) 3.35
C) 3.50
D) 6.00

Question 47

Nodine Fabrication Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company's cost formula for variable overhead is $7.50 per MH. The company had budgeted its fixed manufacturing overhead cost at $48,000 for the month. During the month, the actual total variable overhead was $59,760 and the actual total fixed manufacturing overhead was $45,000. The actual level of activity for the period was 8,300 MHs. What was the total of the variable overhead rate and fixed manufacturing overhead budget variances for the month?

A) $2,490 favorable
B) $5,490 favorable
C) $5,490 unfavorable
D) $2,490 unfavorable

Question 48

Gildon Corporation produces metal telephone poles. In the most recent month, the company budgeted production of 7,200 poles. Actual production was 7,600 poles. According to standards, each pole requires 6.5 machine-hours. The actual machine-hours for the month were 49,890 machine-hours. The budgeted indirect labor is $1.20 per machine-hour. The actual indirect labor cost for the month was $56,408. The variable overhead efficiency variance for indirect labor is:

A) $588 U
B) $2,872 F
C) $588 F
D) $2,872 U

Question 49

Direct labor standards at Cepeda Manufacturing Corporation allow 5 direct labor-hours for every unit produced. The standard direct labor rate is $12.00 per hour. During the month of February, Cepeda incurred 35,000 direct labor-hours and recorded a $15,000 favorable labor efficiency variance. How many units did Cepeda produce during February?

A) 6,750
B) 7,250
C) 33,750
D) 36,250

Question 50

Kronstedt Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company has provided the following data for the most recent month:
What was the variable overhead rate variance for the month?

A) $710 unfavorable
B) $1,340 unfavorable
C) $630 favorable
D) $3,000 unfavorable

Question 51

The following standards for variable overhead have been established for a company that makes only one product:

The following data pertain to operations for the last month: What is the variable overhead efficiency variance for the month?

A) $30,561 U
B)$31,146 U
C) $28,136 U
D) $2,426 U

Question 52

Giguere Corporation applies manufacturing overhead to products on the basis of standard machine-hours. For the most recent month, the company based its budget on 2,000 machine-hours. Budgeted and actual overhead costs for the month appear below:
The company actually worked 1,920 machine-hours during the month. The standard hours allowed for the actual output were 1,760 machine-hours for the month. What was the overall variable overhead efficiency variance for the month?

A) $832 unfavorable
B) $220 favorable
C) $1,888 unfavorable
D) $1,056 favorable

Question 53

At Overland Company, maintenance cost is exclusively a variable cost that varies directly with machine-hours. The performance report for July showed that actual maintenance costs totaled $9,800 and that the associated rate variance was $200 unfavorable. If 8,000 machine-hours were actually worked during July, the budgeted maintenance cost per machine-hour was:

A) $1.20
B) $1.25
C) $1.275
D) $1.225

Question 54

Hutton Corporation keeps careful track of the time required to fill orders. Data concerning a particular order appear below:
The throughput time was:

A) 25 hours
B) 13.5 hours
C) 20.9 hours
D) 4.1 hours

Question 55

The following labor standards have been established for a particular product:

The following data pertain to operations concerning the product for the last month: What is the labor rate variance for the month?

A) $2,955 F
B) $4,935 F
C) $2,955 U
D)$1,890 U

Question 56

Mackessy Corporation applies manufacturing overhead to products on the basis of standard machine-hours. Budgeted and actual variable overhead costs for the most recent month appear below:
The original budget was based on 7,400 machine-hours. The company actually worked 7,620 machine-hours during the month and the standard hours allowed for the actual output were 7,730 machine-hours. What was the overall variable overhead efficiency variance for the month?

A) $1,496 favorable
B) $1,118 unfavorable
C) $378 favorable
D) $870 unfavorable

Question 57

The following data have been provided by Hanover Corporation, a company that produces forklift trucks:
The variable overhead efficiency variance for supplies cost is:

A) $3,496 U
B) $5,145 U
C) $5,145 F
D) $3,496 F

Question 58

The following standards for variable overhead have been established for a company that makes only one product:

The following data pertain to operations for the last month: What is the variable overhead rate variance for the month?

A) $6,226 U
B)$2,050 U
C) $1,940 F
D) $8,166 U

Question 59

Servantez Manufacturing Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company's cost formula for variable overhead is $9.50 per MH. During the month, the actual total variable overhead was $51,300 and the actual level of activity for the period was 5,700 MHs. What was the variable overhead rate variance for the month?

