Question 1

Which of the following is true?
A)Standard costs cannot be incorporated into the accounts in the general ledger.
B)An advantage of standard costs is that they simplify costing of inventories and reduce clerical costs.
C)Setting standard costs is relatively simple because it is done entirely by accountants.
D)Standard cost cards are the subsidiary ledger for the Work in Process account in a standard cost system.

Accepted Answer

Standard costs can be incorporated into the accounts in the general ledger. Setting standard costs is not done entirely by accountants, as it requires input from various departments. Standard cost cards are a component of the cost accounting system and are used to accumulate costs for each item produced in order to compute variances between standard and actual costs. However, an advantage of standard costs is that they simplify costing of inventories and reduce clerical costs by providing a predetermined cost for each unit produced.

Question 2

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

Accepted Answer

An unfavourable labour quantity variance occurs when the actual number of direct labour hours worked is greater than the standard number of hours that should have been worked for the output achieved. This means that more labour hours were used than what was expected or budgeted for, leading to higher costs and less efficiency.

Question 3

Inventories cannot be valued at standard cost in financial statements.

Accepted Answer

Inventories can be valued at standard cost in financial statements, as long as the standard cost is lower than the actual cost or net realizable value. However, if the standard cost is higher than the actual cost or net realizable value, the inventory must be written down to its lower value.

Question 4

A standard cost is
A)a cost which is paid for a group of similar products.
B)the average cost in an industry.
C)a predetermined cost.
D)the historical cost of producing a product last year.

Accepted Answer

A standard cost is a predetermined cost that is used as a benchmark or target for actual costs. It is often based on historical costs, but can also take into account expected future costs and efficiencies. It is used to evaluate actual costs and identify areas for improvement.

Question 5

Which of the following is true?
A)In developing a standard cost for direct materials, a price factor and a quantity factor must be considered.
B)A direct labour price standard is frequently called the direct labour efficiency standard.
C)The standard predetermined overhead rate must be based on direct labour hours as the standard activity index.
D)The direct materials price standard should be based on the production department's best estimate of the cost of raw material.

Accepted Answer

Developing a standard cost for direct materials requires consideration of both price and quantity factors. It is important to determine the standard cost of one unit of material based on the expected quantities to be used, as well as the cost per unit of material.

Question 6

A debit to the Overhead Volume Variance account indicates that the standard hours allowed for the output produced was greater than the standard hours at normal capacity.

Accepted Answer

A debit to the Overhead Volume Variance account indicates that the actual production volume was less than the expected (or standard) production volume, not a comparison of standard hours allowed to standard hours at normal capacity.

Question 7

The difference between a budget and a standard is that
A)a budget expresses what costs were, while a standard expresses what costs should be.
B)a budget expresses management's plans, while a standard reflects what actually happened.
C)a budget expresses a total amount while a standard expresses a unit amount.
D)standards are excluded from the cost accounting system, whereas budgets are generally incorporated into the cost accounting system.

Accepted Answer

A budget typically outlines the overall financial plan for a certain period, showing the total amounts allocated for various expenses or revenues. In contrast, a standard specifies the expected cost (or revenue) on a per unit basis, such as the standard cost per unit of material, labor, or overhead. This allows for more detailed planning and variance analysis on a unit level, rather than just looking at total figures.

Question 8

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

Accepted Answer

The correct formula is Standard cost = Budgeted cost, and the price variance and quantity variance are used to analyze the reasons for the difference between the actual cost and the standard cost.

Question 9

If standard costs are incorporated into the accounting system,
A)it may simplify the costing of inventories and reduce clerical costs.
B)it can eliminate the need for the budgeting process.
C)the accounting system will produce information which is less relevant than the historical cost accounting system.
D)approval of the stockholders is required.

Accepted Answer

Standard costs can simplify the costing of inventories and reduce clerical costs by providing a pre-determined cost for each unit of production. This makes it easier to track and allocate costs to inventory items. It does not eliminate the need for the budgeting process, and the accounting system can still provide relevant information for decision-making. Approval of stockholders is not required for implementing standard costs in the accounting system.

Question 10

When it comes to variances,
A)actual costs that vary from standard costs always indicate efficiencies.
B)ideal standards will generally result in favourable variances for the company.
C)a variance is the difference between total actual costs and total standard costs.
D)if actual costs are less than standard costs, the variance is unfavourable.

