Deck 10: Standard Costing: a Managerial Control Tool

Question 1

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

Answer 1

False

Question 2

Ideal standards can be achieved under efficient operating conditions.

Answer 2

False

Question 3

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

Answer 3

True

Question 4

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

Question 5

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 6

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

Question 7

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

Question 8

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

Question 9

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

Question 10

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

Question 11

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

Question 12

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

Question 13

Currently attainable standards can be achieved under efficient operating conditions.

Question 14

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

Question 15

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 16

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 17

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

Question 18

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

Question 19

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

Question 20

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

Question 21

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

Question 22

Kaizen costing provides fixed standards which reflect continuous improvement efforts.

Question 23

Favorable variances are credits and unfavorable variances are debits.

Question 24

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

Question 25

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 26

Match the variance with its correct calculation.
a.
Actual Quantity *Actual Price
b.
(Actual Hours*Actual Rate) - (Standard Hours *Standard Rate)
c.
(Actual Quantity *Actual Price) - (Standard Quantity * Standard Price)
d.
(Actual Hours - Standard Hours) * Standard Rate
e.
(Actual Price -Standard Price) *Actual Quantity
f.
Standard Quantity * Standard Price
g.
(Actual Rate - Standard Rate) * Actual Hours
h.
(Actual Quantity - Standard Quantity) *Standard Price

-Budgeted Costs

Question 27

MATCHING
Match each item with the correct statement below.
a.
Quantity Standards
b.
Ideal Standards
c.
Price Standards
d.
Standard Cost Sheet
e.
Upper Control Limit
f.
Currently Attainable Standards
g.
Kaizen Standards
A tool used to provide the production data needed to calculate the standard unit cost.

Question 28

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

Question 29

MATCHING
Match each item with the correct statement below.
a.
Quantity Standards
b.
Ideal Standards
c.
Price Standards
d.
Standard Cost Sheet
e.
Upper Control Limit
f.
Currently Attainable Standards
g.
Kaizen Standards
These reflect the amount that should be paid for the quantity of input to be used.

Question 30

Match the variance with its correct calculation.
a.
Actual Quantity *Actual Price
b.
(Actual Hours*Actual Rate) - (Standard Hours *Standard Rate)
c.
(Actual Quantity *Actual Price) - (Standard Quantity * Standard Price)
d.
(Actual Hours - Standard Hours) * Standard Rate
e.
(Actual Price -Standard Price) *Actual Quantity
f.
Standard Quantity * Standard Price
g.
(Actual Rate - Standard Rate) * Actual Hours
h.
(Actual Quantity - Standard Quantity) *Standard Price

-Actual Costs

Question 31

MATCHING
Match each item with the correct statement below.
a.
Quantity Standards
b.
Ideal Standards
c.
Price Standards
d.
Standard Cost Sheet
e.
Upper Control Limit
f.
Currently Attainable Standards
g.
Kaizen Standards
This reflects the planned improvement that is set, which will help reduce nonvalue-added costs.

Question 32

MATCHING
Match each item with the correct statement below.
a.
Quantity Standards
b.
Ideal Standards
c.
Price Standards
d.
Standard Cost Sheet
e.
Upper Control Limit
f.
Currently Attainable Standards
g.
Kaizen Standards
Standards that are rigorous but achievable and reflect reasonable efficiency.

Question 33

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

Question 34

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 35

MATCHING
Match each item with the correct statement below.
a.
Quantity Standards
b.
Ideal Standards
c.
Price Standards
d.
Standard Cost Sheet
e.
Upper Control Limit
f.
Currently Attainable Standards
g.
Kaizen Standards
These reflect the amount of input that should be used per unit of output.

Question 36

MATCHING
Match each item with the correct statement below.
a.
Quantity Standards
b.
Ideal Standards
c.
Price Standards
d.
Standard Cost Sheet
e.
Upper Control Limit
f.
Currently Attainable Standards
g.
Kaizen Standards
Standards of perfection that require absolute efficiency.

Question 37

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 38

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

Question 39

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

Question 40

MATCHING
Match each item with the correct statement below.
a.
Quantity Standards
b.
Ideal Standards
c.
Price Standards
d.
Standard Cost Sheet
e.
Upper Control Limit
f.
Currently Attainable Standards
g.
Kaizen Standards
This is the standard plus the allowable deviation when determining whether variances are significant.

