Question 1

The Purchasing Department would normally begin an investigation regarding an unfavorable materials quantity variance.

Accepted Answer

The Production Department is typically responsible for investigating an unfavorable materials quantity variance, as it relates to the efficiency and usage of materials in the manufacturing process.

Question 2

Consider the following statements:
I.The standard cost per unit of materials is used to calculate a materials price variance.
II.The standard cost per unit of materials is used to calculate a materials quantity variance.
III.The standard cost per unit of materials cannot be determined until the end of the period.
Which of the above statements is (are)true?
A)I only.
B)II only.
C)III only.
D)I and II.
E)I,II,and III.

Accepted Answer

Statement I is true because the materials price variance is calculated by comparing the actual price paid per unit of materials to the standard price per unit of materials.

Statement II is also true because the materials quantity variance is calculated by comparing the actual quantity of materials used to the standard quantity of materials that should have been used based on the level of output achieved.

Statement III is false because the standard cost per unit of materials is determined before the period begins as part of the budgeting and planning process.

Question 3

Most companies base the calculation of the material price variance on the:
A)quantity of direct materials purchased.
B)quantity of direct materials spoiled.
C)quantity of direct materials that should have been used in achieving actual production.
D)quantity of direct materials actually useD.
E)quantity of direct materials to be purchased during the next accounting period.
Units may not be the unit of measure for direct materials.

Accepted Answer

The material price variance is typically calculated based on the quantity of direct materials purchased, as it reflects the difference between the actual cost and the standard cost of materials at the point of purchase.

Question 4

A favorable labor efficiency variance is created when actual labor hours worked exceed standard hours allowed.

Accepted Answer

A favorable labor efficiency variance occurs when the actual labor hours worked are less than the standard hours allowed for the production achieved.

Question 5

Which of the following individuals is least likely to become involved in the setting of either direct material standards or direct labor standards?
A)The purchasing manager.
B)A production supervisor.
C)An engineer.
D)A machine operator.
E)A company's president.

Accepted Answer

The company's president is least likely to become involved in the setting of direct material standards or direct labor standards because these tasks are typically handled by individuals with more specialized roles in purchasing, production, and engineering. The president usually focuses on broader strategic issues rather than the specifics of production standards.

Question 6

The typical balanced scorecard is best described as containing both financial and nonfinancial performance measures.

Accepted Answer

The balanced scorecard is designed to measure performance in four perspectives: financial, customer, internal business processes, and learning and growth. While financial measures are an important component, nonfinancial measures are also included to provide a more comprehensive assessment of overall performance.

Question 7

Which of the following would be considered if a company desires to establish a series of practical manufacturing standards?
A)The productivity loss associated with a short-term worker slowdown.
B)Normal defect rates in an assembly process.
C)Highly unusual spoilage rates of direct materials.
D)Quantity discounts associated with purchases of direct materials.
E)Both "B" and "D."

Accepted Answer

Normal defect rates and quantity discounts are relevant for setting practical manufacturing standards as they reflect typical operational conditions and cost-saving opportunities.

Question 8

Variances are computed by taking the difference between which of the following?
A)Product cost and period cost.
B)Actual cost and differential cost.
C)Price factors and rate factors.
D)Actual cost and standard cost.
E)Product cost and standard cost.

Accepted Answer

Variances are computed by taking the difference between actual cost and standard cost. This helps in identifying the reasons for deviations from the planned or expected costs.

Question 9

Normal defect rates in an assembly process would be considered if a company desires to establish a series of practical manufacturing standards.

Accepted Answer

Normal defect rates are important to consider when establishing manufacturing standards as they provide a baseline for acceptable levels of defects in the finished product. Knowing the normal defect rates can help companies set realistic goals for reducing defects and improving quality.

Question 10

Which of the following are methods for setting standards?
A)Analysis of historical data and goal congruence.
B)Task analysis and matrix application forms.
C)Task analysis and the analysis of historical data.
D)Matrix application forms and analysis of historical data.
E)Goal congruence and task analysis.

Accepted Answer

The two methods for setting standards are task analysis and analysis of historical data. Goal congruence and matrix application forms are not widely accepted methods for setting standards.

Question 11

Which of the following is a predetermined estimated cost that can be used in the calculation of a variance?
A)Product cost.
B)Actual cost.
C)Standard cost.
D)Differential cost.
E)Marginal cost.

Accepted Answer

Standard cost is a predetermined estimated cost that can be used in the calculation of a variance. Product cost and differential cost are not necessarily predetermined and may not be used in the calculation of a variance. Actual cost and marginal cost refer to actual costs incurred and the cost of producing one additional unit, respectively, and do not relate to predetermined estimates used in variance analysis.

Question 12

The term "management by exception" is best defined as:
A)choosing exceptional managers.
B)controlling actions of subordinates through acceptance of management techniques.
C)investigating unfavorable variances.
D) Devoting management time to investigate significant variances.
E)controlling costs so that non-zero variances are treated as "exceptional."