Accepted Answer

A variance is the difference between actual costs and standard costs. It does not necessarily indicate efficiencies or inefficiencies. Ideal standards may result in unfavourable variances if they are set too high. If actual costs are less than standard costs, the variance is favourable, not unfavourable.

Question 11

The learning and growth perspective on the balanced scorecard includes measures monitoring product development, production, delivery, and after-sale service.

Accepted Answer

The learning and growth perspective focuses on employee training, information systems, and organizational culture to support continuous improvement and innovation, not directly on product development, production, delivery, and after-sale service.

Question 12

Budget data are not journalized in cost accounting systems with the exception of
A)the application of manufacturing overhead.
B)direct labour budgets.
C)direct materials budgets.
D)cash budget data.

Accepted Answer

Budget data related to the application of manufacturing overhead needs to be journalized in cost accounting systems as it is a significant component of product costs. However, other budgets such as direct labour, direct materials or cash budgets are not journalized in cost accounting systems as they are part of financial accounting and not relevant to product costing.

Question 13

It is possible that a company's financial statements may report inventories at
A)budgeted costs.
B)standard costs.
C)both budgeted and standard costs.
D)none of these.

Accepted Answer

Inventories can be reported at standard costs, which are predetermined costs that companies use for budgeting and assessing performance. Standard costs are used in accounting as a way to value inventory and measure cost of goods sold, providing a consistent and simplified method for tracking inventory costs. Budgeted costs, on the other hand, are projections or estimates of future costs and are not typically used for reporting inventories in financial statements.

Question 14

Which of the following statements is FALSE?
A)A standard cost is more accurate than a budgeted cost.
B)A standard is a unit amount.
C)In concept, standards and budgets are essentially the same.
D)The standard cost of a product is equivalent to the budgeted cost per unit of product.

Accepted Answer

This statement is false because a standard cost is based on ideal conditions and may not reflect actual costs, while a budgeted cost takes into consideration the expected actual costs for a period. Therefore, a budgeted cost is considered to be more accurate than a standard cost.

Question 15

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

Accepted Answer

The answer of A standard is a unit amount, whereas...

Question 16

Standard cost is the industry average cost for a product or service.

Accepted Answer

Standard cost is the cost that a company expects to incur for producing a product or service, based on factors such as material costs, labor costs, and overhead costs. It may differ from the industry average cost.

Question 17

Normal standards
A)should not be rigorous but attainable.
B)do not incorporate normal contingencies of production into the standards.
C)once set should not be changed during the year.
D)represent efficient levels of performance that are attainable under expected operating conditions.

Accepted Answer

Normal standards represent efficient levels of performance that are attainable under expected operating conditions. They should not be too rigorous but should be attainable given the resources available. They should also take into account the normal contingencies of production, such as normal machine breakdowns or employee absences. Normal standards may need to be adjusted during the year if there are significant changes in operating conditions, but they should be relatively stable over time.

Question 18

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

Accepted Answer

The production department is responsible for purchasing and using the direct materials needed for production, and therefore can impact the direct materials price variance.

Question 19

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.

Accepted Answer

A materials quantity variance is calculated as the difference between the standard quantity of materials that should have been used for the actual output and the actual quantity used, multiplied by the standard price per unit of material.

Question 20

Standard costs may be used by
A)universities.
B)governmental agencies.
C)charitable organizations.
D)all of these.

Accepted Answer

Standard costs can be used by any organization regardless of its sector, including universities, governmental agencies, and charitable organizations.

Quiz 12: Standard Costs and Balanced Scorecard

Which of the following is true?

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

Inventories cannot be valued at standard cost in financial statements.

A standard cost is

Which of the following is true?

A debit to the Overhead Volume Variance account indicates that the standard hours allowed for the output produced was greater than the standard hours at normal capacity.

The difference between a budget and a standard is that

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

If standard costs are incorporated into the accounting system,

When it comes to variances,

The learning and growth perspective on the balanced scorecard includes measures monitoring product development, production, delivery, and after-sale service.

Budget data are not journalized in cost accounting systems with the exception of

It is possible that a company's financial statements may report inventories at

Which of the following statements is FALSE?

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

Standard cost is the industry average cost for a product or service.

Normal standards

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

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.

Standard costs may be used by