A) $2,850 favorable
B) $300 unfavorable
C) $2,850 unfavorable
D) $300 favorable

Question 60

Aymond Electronics Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company had budgeted its fixed manufacturing overhead cost at $42,700 for the month and its level of activity at 2,000 MHs. The actual total fixed manufacturing overhead was $44,100 for the month and the actual level of activity was 1,800 MHs. What was the fixed manufacturing overhead budget variance for the month to the nearest dollar?

A) $5,670 favorable
B) $1,400 favorable
C) $5,670 unfavorable
D) $1,400 unfavorable

Question 61

Schoenfeld Corporation is developing direct labor standards. The basic direct labor wage rate is $10.00 per hour. Employment taxes are 9% of the basic wage rate. Fringe benefits are $3.71 per direct labor-hour. A particular product requires 0.88 direct labor-hours per unit. The allowance for breaks and personal needs is 0.06 direct labor-hours per unit. The allowance for cleanup, machine downtime, and rejects is 0.09 direct labor-hours per unit.
The standard rate per direct labor-hour should be:

A) $4.61
B) $10.00
C) $5.39
D) $14.61

Question 62

Hirons Corporation keeps careful track of the time required to fill orders. Data concerning a particular order appear below:
The manufacturing cycle efficiency (MCE) was closest to:

A) 0.11
B) 0.15
C) 0.04
D) 0.53

Question 63

Harnish Corporation is developing standards for its products. One product requires an input that is purchased for $55.00 per kilogram from the supplier. By paying cash, the company gets a discount of 8% off this purchase price. Shipping costs from the supplier's warehouse amount to $5.17 per kilogram. Receiving costs are $0.28 per kilogram. Each unit of output of the product requires 0.75 kilogram of this input. The allowance for waste and spoilage is 0.04 kilogram of this input for each unit of output. The allowance for rejects is 0.11 kilogram of this input for each unit of output.
The standard quantity in kilograms of this input per unit of output should be:

A) 0.75
B) 0.71
C) 0.90
D) 0.60

Question 64

The Apoundright Company uses standard costing and has established the following standards for its single product:
Direct materials: 2 gallons at $3 per gallon
Direct labor: 0.5 hours at $8 per hour
Variable overhead: 0.5 hours at $2 per hour
During November, the company made 4,000 units and incurred the following costs:
Direct materials purchased: 8,100 gallons at $3.10 per gallon
Direct materials used: 7,600 gallons
Direct labor used: 2,200 hours at $8.25 per hour
Actual variable overhead: $4,175
The company applies variable overhead to products on the basis of standard direct labor-hours.
The materials quantity variance for November was:

A) $1,200 U
B) $1,200 F
C) $300 U
D) $1,500 F

Question 65

The Koski Company has established standards as follows: Actual production figures for the past year were as follows:
The variable overhead efficiency variance is:

A) $500 F
B) $500 U
C) $245 F
D) $250 F

Question 66

Harnish Corporation is developing standards for its products. One product requires an input that is purchased for $55.00 per kilogram from the supplier. By paying cash, the company gets a discount of 8% off this purchase price. Shipping costs from the supplier's warehouse amount to $5.17 per kilogram. Receiving costs are $0.28 per kilogram. Each unit of output of the product requires 0.75 kilogram of this input. The allowance for waste and spoilage is 0.04 kilogram of this input for each unit of output. The allowance for rejects is 0.11 kilogram of this input for each unit of output.
The standard price per kilogram of this input should be:

A) $55.00
B) $56.05
C) $53.95
D) $64.85

Question 67

The Koski Company has established standards as follows: Actual production figures for the past year were as follows:
The variable overhead rate variance is:

A) $345 F
B) $95 F
C) $655.50 F
D) $345 U

Question 68

The Apoundright Company uses standard costing and has established the following standards for its single product:
Direct materials: 2 gallons at $3 per gallon
Direct labor: 0.5 hours at $8 per hour
Variable overhead: 0.5 hours at $2 per hour
During November, the company made 4,000 units and incurred the following costs:
Direct materials purchased: 8,100 gallons at $3.10 per gallon
Direct materials used: 7,600 gallons
Direct labor used: 2,200 hours at $8.25 per hour
Actual variable overhead: $4,175
The company applies variable overhead to products on the basis of standard direct labor-hours.
The labor rate variance for November was:

