Question 1

If the total variances in the accounting information system are favorable, accountants must adjust some accounts by decreasing costs during the closing process.

Accepted Answer

True

Question 2

The direct materials price variance is often based on materials purchased, rather than on materials used.

Accepted Answer

The direct materials price variance is based on the difference between the actual price paid for materials and the standard price expected. This calculation is typically based on the materials purchased, as it reflects the actual cost incurred by the company. However, it is important to note that the variance in materials purchased can also impact the variance in materials used, as fluctuations in materials price or quality can affect the quantity or efficiency of production.

Question 3

Identifying the reasons for variances is usually a quick and easy process.

Accepted Answer

Identifying the reasons for variances can be a complex process that requires thorough investigation and analysis. It may involve examining multiple factors and using various tools and techniques to identify the root cause of the variance.

Question 4

The cost categories that are measured and monitored in a given organization depend, in part, on the costs that managers consider important.

Accepted Answer

The costs that are measured and monitored in an organization are based on the importance that managers ascribe to them. They may prioritize certain cost categories to achieve specific objectives, such as reducing expenses or improving profitability.

Question 5

Normal fluctuations in labor hours may cause a favorable direct labor efficiency variance.

Accepted Answer

Normal fluctuations in labor hours may cause a favorable direct labor efficiency variance, as long as the actual hours worked are less than the standard hours allowed. This is because the efficiency variance is calculated based on the difference between the actual hours worked and the standard hours allowed. If the actual hours worked are less than the standard hours allowed, the efficiency variance will be favorable. However, if the actual hours worked are more than the standard hours allowed, the efficiency variance will be unfavorable.

Question 6

If a variance is considered material, it should be allocated to work in process inventory, finished goods inventory, and cost of goods sold.

Accepted Answer

If a variance is material, it means it is significant enough to affect the value of inventory or the cost of goods sold. Therefore, it should be allocated to the appropriate inventory accounts and cost of goods sold account.

Question 7

The fixed overhead spending variance is normally zero because fixed costs are constant within a relevant range of activity.

Accepted Answer

The fixed overhead spending variance measures the difference between the actual amount spent on fixed overhead and the budgeted amount. It can be zero if the actual spending matches the budgeted amount. However, it is possible for the actual spending to differ from the budgeted amount due to factors such as changes in the cost of inputs or unexpected maintenance costs, resulting in a non-zero fixed overhead spending variance.

Question 8

If a variance is unfavorable, it should be closed directly to cost of goods sold.

Accepted Answer

The answer of If a variance is unfavorable, it should...

Question 9

The total direct labor variance can be broken down into two components: the efficiency variance and the price variance.

Accepted Answer

This is correct. The total direct labor variance is the difference between the actual and standard direct labor costs, and it can be divided into the efficiency variance (due to differences in the actual and standard amount of labor used) and the price variance (due to differences in the actual and standard wage rates paid to workers).

Question 10

Calculating variances is a necessary, but not sufficient, step for completing a variance analysis.

Accepted Answer

While calculating variances provides essential information for variance analysis, it is not the only step involved. Variance analysis also requires examining the reasons behind the discrepancies between actual and expected results and determining appropriate actions to address those issues.

Question 11

Unreasonable standards may be the cause of direct materials variances, but not of direct labor variances.

Accepted Answer

Unreasonable standards can indeed lead to direct labor variances. If the standards are set too high, then it may be impossible for workers to meet them, leading to unfavorable variances. Additionally, if the standards are set too low, workers may complete tasks more quickly than expected, leading to favorable variances.

Question 12

A standard cost variance is a difference between a standard cost and an actual cost.

Accepted Answer

A standard cost variance is calculated by subtracting the standard cost from the actual cost, which results in a difference that may be favorable or unfavorable.

Question 13

The standard cost of direct materials is computed as the standard price per unit of input times the standard quantity per unit of input.

Accepted Answer

This formula is used to calculate the standard cost of direct materials.

Question 14

The total standard cost for a unit of output is the sum of the standard costs for the resources used in production.

Accepted Answer

This statement is true. Standard cost includes the cost of direct materials, direct labor, and manufacturing overhead, which are the resources used in production. The total standard cost for a unit of output is the sum of these standard costs.

Question 15

The direct materials efficiency variance tells managers about the efficiency of the purchasing process.

Accepted Answer

The direct materials efficiency variance is related to the efficiency of the production process, not the purchasing process. It measures the difference between the actual amount of materials used in production and the expected amount of materials for the level of output achieved, taking into account any changes in quality or waste.

Question 16

Variance analysis is used for monitoring and performance evaluation.

Accepted Answer

Variance analysis compares actual performance to expected performance and identifies areas of improvement or deviation. Therefore, it is used for monitoring and performance evaluation.

Question 17

A contract with a new supplier may cause an unfavorable materials price variance.

Accepted Answer

Often, when a company switches to a new supplier, the prices charged for materials may be different than what they were expecting or used to. This can lead to an unfavorable materials price variance.

Question 18

Errors in the accounting records related to actual production output could lead to a fixed overhead production volume variance.

Accepted Answer

The fixed overhead production volume variance reflects the difference between actual production volume and the budgeted production volume. If there are errors in the accounting records related to actual production output, it could result in an inaccurate calculation of the variance.

Question 19

The fixed overhead budget variance can be broken down into two parts: the spending variance and the production volume variance.

Accepted Answer

This is true. The fixed overhead budget variance can be broken down into the spending variance and the production volume variance. The spending variance is the difference between actual fixed overhead costs and budgeted fixed overhead costs based on the actual level of production. The production volume variance is the difference between budgeted fixed overhead costs based on the actual level of production and budgeted fixed overhead costs based on the standard level of production.

Question 20

The variable overhead budget variance is the difference between allocated variable overhead cost and actual variable overhead cost.

Accepted Answer

The answer of The variable overhead budget variance is the...

Quiz 11: Standard Costs and Variance Analysis