Deck 10: Standard Costing: a Managerial Control Tool

Question 1

Currently attainable standards offer the most behavioral benefits because higher performance levels are attained through challenging,yet achievable,standards.

Answer 1

True

Question 2

Engineering studies are often too rigorous and may not be achievable by operating personnel.

Answer 2

True

Question 3

Managers develop quantity standards when they decide what amount of input should be used per unit of output.

Answer 3

True

Question 4

One reason for adopting a standard cost system is to make product costing easier.

Question 5

Managers develop price standards when they determine what amount should be paid for the quantity of input to be used.

Question 6

Ideal standards can be achieved only if everything operates perfectly,meaning that they do not allow for any machine breakdowns,slack,etc.

Question 7

The quantity of each input that should be used to produce one unit of output is documented on the standard cost sheet.

Question 8

Ideal standards can be achieved under efficient operating conditions.

Question 9

The standard unit cost is developed before the standard costs for direct materials,direct labor,and overhead can be set.

Question 10

The unit standard quantity of inputs is vital to the computation of total amount of inputs allowed for the actual output and efficiency variances.

Question 11

The total budget variance is the difference between the actual cost of the input and its planned cost.

Question 12

The benefits of operational control under a standard cost system can extend to all manufacturing environments.

Question 13

Standard costs are developed for direct materials,direct labor,and variable overhead only.

Question 14

Currently attainable standards can be achieved under efficient operating conditions.

Question 15

The standard cost sheet provides the input standards needed to compute the total amount of inputs allowed for the actual output,an essential component in computing efficiency variances.

Question 16

To compute the standard direct labor hours allowed,multiply the unit labor standard by the actual output.

Question 17

The standard cost per unit of output for a particular input is calculated by multiplying the standard input price by the standard input allowed per unit of output produced.

Question 18

The standard quantity of materials allowed can be calculated by multiplying the unit labor standard by the actual output.

Question 19

In setting standards,historical experience should be used with caution because it can perpetuate operating inefficiencies.

Question 20

The actual quantity of input at the standard price less than the standard quantity of input at the standard price equals the usage variance.

Question 21

An unfavorable price variance occurs whenever the actual prices are greater than the standard prices.

Question 22

The amount of input that should be used per unit of output is known as the _______________.
or

Question 23

Kaizen costing provides fixed standards which reflect continuous improvement efforts.

Question 24

The __________________ provides the products data needed to calculate the standard unit cost.

Question 25

________________ demands maximum efficiency and can be achieved only if everything operates perfectly.

Question 26

A kaizen standard reflects the realized improvements for the past periods and a search for more improvements for the future.

Question 27

The amount that should be paid for the quantity of the input to be used is known as the ______________.
or

Question 28

For better control,the materials price variance is computed using actual quantity of materials purchased.

Question 29

An unfavorable usage variance would occur when the actual usage of inputs is greater than the standard usage.

Question 30

The actual quantity of input at the actual price less the actual quantity of input at the standard price is the price variance.

Question 31

Standards are set by using historical experiences,___________________,and input from operating personnel,marketing,and accounting.

Question 32

The sum of the price and usage variances will add up to the total materials variance only if the materials purchased is equal to the materials used.

Question 33

In a ____________________,costs are assigned to products using quantity and price standards for all three manufacturing costs: direct materials,direct labor,and overhead.

Question 34

_______________ often means the difference between success and failure or between above-average profits and lesser profits.

Question 35

The sum of the labor rate and labor efficiency variances will always add up to the total labor variance.

Question 36

The materials price variance is computed using the actual quantity of materials used,and the materials usage variance is computed using the actual quantity of materials purchased.

Question 37

The ______________________ can be used to compute the total amount of inputs allowed for the actual output.

Question 38

Favorable variances are credits and unfavorable variances are debits.

Question 39

___________________ can provide an initial guideline for setting standards,but should be used with caution because they can perpetuate existing inefficiencies.

Question 40

An acceptable range is established in order to determine if whether variances are significant.The acceptable range is the standard,plus or minus an allowable deviation.

Question 41

The ____________________ measures the difference between the actual costs of materials and their budgeted costs for actual level of activity.

Question 42

Ideal standards

A)do not allow for machine breakdowns,slack,or lack of skill (even momentarily).
B)demand maximum efficiency.
C)can be achieved only if everything operates perfectly.
D)All of these.
E)None of these.

Question 43

The ___________________ measures the difference between the labor hours that were actually used and the labor hours that should have been used.

