Question 1

A favorable direct materials price variance indicates which of the following?
A)The actual cost of materials purchased was greater than the standard cost of materials purchased.
B)The standard cost of materials purchased was less than the actual cost of materials purchased.
C)The Actual Quantity (AQ)of materials used was less than the standard quantity of materials used for actual production.
D)The standard cost of materials purchased was greater than the actual cost of materials purchased.

Accepted Answer

A favorable direct materials price variance occurs when the actual cost of materials is less than the standard cost anticipated for those materials. This means the company paid less for its materials than it had planned, which is a positive outcome.

Question 2

A price variance for production inputs is the difference between the actual unit price of an input and the standard unit price of the input, multiplied by the actual input quantity.

Accepted Answer

This is the correct definition of price variance.

Question 3

A quantity (efficiency)variance for production inputs (materials and labor)is the difference between the Actual Quantity (AQ)of input used and the standard quantity of input, multiplied by the standard price per unit of input.

Accepted Answer

This statement accurately describes the calculation of a quantity variance for production inputs.

Question 4

A favorable direct materials price variance and an unfavorable direct materials quantity variance might indicate which of the following?
A)Less expensive, inferior materials requiring less than the standard amount were used in production.
B)Less expensive, inferior materials requiring more than the standard amount were used in production.
C)More expensive, superior materials requiring more than the standard amount were used in production.
D)More expensive, superior materials requiring less than the standard amount were used in production.

Accepted Answer

A favorable direct materials price variance indicates that the actual cost of materials was less than the expected cost, suggesting that less expensive materials were purchased. An unfavorable direct materials quantity variance indicates that more materials were used than expected, which could be due to the inferior quality of the cheaper materials requiring more to be used to meet production needs.

Question 5

The ________ tells managers how much of the overall variance id due to paying a higher or lower price than expected for the quantity of materials it purchased.
A)production volume variance
B)overhead flexible budget variance
C)price variance
D)quantity variance

Accepted Answer

The price variance specifically relates to the difference between the actual cost paid and the expected cost of materials. The other options (production volume variance, overhead flexible budget variance, quantity variance) do not directly relate to the cost of materials purchased.

Question 6

Which variance is directly impacted if a worker drops the raw material during production and the raw material must be discarded?
A)Direct materials quantity variance
B)Direct materials price variance
C)Direct labor rate variance
D)Direct labor efficiency variance

Accepted Answer

The direct materials quantity variance is directly impacted because the raw material was dropped and had to be discarded, resulting in a higher quantity of materials being used than originally planned.

Question 7

Circumstances can occur that result in favorable direct materials price variances and unfavorable direct materials quantity variances.

Accepted Answer

This is because favorable price variances imply that the actual price paid for the materials was lower than the standard price, which is beneficial. However, unfavorable quantity variances imply that more materials were used than planned, resulting in higher costs. Therefore, it is possible for these two variances to occur simultaneously.

Question 8

The direct materials flexible budget variance can be divided into which of the following two variances?
A)Price variance and the rate variance
B)Price variance and the standard variance
C)Price variance and the quantity variance
D)Quantity variance and the efficiency variance

Accepted Answer

The direct materials flexible budget variance can be divided into the price variance and the quantity variance. The price variance measures the difference between the actual price of the materials and the expected or standard price. The quantity variance measures the difference between the actual quantity of materials used and the expected or standard quantity.

Question 9

Raw material, ruined through mistakes during production, results in a materials quantity variance.

Accepted Answer

Raw material can be wasted or ruined due to errors during production, leading to a variance in the quantity of materials used for production.

Question 10

A company uses sugar in producing its product. If the price of sugar doubles, which variance is directly impacted?
A)Direct materials quantity variance
B)Direct materials price variance
C)Direct labor rate variance
D)Direct labor efficiency variance

Accepted Answer

When the price of sugar doubles, it directly impacts the cost of the raw material used in production. Therefore, the variance that is directly impacted is the direct materials price variance.

Question 11

Which of the following situations may lead to a favorable direct materials price variance?
A)The purchasing manager was able to negotiate a lower purchase price for raw materials.
B)A vendor shipped a greater quantity of raw materials than ordered.
C)The purchasing manager paid a premium price for a higher quality of raw materials.
D)Raw materials waste was substantially reduced in the factory.

Accepted Answer

When the purchasing manager negotiates a lower purchase price for the raw materials, it leads to a favorable direct materials price variance.

Question 12

The Standard Quantity (SQ)of direct materials is calculated as
A)the budgeted quantity of units less the Standard Quantity (SQ)of units.
B)the Standard Quantity (SQ)of input per unit times the number of units budgeted.
C)the number of units actually made times the direct materials price standard.
D)the Standard Quantity (SQ)of input per unit times the number of units actually made.

Accepted Answer

The Standard Quantity (SQ) of direct materials is calculated by multiplying the standard quantity of input per unit by the number of units actually made. This reflects the amount of materials that should have been used for the actual production level.

Question 13

If the Standard Quantity Allowed (SQA)for direct materials is greater than the Actual Quantity (AQ)used, the quantity variance is unfavorable.

Accepted Answer

If the SQA is greater than the AQ used, it means less materials were used than planned, resulting in a favorable quantity variance. If the AQ used is greater than the SQA, it means more materials were used than planned, resulting in an unfavorable quantity variance.

