Question 1

Which of the following is characteristic of direct labour variances?
A) The labour efficiency variance measures the difference between what was paid to direct labourers and what should have been paid.
B) The labour rate and labour efficiency variances will always add up to the total labour variance.
C) The labour rate variance measures the difference between the labour hours that were actually used and the labour hours that should have been used.
D) The labour rate variance measures the difference between the labour hours that were originally budgeted and the labour hours that should have been used.

Accepted Answer

The labour rate variance measures the difference between the actual rate paid to direct labourers and the standard rate, while the labour efficiency variance measures the difference between the actual labour hours used and the standard labour hours allowed. Therefore, both variances together add up to the total labour variance. Option A is incorrect as it describes the wage rate variance, not the labour efficiency variance. Option C is incorrect since it describes the labour efficiency variance. Option D is incorrect as it describes the budgeted labour variance, not the labour rate variance.

Question 2

Fender Corporation produced 100 units of Product XX.The total standard and actual costs for materials and direct labour for the 100 units of Product XX are as follows:  What is the labour efficiency variance for Fender Corporation?
A) $480 (U)
B) $480 (F)
C) $552 (U)
D) $552 (F)

Accepted Answer

The answer of Fender Corporation produced 100 units of Product...

Question 3

Which formula is used to calculate the labour rate variance?
A) (actual rate × actual hours)− (standard rate × standard hours)
B) (standard rate × actual rate)− (actual rate × actual hours)
C) (actual rate × standard hours)− (standard rate × actual hours)
D) (actual rate × actual hours)− (standard rate × actual hours)

Accepted Answer

The answer of Which formula is used to calculate the...

Question 4

During September,a small roofing company purchased 500 bundles of a certain type of shingle at a price of $35 per bundle,$5 less than the standard price.The company's standard quantity of this type of shingles is 550 bundles.What is the journal entry to record the purchase of materials?
A) Materials 20,000
Materials price variance 2,500
Accounts payable 17,500
B) Materials 20,000
Materials price variance 2,500
Accounts payable 22,500
C) Materials 17,500
Materials price variance 2,500
Accounts payable 15,000
D) Materials 20,000
Materials price variance 2,750
Accounts payable 17,250

Accepted Answer

The answer of During September,a small roofing company purchased 500...

Question 5

During November,10,000 direct labour hours were worked at a standard cost of $10 per hour.Suppose the direct labour rate variance for November was $4,000 unfavourable.What was the actual cost per direct labour hour?
A) $9.20
B) $9.60
C) $10.00
D) $10.40

Accepted Answer

Direct labour rate variance = (Actual rate - Standard rate) x Actual hours

$4,000 unfavourable = (Actual rate - $10) x 10,000

Actual rate - $10 = $0.40

Actual rate = $10.40 per direct labour hour.

Question 6

Which of the following does NOT describe kaizen costing?
A) It is concerned with reducing the costs of existing products and processes.
B) It tries to reduce both value-added and non-value-added costs.
C) The cost reduction process is accomplished through the repetitive use of the kaizen cycle and the maintenance cycle.
D) The kaizen standard reflects the planned improvement for the upcoming period.

Accepted Answer

Kaizen costing only tries to reduce non-value-added costs, not value-added costs. The goal is to eliminate waste and inefficiencies in the production process while maintaining or improving product quality.

Question 7

Min Company has developed the following standards for one of its products. $\begin{array}{ll}
\text { Direct materials: } & 15 \mathrm{~kg} \times \$ 17.50 \text { per kilogram } \
\text { Direct labour: } & 4 \text { hours } \times \$ 24 \text { per hour } \
\text { Variable manufacturing overhead: } & 4 \text { hours } \times \$ 14 \text { per hour }
\end{array}$ The following activity occurred during the month of November: $$\begin{array} { l l } 
\text { Materials purchased: } & 20,000 \mathrm {~kg} \text { costing } \$ 340,000 \
\text { Materials used: } & 7,200 \mathrm {~kg} \
\text { Units produced: } & 500 \text { units } \
\text { Direct labour: } & 2,300 \text { hours at } \$ 23.60 \text { per hour }
\end{array}$$ The company records materials price variances at the time of purchase.What is the direct materials price variance?
A) $10,000 favourable
B) $10,000 unfavourable
C) $50,000 favourable
D) $50,000 unfavourable

Accepted Answer

The direct materials price variance is calculated as (Actual Price - Standard Price) x Actual Quantity Purchased. Here, the actual price is $340,000 / 20,000 kg = $17 per kg, and the standard price is $17.50 per kg. The variance is ($17 - $17.50) x 20,000 kg = -$10,000, which is favourable.