Question 41

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

Question 42

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

Question 43

Match the variance with its correct calculation.
a.
Actual Quantity *Actual Price
b.
(Actual Hours*Actual Rate) - (Standard Hours *Standard Rate)
c.
(Actual Quantity *Actual Price) - (Standard Quantity * Standard Price)
d.
(Actual Hours - Standard Hours) * Standard Rate
e.
(Actual Price -Standard Price) *Actual Quantity
f.
Standard Quantity * Standard Price
g.
(Actual Rate - Standard Rate) * Actual Hours
h.
(Actual Quantity - Standard Quantity) *Standard Price

-Materials Price Variance

Question 44

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

Question 45

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

Question 46

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

Question 47

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

Question 48

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

Question 49

Match the variance with its correct calculation.
a.
Actual Quantity *Actual Price
b.
(Actual Hours*Actual Rate) - (Standard Hours *Standard Rate)
c.
(Actual Quantity *Actual Price) - (Standard Quantity * Standard Price)
d.
(Actual Hours - Standard Hours) * Standard Rate
e.
(Actual Price -Standard Price) *Actual Quantity
f.
Standard Quantity * Standard Price
g.
(Actual Rate - Standard Rate) * Actual Hours
h.
(Actual Quantity - Standard Quantity) *Standard Price

-Labor Efficiency Variance

Question 50

Match the variance with its correct calculation.
a.
Actual Quantity *Actual Price
b.
(Actual Hours*Actual Rate) - (Standard Hours *Standard Rate)
c.
(Actual Quantity *Actual Price) - (Standard Quantity * Standard Price)
d.
(Actual Hours - Standard Hours) * Standard Rate
e.
(Actual Price -Standard Price) *Actual Quantity
f.
Standard Quantity * Standard Price
g.
(Actual Rate - Standard Rate) * Actual Hours
h.
(Actual Quantity - Standard Quantity) *Standard Price

-Total Direct Labor Variance

Question 51

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

Question 52

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

Question 53

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

Question 54

Match the variance with its correct calculation.
a.
Actual Quantity *Actual Price
b.
(Actual Hours*Actual Rate) - (Standard Hours *Standard Rate)
c.
(Actual Quantity *Actual Price) - (Standard Quantity * Standard Price)
d.
(Actual Hours - Standard Hours) * Standard Rate
e.
(Actual Price -Standard Price) *Actual Quantity
f.
Standard Quantity * Standard Price
g.
(Actual Rate - Standard Rate) * Actual Hours
h.
(Actual Quantity - Standard Quantity) *Standard Price

-Total Materials Variance

Question 55

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

Question 56

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

Question 57

Match the variance with its correct calculation.
a.
Actual Quantity *Actual Price
b.
(Actual Hours*Actual Rate) - (Standard Hours *Standard Rate)
c.
(Actual Quantity *Actual Price) - (Standard Quantity * Standard Price)
d.
(Actual Hours - Standard Hours) * Standard Rate
e.
(Actual Price -Standard Price) *Actual Quantity
f.
Standard Quantity * Standard Price
g.
(Actual Rate - Standard Rate) * Actual Hours
h.
(Actual Quantity - Standard Quantity) *Standard Price

-Labor Rate Variance

Question 58

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

Question 59

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

Question 60

Match the variance with its correct calculation.
a.
Actual Quantity *Actual Price
b.
(Actual Hours*Actual Rate) - (Standard Hours *Standard Rate)
c.
(Actual Quantity *Actual Price) - (Standard Quantity * Standard Price)
d.
(Actual Hours - Standard Hours) * Standard Rate
e.
(Actual Price -Standard Price) *Actual Quantity
f.
Standard Quantity * Standard Price
g.
(Actual Rate - Standard Rate) * Actual Hours
h.
(Actual Quantity - Standard Quantity) *Standard Price

-Materials Usage Variance

Question 61

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

Question 62

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

Question 63

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 64

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 65

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

Question 66

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

Question 67

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 68

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

Question 69

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 70

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 71

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 72

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 73

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 74

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 75

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 76

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 77

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 78

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 79

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

Question 80

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.