Question 14

A direct materials flexible budget variance can be broken down into a price variance and a quantity variance.

Accepted Answer

This statement is true. The flexible budget variance for direct materials can be separated into two components: price variance and quantity variance. The price variance reflects the difference between the actual price paid for materials and the expected (budgeted) price for those same materials. The quantity variance, on the other hand, reflects the difference between the actual quantity of materials used in production and the expected (budgeted) quantity of materials that should have been used. These variances can help managers identify the root causes of cost overruns or cost savings in their direct materials costs.

Question 15

A price variance for direct materials measures how well a company keeps unit prices of material within standards.

Accepted Answer

A price variance for direct materials measures the difference between the actual cost paid for materials and the expected standard cost of those materials, in terms of unit prices. Therefore, it does measure how well a company keeps unit prices of material within standards.

Question 16

A favorable direct materials quantity variance indicates which of the following?
A)The actual cost of direct materials was less than the standard cost of direct materials.
B)The Standard Quantity (SQ)of direct materials for actual output was less than the Actual Quantity (AQ)of direct materials used.
C)The Actual Quantity (AQ)of direct materials used was less than the standard quantity for actual output.
D)The Actual Quantity (AQ)of direct materials used was greater than the standard quantity for budgeted output.

Accepted Answer

A favorable direct materials quantity variance occurs when the actual quantity of direct materials used is less than the standard quantity for actual output. This could be due to efficient usage of materials or a reduction in waste.

Question 17

The direct materials price variance is the difference between the Actual Price (AP)and the Standard Price (SP), multiplied by the Actual Quantity Purchased (AQP).

Accepted Answer

This is the formula for calculating the direct materials price variance in standard costing.

Question 18

The direct materials price variance is calculated as
A)the difference in Actual Quantities (AQ)multiplied by the Actual Price (AP)of the input.
B)the Actual Quantity (AQP)of direct materials divided by the Actual Quantity (AQ).
C)the difference in prices of the Actual Quantity Purchased (AQP)and the Actual Price (AP)multiplied by the Actual Quantity Purchased (AQP)and the Standard Price (SP)of the input purchased.
D)the direct materials Actual Quantity Purchased (AQ)divided by the per unit price.

Accepted Answer

The direct materials price variance is calculated as the difference between the Actual Price (AP) and the Standard Price (SP) of the input, multiplied by the Actual Quantity Purchased (AQP). This measures how much more or less was paid for the materials than was expected.

Question 19

If the purchasing manager purchased a greater quantity of raw materials than budgeted, but paid the Standard Price (SP), which variance may be affected?
A)Materials price variance
B)Materials quantity variance
C)Both of the variances may be affected
D)Neither of the variances may be affected

Accepted Answer

The answer of If the purchasing manager purchased a greater...

Question 20

A company's purchasing department negotiates all of the purchasing contracts for raw materials. Which variance is most useful in assessing the performance of the purchasing department?
A)Direct materials quantity variance
B)Direct materials price variance
C)Direct labor rate variance
D)Direct labor efficiency variance

Accepted Answer

The direct materials price variance is the most useful variance in assessing the performance of the purchasing department because it reflects the difference between the actual price paid for raw materials and the standard price that was negotiated by the purchasing department. A favorable price variance indicates that the purchasing department was able to negotiate better prices for materials, while an unfavorable variance may indicate that the department needs to improve its negotiating skills or that market conditions have changed. The other variances listed relate to labor, not purchasing, and therefore would not be as relevant in assessing the performance of the purchasing department.

Quiz 11: Standard Costs and Variances

A favorable direct materials price variance indicates which of the following?

A price variance for production inputs is the difference between the actual unit price of an input and the standard unit price of the input, multiplied by the actual input quantity.

A quantity (efficiency)variance for production inputs (materials and labor)is the difference between the Actual Quantity (AQ)of input used and the standard quantity of input, multiplied by the standard price per unit of input.

A favorable direct materials price variance and an unfavorable direct materials quantity variance might indicate which of the following?

The ________ tells managers how much of the overall variance id due to paying a higher or lower price than expected for the quantity of materials it purchased.

Which variance is directly impacted if a worker drops the raw material during production and the raw material must be discarded?

Circumstances can occur that result in favorable direct materials price variances and unfavorable direct materials quantity variances.

The direct materials flexible budget variance can be divided into which of the following two variances?

Raw material, ruined through mistakes during production, results in a materials quantity variance.

A company uses sugar in producing its product. If the price of sugar doubles, which variance is directly impacted?

Which of the following situations may lead to a favorable direct materials price variance?

The Standard Quantity (SQ) of direct materials is calculated as

If the Standard Quantity Allowed (SQA)for direct materials is greater than the Actual Quantity (AQ)used, the quantity variance is unfavorable.

A direct materials flexible budget variance can be broken down into a price variance and a quantity variance.

A price variance for direct materials measures how well a company keeps unit prices of material within standards.

A favorable direct materials quantity variance indicates which of the following?

The direct materials price variance is the difference between the Actual Price (AP)and the Standard Price (SP), multiplied by the Actual Quantity Purchased (AQP).

The direct materials price variance is calculated as

If the purchasing manager purchased a greater quantity of raw materials than budgeted, but paid the Standard Price (SP) , which variance may be affected?

A company's purchasing department negotiates all of the purchasing contracts for raw materials. Which variance is most useful in assessing the performance of the purchasing department?