Question 44

Standards based on the amount of input that should be used per unit of output are called

A)quantity standards.
B)price standards.
C)ideal standards.
D)currently attainable standards.
E)kaizen standards.

Question 45

Which of the following is not true regarding engineering studies?

A)They can determine the most efficient way to operate.
B)They are often achievable by operating personnel.
C)They provide very rigorous guidelines.
D)All of these statements are true.
E)More than two of these statements are true.

Question 46

The _______________ computes the difference between what was paid to direct laborers and what should have been paid.

Question 47

_________________ occur whenever actual prices or actual usage of inputs are greater than standard prices or standard usage.

Question 48

The _____________________ measures the difference between the direct materials actually used and the direct materials that should have been used for the actual output.

Question 49

The ____________________ measures the difference between what should have been paid for raw materials and what was actually paid.

Question 50

Standard cost systems are adopted

A)to improve planning and control.
B)to facilitate product costing.
C)to improve planning and control,and to facilitate product costing.
D)to enhance the operational control of firms that emphasize continuous improvement.
E)for all of these reasons.

Question 51

___________________ is calculated by multiplying the unit labor standard by the actual output.

Question 52

______________ focuses on the continuous reduction of the manufacturing costs of existing products and processes.

Question 53

Price standards are based on

A)the amount of input that should be used per unit of output.
B)the amount that should be paid for the total quantity of input to be used.
C)the amount that should be paid per unit of output.
D)the amount that should be paid per unit of input purchased.
E)none of these.

Question 54

____________________ is the difference between the actual and standard unit price of an input multiplied by the number of inputs used.
or

Question 55

Which of the following is true regarding historical experience in standard setting?

A)It provides very rigorous guidelines.
B)Operating personnel may not be able to achieve operating standards based on historical experience.
C)It should be used with caution because it can perpetuate inefficiencies.
D)Standards based on historical experience are better than standards based on engineering studies.
E)None of these.

Question 56

The ____________________ is the difference between the actual cost of the input and its planned cost.

Question 57

The sources of quantitative standards include

A)historical experience.
B)engineering studies.
C)input from operating personnel.
D)historical experience,engineering studies,and input from operating personnel.
E)none of these.

Question 58

A ______________ is the difference between the sales price needed to capture a predetermined market share and the desired per-unit profit.

Question 59

Which of the following is true regarding currently attainable standards?

A)They can be achieved under efficient operating conditions.
B)Allowance is made for normal breakdowns,interruptions,etc.
C)They are challenging but achievable.
D)They tend to achieve higher performance levels from personnel.
E)All of these.

Question 60

In setting price standards for materials and labor,

A)the purchasing department must consider discounts,freight,and quality.
B)personnel must consider payroll taxes,fringe benefits,and qualifications.
C)it is the joint responsibility of operations,purchasing,personnel,and accounting.
D)All of these.
E)None of these.

Question 61

The difference between the actual cost of the input and its planned cost is

A)the total budget variance.
B)the usage variance.
C)the price variance.
D)the efficiency variance.
E)the budget variance.

Question 62

The standard cost system differs from the actual cost system in the assignment of

A)direct materials.
B)direct labor.
C)overhead.
D)all of the manufacturing inputs.
E)none of the manufacturing inputs.

Question 63

Standard hours allowed are computed using the equation

A)unit labor standard ´ actual output.
B)unit labor standard ´ standard output.
C)unit labor standard ´ actual input.
D)unit labor standard ´ standard input.
E)not shown here.

Question 64

Which of the following is true concerning the materials price variance?

A)It is the difference between the actual and standard unit price of an input multiplied by the number of inputs used.
B)It is the difference between the actual and standard unit price of an output multiplied by the number of inputs used.
C)It is the difference between the actual and standard unit price of an input multiplied by the number of inputs purchased.
D)It is the difference between the actual and standard unit price of an output multiplied by the number of inputs purchased.
E)None of these.

Question 65

Which of the following is not true concerning control limits?

A)Control limits are the top and bottom measures of the allowable range.
B)The upper control limit is the standard plus the allowable deviation.
C)The lower control limit is the standard minus the allowable deviation.
D)In current practice,control limits are set objectively using standard formulas.
E)Variances that fall outside the control limits are investigated.

Question 66

The production data needed to calculate the standard unit cost as well as the underlying details for the standard cost per unit are provided in

A)the standard cost sheet.
B)the standard production budget.
C)the balance sheet.
D)the standard work-in-process account.
E)none of these.

