Question 1

If the standard to produce a given amount of product is 600 direct labor hours at $15 and the actual was 600 hours at $17, the rate variance was $1,200 unfavorable.

Accepted Answer

The answer of If the standard to produce a given...

Question 2

If the standard to produce a given amount of product is 1,000 units of direct materials at $11 and the actual was 800 units at $12, the direct materials quantity variance was $1,000 unfavorable.

Accepted Answer

The direct materials quantity variance is calculated as follows:

Standard cost for actual production - Standard cost for standard production

In this case, the standard cost for standard production would be:

1,000 units x $11 = $11,000

The standard cost for actual production would be:

800 units x $11 = $8,800

Therefore, the direct materials quantity variance would be:

$8,800 - $11,000 = $2,200 unfavorable

So the correct answer is B, the direct materials quantity variance was $2,200 unfavorable, not $1,000 unfavorable.

Question 3

If the standard to produce a given amount of product is 2,000 units of direct materials at $12 and the actual was 1,600 units at $13, the direct materials quantity variance was $5,200 favorable.

Accepted Answer

To calculate the direct materials quantity variance, we need to use the following formula:

DM Quantity Variance = (Standard Quantity - Actual Quantity) x Standard Price

Using the information provided in the question, we can calculate the variance as follows:

DM Quantity Variance = (2,000 - 1,600) x $12 = $4,800 unfavorable

Therefore, the statement in the question is false, and the direct materials quantity variance is actually $4,800 unfavorable, not $5,200 favorable.

Question 4

A favorable cost variance occurs when actual cost is less than budgeted cost at actual volumes.

Accepted Answer

A favorable cost variance occurs when the actual cost is less than the budgeted cost, indicating that the organization has saved money on that particular item or project.

Question 5

The variance from standard for factory overhead resulting from incurring a total amount of factory overhead cost that is greater or less than the amount budgeted for the level of operations achieved is termed controllable variance.

Accepted Answer

This is the definition of controllable variance.

Question 6

Because accountants have financial expertise, they are the only ones that are able to set standard costs for the production area.

Accepted Answer

While accountants play a role in determining standard costs, they work collaboratively with production managers and engineers to establish accurate and reasonable cost standards. The input of multiple departments and areas of expertise is required to set the most effective standard costs.

Question 7

Standards are more widely used for nonmanufacturing activities than for manufacturing activities.

Accepted Answer

Standards are widely used in both manufacturing and nonmanufacturing activities, but historically, they have been more closely associated with manufacturing due to the critical importance of consistency, quality, and interoperability in the production of goods.

Question 8

The variance from standard for factory overhead cost resulting from operating at a level above or below 100% of normal capacity is termed volume variance.

Accepted Answer

This statement is true. Volume variance refers to the difference in factory overhead cost due to operating at a level above or below the normal capacity.

Question 9

A budget performance report compares actual results with the budgeted amounts and reports differences for possible investigation.

Accepted Answer

This statement accurately describes the purpose of a budget performance report.

Question 10

If the standard to produce a given amount of product is 1,000 units of direct materials at $11 and the actual was 800 units at $12, the direct materials price variance was $800 favorable.

Accepted Answer

The formula for direct materials price variance is (Actual price - Standard price) x Actual quantity. Using this formula, the direct materials price variance would be ($12 - $11) x 800 = $800 unfavorable, not favorable.

Question 11

While setting standards, managers should never allow for spoilage or machine breakdowns in their calculations.

Accepted Answer

Managers should always consider the possibility of spoilage or machine breakdowns in their calculations when setting standards. Failure to do so can lead to unrealistic goals and unrealistic expectations for employees. By factoring in these potential setbacks, managers can create more accurate and achievable standards for their team.

Question 12

If the standard to produce a given amount of product is 1,000 units of direct materials at $11 and the actual was 800 units at $12, the direct materials price variance was $800 unfavorable.

Accepted Answer

The answer of If the standard to produce a given...

Question 13

If the standard to produce a given amount of product is 500 direct labor hours at $15 and the actual was 600 hours at $17, the rate variance was $1,200 favorable.

Accepted Answer

The rate variance is calculated by (Actual Rate - Standard Rate) x Actual Hours. Using the given information, we get:
($17 - $15) x 600 = $1,200 unfavorable
Therefore, the answer is B, not A.