A) $1,050 U
B) $550 U
C) $2,150 U
D) $2,150 F

Question 69

The Koski Company has established standards as follows: Actual production figures for the past year were as follows:
The labor efficiency variance is:

A) $400 F
B) $800 F
C) $800 U
D) $500 F

Question 70

The Apoundright Company uses standard costing and has established the following standards for its single product:
Direct materials: 2 gallons at $3 per gallon
Direct labor: 0.5 hours at $8 per hour
Variable overhead: 0.5 hours at $2 per hour
During November, the company made 4,000 units and incurred the following costs:
Direct materials purchased: 8,100 gallons at $3.10 per gallon
Direct materials used: 7,600 gallons
Direct labor used: 2,200 hours at $8.25 per hour
Actual variable overhead: $4,175
The company applies variable overhead to products on the basis of standard direct labor-hours.
The labor efficiency variance for November was:

A) $1,050 U
B) $550 U
C) $1,600 F
D) $1,600 U

Question 71

Marazzi Corporation keeps careful track of the time required to fill orders. The times recorded for a particular order appear below:
The throughput time was:

A) 5.3 hours
B) 20.7 hours
C) 15.4 hours
D) 9.5 hours

Question 72

The Apoundright Company uses standard costing and has established the following standards for its single product:
Direct materials: 2 gallons at $3 per gallon
Direct labor: 0.5 hours at $8 per hour
Variable overhead: 0.5 hours at $2 per hour
During November, the company made 4,000 units and incurred the following costs:
Direct materials purchased: 8,100 gallons at $3.10 per gallon
Direct materials used: 7,600 gallons
Direct labor used: 2,200 hours at $8.25 per hour
Actual variable overhead: $4,175
The company applies variable overhead to products on the basis of standard direct labor-hours.
The total variable overhead variance (including both the rate and efficiency variances) for November was:

A) $175 U
B) $225 F
C) $225 U
D) $400 U

Question 73

The Koski Company has established standards as follows: Actual production figures for the past year were as follows:
The materials price variance is:

A) $160 U
B) $6,300 U
C) $300 U
D) $150 U

Question 74

Wandersee Corporation keeps careful track of the time required to fill orders. Data concerning a particular order appear below:
The delivery cycle time was:

A) 33.9 hours
B) 32.5 hours
C) 2.1 hours
D) 6.3 hours

Question 75

Schoenfeld Corporation is developing direct labor standards. The basic direct labor wage rate is $10.00 per hour. Employment taxes are 9% of the basic wage rate. Fringe benefits are $3.71 per direct labor-hour. A particular product requires 0.88 direct labor-hours per unit. The allowance for breaks and personal needs is 0.06 direct labor-hours per unit. The allowance for cleanup, machine downtime, and rejects is 0.09 direct labor-hours per unit.
The standard direct labor-hours per unit should be:

A) 0.88
B) 1.03
C) 0.73
D) 0.82

Question 76

The Apoundright Company uses standard costing and has established the following standards for its single product:
Direct materials: 2 gallons at $3 per gallon
Direct labor: 0.5 hours at $8 per hour
Variable overhead: 0.5 hours at $2 per hour
During November, the company made 4,000 units and incurred the following costs:
Direct materials purchased: 8,100 gallons at $3.10 per gallon
Direct materials used: 7,600 gallons
Direct labor used: 2,200 hours at $8.25 per hour
Actual variable overhead: $4,175
The company applies variable overhead to products on the basis of standard direct labor-hours.
The materials price variance for November was:

A) $2,310 U
B) $2,310 F
C) $810 U
D) $810 F

Question 77

The Koski Company has established standards as follows: Actual production figures for the past year were as follows:
The materials quantity variance is:

A) $400 U
B) $410 F
C) $410 U
D) $6,000 U

Question 78

Reifsnyder Corporation keeps careful track of the time required to fill orders. The times recorded for a particular order appear below:
The manufacturing cycle efficiency (MCE) was closest to:

A) 0.73
B) 0.06
C) 0.15
D) 0.02

Question 79

Rodenberger Corporation keeps careful track of the time required to fill orders. The times recorded for a particular order appear below:
The delivery cycle time was:

A) 30.8 hours
B) 8.8 hours
C) 31.9 hours
D) 2.7 hours

Question 80

The Koski Company has established standards as follows: Actual production figures for the past year were as follows:
The labor rate variance is:

A) $210 F
B) $190 F
C) $399 F
D) $190 U