Question 67

Standard cost systems can enhance operational control through the use of

A)efficiency variances which indicate the need for corrective action.
B)price variances which indicate the need for better spending control.
C)standard costs which indicate the desired cost of a unit of input.
D)actual costs which indicate the price received for units sold.
E)All of these.

Question 68

The standard quantity of materials allowed is computed by the equation

A)unit quantity standard ´ standard output.
B)unit quantity standard ´ actual input.
C)unit quantity standard ´ standard input.
D)unit quantity standard ´ actual output.
E)not shown here.

Question 69

Acme Company's standard cost is $500,000.The allowable deviation is $\pm$ 10%.Its actual costs for three months are The upper and lower control limits are,respectively,

A)$550,000 and $450,000
B)$500,000 and $450,000
C)$550,000 and $500,000
D)$575,000 and $520,000

Question 70

Figure 10-1. Flying High Company manufactures model airplanes.During the month,it manufactured 10,000 airplanes.Each one used an average of 6.5 direct labor hours and an average of 1.5 sheets of aluminum.It normally manufactures 7,500 airplanes.Materials and labor standards for making the airplanes are:
Refer to Figure 10-1.Compute the standard number of sheets of aluminum allowed for a volume of 10,000 airplanes.

A)15,000 sheets
B)10,000 sheets
C)7,500 sheets
D)11,250 sheets

Question 71

Which of the following is not true regarding normal costing systems?

A)A normal costing system predetermines overhead costs.
B)A normal costing system assigns direct materials and direct labor to products using a predetermined rate.
C)In a normal costing system overhead is assigned using a budgeted rate and actual activity.
D)A normal costing system has less capacity for control than a standard costing system.
E)All of these statements are true.

Question 72

Which of the following is true regarding variances?

A)Unfavorable variances occur whenever actual prices or actual usage of inputs are greater than standard prices or standard usage.
B)Favorable variances occur whenever actual prices or actual usage of inputs are greater than standard prices or standard usage.
C)Unfavorable variances are always credits.
D)Favorable variances are always debits.
E)None of these.

Question 73

In a standard cost system,costs are assigned to all of the following,except for

A)direct materials.
B)direct labor.
C)variable overhead.
D)fixed overhead.
E)none of these.

Question 74

Which of the following is true regarding standard cost systems in manufacturing environments that emphasize continuous improvement and just-in-time manufacturing and purchasing?

A)The standard cost system enhances the operational control.
B)The materials price variance may encourage the purchasing department to buy in smaller quantities to reduce inventories.
C)Variances can be computed and presented in reports to higher-level managers.
D)The operational level will benefit from the detailed computation of variances.
E)None of these.

Question 75

Variances indicate

A)that actual performance is not going according to plan.
B)the cause of the variance.
C)who is responsible for the variance.
D)when the variance should be investigated.
E)none of these.

Question 76

The usage variance is the difference between the actual and standard quantity of inputs

A)multiplied by the standard unit price of the input.
B)budgeted multiplied by the standard unit price of the input.
C)multiplied by the actual unit price of the input.
D)purchased multiplied by the actual unit price of the input.
E)none of these.

Question 77

Which of the following is not an advantage of standard costing over normal costing and actual costing?

A)A greater capacity for control.
B)Ability to easily distinguish the FIFO and weighted average methods of accounting for beginning inventory costs.
C)Computing a unit cost for each equivalent unit cost category is not necessary.
D)Providing for readily available unit cost information.
E)All of these are advantages of standard costing.

Question 78

An accountant would refer to a cost sheet to perform which of the following actions?

A)Calculate standard cost per unit.
B)Calculate efficiency variances.
C)Calculate the total amount of inputs allowed for the actual output.
D)All of these.

Question 79

Figure 10-1. Flying High Company manufactures model airplanes.During the month,it manufactured 10,000 airplanes.Each one used an average of 6.5 direct labor hours and an average of 1.5 sheets of aluminum.It normally manufactures 7,500 airplanes.Materials and labor standards for making the airplanes are:
Refer to Figure 10-1.Compute the standard hours allowed for a volume of 10,000 airplanes.

A)60,000 hours
B)420,000 hours
C)70,000 hours
D)65,000 hours

Question 80

All of the following are true regarding variance investigation except

A)the investigation should be undertaken only if the anticipated benefits are greater than the expected costs.
B)managers must consider whether a variance will recur.
C)it is difficult to assess the costs and benefits of variance analysis on a case-by-case basis.
D)variances are not investigated unless they are large enough to be of a concern.
E)every variance is investigated.