Question 14

The direct labor time variance measures the efficiency of the direct labor force.

Accepted Answer

The direct labor time variance compares the actual hours worked by the direct labor force to the standard hours allowed for the work performed. This variance measures the efficiency of the direct labor force.

Question 15

If the standard to produce a given amount of product is 600 direct labor hours at $15 and the actual was 500 hours at $17, the time variance was $1,700 unfavorable.

Accepted Answer

The question is asking about the time variance, but the given information only provides data on the labor hours and rates. In order to calculate the time variance, we would need to know the standard time and actual time taken to produce the product. Therefore, the answer cannot be determined based on the given information.

Question 16

Standards are designed to evaluate price and quantity variances separately.

Accepted Answer

Standards are designed to evaluate price and quantity variances separately to identify the root causes of variances and facilitate corrective actions.

Question 17

If the standard to produce a given amount of product is 1,000 units of direct materials at $11 and the actual was 800 units at $12, the direct materials quantity variance was $2,200 unfavorable.

Accepted Answer

The answer of If the standard to produce a given...

Question 18

If the standard to produce a given amount of product is 600 direct labor hours at $17 and the actual was 500 hours at $15, the time variance was $1,500 unfavorable.

Accepted Answer

The time variance is calculated as (Standard Hours - Actual Hours) x Standard Rate. Therefore, the time variance in this case would be (600 - 500) x 17 = $1,700 unfavorable.

Question 19

Standard costs are determined by multiplying expected price by expected quantity.

Accepted Answer

Standard costs are determined by estimating the expected price and expected quantity, and multiplying the two together to establish a standard cost for each item or product.

Question 20

An unfavorable cost variance occurs when budgeted cost at actual volumes exceeds actual cost.

Accepted Answer

An unfavorable cost variance occurs when actual cost exceeds budgeted cost at actual volumes.

Quiz 7: Performance Evaluation Using Variances From Standard Costs

If the standard to produce a given amount of product is 600 direct labor hours at $15 and the actual was 600 hours at $17, the rate variance was $1,200 unfavorable.

If the standard to produce a given amount of product is 1,000 units of direct materials at $11 and the actual was 800 units at $12, the direct materials quantity variance was $1,000 unfavorable.

If the standard to produce a given amount of product is 2,000 units of direct materials at $12 and the actual was 1,600 units at $13, the direct materials quantity variance was $5,200 favorable.

A favorable cost variance occurs when actual cost is less than budgeted cost at actual volumes.

The variance from standard for factory overhead resulting from incurring a total amount of factory overhead cost that is greater or less than the amount budgeted for the level of operations achieved is termed controllable variance.

Because accountants have financial expertise, they are the only ones that are able to set standard costs for the production area.

Standards are more widely used for nonmanufacturing activities than for manufacturing activities.

The variance from standard for factory overhead cost resulting from operating at a level above or below 100% of normal capacity is termed volume variance.

A budget performance report compares actual results with the budgeted amounts and reports differences for possible investigation.

If the standard to produce a given amount of product is 1,000 units of direct materials at $11 and the actual was 800 units at $12, the direct materials price variance was $800 favorable.

While setting standards, managers should never allow for spoilage or machine breakdowns in their calculations.

If the standard to produce a given amount of product is 1,000 units of direct materials at $11 and the actual was 800 units at $12, the direct materials price variance was $800 unfavorable.

If the standard to produce a given amount of product is 500 direct labor hours at $15 and the actual was 600 hours at $17, the rate variance was $1,200 favorable.

The direct labor time variance measures the efficiency of the direct labor force.

If the standard to produce a given amount of product is 600 direct labor hours at $15 and the actual was 500 hours at $17, the time variance was $1,700 unfavorable.

Standards are designed to evaluate price and quantity variances separately.

If the standard to produce a given amount of product is 1,000 units of direct materials at $11 and the actual was 800 units at $12, the direct materials quantity variance was $2,200 unfavorable.

If the standard to produce a given amount of product is 600 direct labor hours at $17 and the actual was 500 hours at $15, the time variance was $1,500 unfavorable.

Standard costs are determined by multiplying expected price by expected quantity.

An unfavorable cost variance occurs when budgeted cost at actual volumes exceeds actual cost.