Question 8

Which of the following cost reduction methods is NOT typically used to move the actual cost to target cost?
A) reverse engineering
B) value analysis
C) process improvement
D) forward engineering

Accepted Answer

Forward engineering is not a method typically used to move actual cost to target cost. Forward engineering is the process of designing and developing a new product or system from scratch, rather than starting from an existing one. Reverse engineering, value analysis, and process improvement are all commonly used methods to move actual cost to target cost.

Question 9

Setting a new minimum standard is which step in the kaizen cycle of kaizen costing?
A) plan
B) do
C) check
D) act

Accepted Answer

The answer of Setting a new minimum standard is which...

Question 10

Which formula is used to calculate the labour efficiency variance?
A) (standard hours × actual hours)− (actual hours × standard rate)
B) (actual rate × actual hours)− (standard rate × actual hours)
C) (actual hours × standard rate)− (standard hours × standard rate)
D) (standard hours × actual rate)− (actual hours × actual rate)

Accepted Answer

The labour efficiency variance is calculated as the difference between the standard cost of the actual hours worked and the actual cost of the actual hours worked. The formula for labour efficiency variance is (actual hours × standard rate)− (standard hours × standard rate). This formula calculates the difference between the actual hours worked, multiplied by the standard rate, and the standard hours allowed, multiplied by the standard rate.

Question 11

During March,6,000 direct labour hours were worked at a standard cost of $22 per hour.Suppose the direct labour rate variance for March was $16,500 favourable.What was the actual cost per direct labour hour?
A) $17.50
B) $20.00
C) $22.50
D) $25.00

Accepted Answer

The direct labour rate variance is calculated as (Actual Hourly Rate - Standard Hourly Rate) x Actual Hours Worked. A favourable variance means the actual cost was less than the standard cost. Given a favourable variance of $16,500 for 6,000 hours, the difference per hour is $16,500 / 6,000 = $2.75 less than the standard rate of $22. Therefore, the actual cost per hour was $22 - $2.75 = $19.25, which is not an option provided. However, based on the options given, $17.50 is the only rate lower than the standard rate, indicating a mistake in calculation. Correcting the calculation: The actual cost should be calculated as the standard cost minus the variance per hour. Given the favourable variance, it indicates the calculation error in the explanation. The correct approach to find the actual rate per hour involves dividing the total favourable variance by the total hours worked and subtracting this from the standard rate. However, without the exact calculation leading to one of the provided options, there seems to be a misunderstanding in the explanation provided. The correct calculation based on the given options and understanding that a favourable variance means the actual cost was less, should lead to an option that reflects a lower actual cost than the standard, but the precise calculation provided does not match any of the options exactly.

Question 12

Which of the following is characteristic of variances?
A) An unfavourable labour efficiency variance could result from using higher quality materials that result in fewer inspections.
B) A favourable labour rate variance could result from lower wage workers quitting.
C) A favourable materials price variance could result from purchasing identical materials from another supplier at a lower price.
D) A favourable materials usage variance could result from not efficiently utilizing raw materials,thus causing waste.

Accepted Answer

A favourable materials price variance refers to a situation where materials are purchased at a lower cost without compromising quality. The quality of the materials remains the same in this case, and the cost savings are the result of a good purchasing decision. The other options do not accurately describe characteristics of variances.

Question 13

Which of the following is NOT characteristic of the use of labour variance information?
A) The actual wage rate is almost always different from the standard rate.
B) Unexpected overtime can cause variation in the labour rate.
C) An average wage rate is chosen as the labour rate standard.
D) The production manager controls the use of labour.

Accepted Answer

The answer of Which of the following is NOT characteristic...

Question 14

What is target cost?
A) Expected sales per unit - desired profit per unit
B) Expected costs per unit - desired profit per unit
C) Desired profit per unit - expected costs per unit
D) Desired costs per unit - expected costs per unit

Accepted Answer

Target cost is calculated by subtracting the desired profit per unit from the expected sales price per unit. This helps companies determine how much they can afford to spend on producing a product while still achieving their profit goals.

Question 15

Suppose the actual labour rate exceeds the standard labour rate,and the actual labour hours exceed the number of hours allowed.What would be the labour rate variance and labour efficiency variance? Labour Rate Labour Efficiency
Variance Variance
A) favourable favourable
B) favourable unfavourable
C) unfavourable favourable
D) unfavourable unfavourable

Accepted Answer

- Labour Rate Variance is calculated as Actual Labour Rate - Standard Labour Rate multiplied by Actual Labour Hours. As the actual labour rate exceeds the standard labour rate, the labour rate variance would be unfavourable.
- Labour Efficiency Variance is calculated as Actual Labour Hours - Standard Labour Hours multiplied by Standard Labour Rate. As the actual labour hours exceed the number of hours allowed, the labour efficiency variance would be unfavourable. Hence, the overall variance would be unfavourable for both labour rate and labour efficiency, making option D the correct choice.

Question 16

In general,who controls the use of labour in an organization?
A) CEO
B) Human resources
C) Controller
D) Production manager

Accepted Answer

The answer of In general,who controls the use of labour...

Question 17

A company using kaizen costing emphasizes which of the following?
A) reducing non-value-added cost
B) reducing quality of inputs
C) increasing overhead costs
D) reducing the number of employees

Accepted Answer

Kaizen costing is a continuous improvement strategy that focuses on reducing non-value-added costs, such as waste, unnecessary steps, and inefficiencies in the production process. It is not about reducing the quality of inputs, increasing overhead costs, or reducing the number of employees.

Question 18

Assume that SQ = Standard Quantity,SP = Standard Price,AQ = Actual Quantity,and AP = Actual Price.Also assume a favourable materials usage variance.Which of the following would be the journal entry and the equation to record the issuance and usage of materials?
A) Work in Process SQ × SP
Materials Usage Variance (AQ − SQ)SP
Materials AQ × SP
B) Work in Process AQ × SP
Materials Usage Variance (AQ − SQ)SP
Materials AQ × SP
C) Work in Process AQ × AP
Materials Usage Variance (AQ − SQ)SP
Materials AQ × SP
D) Work in Process SQ × AP
Materials Usage Variance (AQ − SQ)SP
Materials AQ × SP

Accepted Answer

The answer of Assume that SQ = Standard Quantity,SP =...

Question 19

Which of the following statements is characteristic of target costing?
A) It is a useful tool for establishing cost reduction goals for products in the design stage.
B) It is the difference between the sales price needed to capture a predetermined market share and the desired per-unit gross profit.
C) Target costs are internally driven.
D) The principal challenge of target costing is finding the cause of the costs.

Accepted Answer

Target costing is a method used in the design stage of a product to establish cost reduction goals. It involves setting a target cost based on the price that customers are willing to pay for the product and subtracting the desired profit margin, rather than setting the price based on the cost of production. This approach helps companies create products that are both cost-effective and meet the needs of the market.

Question 20

Kaizen costing involves which of the following?
A) changing the standards frequently
B) changing management
C) outsourcing processes
D) creating major ad campaigns

Accepted Answer

Kaizen costing involves continuously improving processes to eliminate waste and reduce costs. This is done by frequently reviewing and changing standards to improve efficiency and reduce costs. Changing management, outsourcing processes, or creating major ad campaigns are not directly related to Kaizen costing.

Quiz 10: Standard Costing: a Managerial Control Tool

Which of the following is characteristic of direct labour variances?

Fender Corporation produced 100 units of Product XX.The total standard and actual costs for materials and direct labour for the 100 units of Product XX are as follows: What is the labour efficiency variance for Fender Corporation?

Which formula is used to calculate the labour rate variance?

During September,a small roofing company purchased 500 bundles of a certain type of shingle at a price of $35 per bundle,$5 less than the standard price.The company's standard quantity of this type of shingles is 550 bundles.What is the journal entry to record the purchase of materials?

During November,10,000 direct labour hours were worked at a standard cost of $10 per hour.Suppose the direct labour rate variance for November was $4,000 unfavourable.What was the actual cost per direct labour hour?

Which of the following does NOT describe kaizen costing?

Which of the following cost reduction methods is NOT typically used to move the actual cost to target cost?

Setting a new minimum standard is which step in the kaizen cycle of kaizen costing?

Which formula is used to calculate the labour efficiency variance?

During March,6,000 direct labour hours were worked at a standard cost of $22 per hour.Suppose the direct labour rate variance for March was $16,500 favourable.What was the actual cost per direct labour hour?

Which of the following is characteristic of variances?

Which of the following is NOT characteristic of the use of labour variance information?

What is target cost?

Suppose the actual labour rate exceeds the standard labour rate,and the actual labour hours exceed the number of hours allowed.What would be the labour rate variance and labour efficiency variance? Labour Rate Labour Efficiency Variance Variance

In general,who controls the use of labour in an organization?

A company using kaizen costing emphasizes which of the following?

Assume that SQ = Standard Quantity,SP = Standard Price,AQ = Actual Quantity,and AP = Actual Price.Also assume a favourable materials usage variance.Which of the following would be the journal entry and the equation to record the issuance and usage of materials?

Which of the following statements is characteristic of target costing?

Kaizen costing involves which of the following?