Accepted Answer

Management by exception is a management style where managers focus on investigating significant variances or exceptions from the normal operating results. This allows managers to focus their time and attention on areas that require their intervention, rather than micromanaging all aspects of operations.

Question 13

A perfection standard:
A)tends to motivate employees over a long period of time.
B)is attainable in an ideal operating environment.
C)would make allowances for normal amounts of scrap and waste.
D)is generally preferred by behavioral scientists.
E)will result in a number of favorable variances on a performance report.

Accepted Answer

A perfection standard is designed to be attainable only in an ideal operating environment, where everything operates perfectly without any inefficiencies or errors.

Question 14

Which of the following choices correctly notes a characteristic associated with perfection standards and one associated with practical standards? 
A)Choice A
B)Choice B
C)Choice C
D)Choice D
E)Choice E

Accepted Answer

The answer of Which of the following choices correctly notes...

Question 15

Variances are computed by taking the difference between the product cost and standard cost.

Accepted Answer

Variances are computed by taking the difference between the actual cost and standard cost, not the product cost.

Question 16

Which of the following choices correctly notes the use of the standard price per unit of direct material when calculating the materials price variance and the material quantity variance? 
A)Choice A
B)Choice B
C)Choice C
D)Choice D
E)Choice E

Accepted Answer

The standard price per unit of direct material is used to calculate both the materials price variance and the material quantity variance. This is because the price variance measures the difference between the actual price paid for the direct materials and the standard price, while the quantity variance measures the difference between the actual quantity of direct materials used and the standard quantity. Therefore, Choice A correctly notes the use of the standard price per unit for both variances.

Question 17

Consider the following statements:
I.Behavioral scientists find that perfection standards often discourage employees and result in low worker morale.
II.Practical standards are also known as attainable standards.
III.Practical standards incorporate a certain amount of inefficiency such as that caused by an occasional machine breakdown.
Which of the above statements is (are)true?
A)I only.
B)II only.
C)III only.
D)II and III.
E)I,II,and III.

Accepted Answer

All three statements are true. Statement I is accurate because setting unattainably high standards can indeed lead to decreased morale among employees, as they may feel their efforts are never good enough. Statement II is correct as practical standards are designed to be attainable, taking into account the average performance levels of employees. Statement III is true because practical standards do account for normal inefficiencies, recognizing that not all processes will run at 100% efficiency all the time due to factors like machine breakdowns or minor delays.

Question 18

Which of the following would not be considered if a company desires to establish a series of practical manufacturing standards?
A)Production time lost during unusual machinery breakdowns.
B)Normal worker fatigue.
C)Freight charges on incoming raw materials.
D)Production time lost during setup procedures for new manufacturing runs.
E)The historical 2% defect rate associated with raw material inputs.

Accepted Answer

The answer of Which of the following would not be...

Question 19

When the quantity of materials purchased is not equal to the quantity of material used,most companies base the calculation of the material quantity variance on the:
A)quantity of direct materials purchased.
B)quantity of direct materials spoiled.
C)quantity of direct materials that should have been used in achieving actual production.
D)quantity of direct materials actually useD.
E)Leave answer E as originally written.
Units may not be the unit of measure for direct materials.

Accepted Answer

The answer of When the quantity of materials purchased is...

Question 20

A standard cost:
A)is the "true" cost of a unit of production.
B)is a budget for the production of one unit of a product or service.
C)can be useful in calculating equivalent units.
D)is normally the average cost within an industry.
E)is almost always the actual cost from previous years.

Accepted Answer

A standard cost is a budgeted cost for a single unit of product or service. It is used as a benchmark to compare against actual costs and to identify where variances occur.

Quiz 10: Standard Costing,Operational Performance Measures,and the Balanced Scorecard

The Purchasing Department would normally begin an investigation regarding an unfavorable materials quantity variance.

Most companies base the calculation of the material price variance on the:

A favorable labor efficiency variance is created when actual labor hours worked exceed standard hours allowed.

Which of the following individuals is least likely to become involved in the setting of either direct material standards or direct labor standards?

The typical balanced scorecard is best described as containing both financial and nonfinancial performance measures.

Which of the following would be considered if a company desires to establish a series of practical manufacturing standards?

Variances are computed by taking the difference between which of the following?

Normal defect rates in an assembly process would be considered if a company desires to establish a series of practical manufacturing standards.

Which of the following are methods for setting standards?

Which of the following is a predetermined estimated cost that can be used in the calculation of a variance?

The term "management by exception" is best defined as:

A perfection standard:

Which of the following choices correctly notes a characteristic associated with perfection standards and one associated with practical standards?

Variances are computed by taking the difference between the product cost and standard cost.

Which of the following choices correctly notes the use of the standard price per unit of direct material when calculating the materials price variance and the material quantity variance?

Which of the following would not be considered if a company desires to establish a series of practical manufacturing standards?

When the quantity of materials purchased is not equal to the quantity of material used,most companies base the calculation of the material quantity variance on the:

A standard cost: