Question 1

Kokko Company makes a product that is expected to require 2 hours of labor per unit of product.The standard cost of labor is $6.00.Kokko actually used 2.1 hours of labor per unit of product.The actual cost of labor was $6.25 per hour.Kokko made 1,100 units of product during the period.Based on this information alone,the labor usage variance is:
A) $190 favorable.
B) $660 unfavorable.
C) $600 favorable.
D) $660 favorable.

Accepted Answer

Labor usage variance = (Actual hours - Standard hours) x Standard rate
= (2.1 - 2) x $6
= $0.6 unfavorable per unit
Total labor usage variance = $0.6 x 1,100 units
= $660 unfavorable.

Question 2

Select the correct statement from the following,assuming Carmichael Company had a favorable direct materials price variance of $3,000 and an unfavorable direct materials usage variance of $2,000.
A) The total direct materials variance is $1,000 unfavorable.
B) The total direct materials variance is $5,000 favorable.
C) The total direct materials variance is $5,000 unfavorable.
D) The total direct materials variance is $1,000 favorable.

Accepted Answer

The total direct materials variance is the sum of the direct materials price variance and the direct materials usage variance.
Total direct materials variance = Favorable direct materials price variance - Unfavorable direct materials usage variance
= $3,000 - $2,000
= $1,000 (favorable)

Question 3

The resources used in the manufacturing process are frequently called:
A) Variances.
B) Standards.
C) Inputs.
D) Outputs.

Accepted Answer

Inputs refer to the resources used in the manufacturing process, such as raw materials, labor, energy, and capital. Variances refer to deviations from the expected or budgeted results, and standards are the benchmark for measuring performance. Outputs are the products or services produced by the manufacturing process.

Question 4

The Russell Company provides the following standard cost data per unit of product: $\begin{array}{lrr}
  \text {Direct material (3 gallons @ \$6 per gallon)  } &\$18.00\
 \text {Direct labor (2 hours@\$10per hour)  } &\$20.00\
\end{array}$

During the period,the company produced and sold 22,000 units,incurring the following costs:
$\begin{array}{llll}
\text { Direct material } & 68,00 \text { Cgallons } & @ & \$ 5.90 \text { per gallon } \
\text { Direct labor } & 45,500 \text { hours } & @ & \$ 9.75 \text { per hour }
\end{array}$

The direct material usage variance was:
A) $12,000 unfavorable.
B) $12,000 favorable.
C) $11,800 unfavorable.
D) $11,800 favorable.

Accepted Answer

The answer of The Russell Company provides the following standard...

Question 5

All of the following factors should influence the decision to investigate a variance except:
A) Frequency of occurrence.
B) Materiality of the variance amount.
C) The direction of the variance (favorable or unfavorable).
D) Capacity for management to control.

Accepted Answer

The direction of the variance (whether it's favorable or unfavorable) should not be a factor in deciding whether to investigate a variance. All variances, whether they are favorable or unfavorable, may indicate potential issues with the accuracy or effectiveness of the underlying processes, and thus should be investigated based on other factors such as frequency of occurrence, materiality, and management's capacity for control.

Question 6

The Russell Company provides the following standard cost data per unit of product: $\begin{array}{lrr}
  \text {Direct material (3 gallons @ \$6 per gallon)  } &\$18.00\
 \text {Direct labor (2 hours@\$10per hour)  } &\$20.00\
\end{array}$

During the period,the company produced and sold 22,000 units,incurring the following costs:
$\begin{array}{llll}
\text { Direct material } & 68,00 \text { Cgallons } & @ & \$ 5.90 \text { per gallon } \
\text { Direct labor } & 45,500 \text { hours } & @ & \$ 9.75 \text { per hour }
\end{array}$
 The direct labor price variance was:
A) $11,000 unfavorable.
B) $11,000 favorable.
C) $11,375 unfavorable.
D) $11,375 favorable.

Accepted Answer

The direct labor price variance is calculated as (Actual Rate - Standard Rate) x Actual Hours = ($9.75 - $10.00) x 45,500 = -$0.25 x 45,500 = -$11,375, which is favorable since the actual rate is less than the standard rate.

Question 7

Global Company makes a product that is expected to use 2.2 pounds of material per unit of product.The material has a standard cost of $2 per pound.Global actually used 2.3 pounds of material per unit of product made in January.The actual cost of material was $1.95 per pound.Based on this information alone,the materials variances for the January production would be:
A) Favorable for price and unfavorable for usage.
B) Unfavorable for price and favorable for usage.
C) Unfavorable for price and unfavorable for usage.
D) Favorable for price and favorable for usage.

Accepted Answer

The material price variance is favorable because the actual cost per pound ($1.95) is less than the standard cost per pound ($2). The material usage variance is unfavorable because more material was used per unit (2.3 pounds) than the standard (2.2 pounds).

Question 8

Abbot Company spent less than expected for materials and more than expected for labor.Select the incorrect statement from the following.
A) You can always expect unfavorable labor variances if you have favorable material variances.
B) In order to facilitate cost control, it will be necessary to analyze the price and quantity of each resource used in production.
C) It cannot be determined from the information provided whether employees were paid higher wages or if they worked more hours.
D) It cannot be determined from the information provided whether the company paid a lower purchase price for materials or if workers used less materials.

Accepted Answer

The statement "You can always expect unfavorable labor variances if you have favorable material variances" is incorrect. While unfavorable labor variances may often accompany favorable material variances, it is not a guaranteed outcome. Other factors, such as efficiency in the production process, can also impact labor variances.

Question 9

White Company budgeted for $200,000 of fixed overhead cost and volume of 40,000 units.During the year,the company produced and sold 39,000 units and spent $210,000 on fixed overhead. The fixed overhead cost volume variance is:
A) $10,000 favorable.
B) $10,000 unfavorable.
C) $5,000 favorable.
D) $5,000 unfavorable.

Accepted Answer

The answer of White Company budgeted for $200,000 of fixed...

Question 10

The standard amount of materials required to make one unit of Product Q is 4 pounds.Tusa's static budget showed a planned production of 3,800 units.During the period,the company actually produced 4,100 units of product.The actual amount of materials used averaged 3.9 pounds per unit.The standard price of material is $1 per pound.Based on this information,the materials usage variance was:
A) $410 favorable.
B) $380 unfavorable.
C) $410 unfavorable.
D) $380 favorable.

Accepted Answer

The materials usage variance is calculated as (Actual quantity used - Standard quantity allowed) x Standard price. In this case, the actual quantity used is 4,100 units x 3.9 pounds per unit = 15,990 pounds. The standard quantity allowed is 4,100 units x 4 pounds per unit = 16,400 pounds. The standard price is $1 per pound. Therefore, the materials usage variance is (15,990 pounds - 16,400 pounds) x $1 per pound = $410 favorable.

Question 11

Standard cost systems facilitate the management practice known as:
A) Management by the numbers.
B) Management development.
C) Management by exception.
D) Just-in-time management.

Accepted Answer

Standard cost systems provide a predetermined cost that serves as a benchmark for evaluating actual costs. This facilitates management by exception, which involves focusing on significant deviations from the standard and taking action to address those exceptions. Management by the numbers and just-in-time management are management practices that are not specifically facilitated by standard cost systems. Management development is a broad term that encompasses various practices for developing managers and is not directly related to standard cost systems.

Question 12

Which of the following equations can be used to compute the total materials variance? (A = Actual; S = Standard; Q = Quantity; P = Price)
A) (AQ × AP) − (SQ × SP)
B) (SQ × SP) − (SQ × SP)
C) (AQ × AP) − (AQ × SP)
D) (AQ × SP) − (SQ × SP)

Accepted Answer

The equation for total materials variance is (AQ × AP) − (SQ × SP). Choice A matches this equation, while the other choices do not.

Question 13

The Russell Company provides the following standard cost data per unit of product: $\begin{array}{lrr}
  \text {Direct material (3 gallons @ \$6 per gallon)  } &\$18.00\
 \text {Direct labor (2 hours@\$10per hour)  } &\$20.00\
\end{array}$

During the period,the company produced and sold 22,000 units,incurring the following costs:
$\begin{array}{llll}
\text { Direct material } & 68,00 \text { Cgallons } & @ & \$ 5.90 \text { per gallon } \
\text { Direct labor } & 45,500 \text { hours } & @ & \$ 9.75 \text { per hour }
\end{array}$

The direct material price variance was:
A) $6,600 unfavorable.
B) $6,600 favorable.
C) $6,800 unfavorable.
D) $6,800 favorable.

Accepted Answer

The answer of The Russell Company provides the following standard...

Question 14

White Company budgeted for $200,000 of fixed overhead cost and volume of 40,000 units.During the year,the company produced and sold 39,000 units and spent $210,000 on fixed overhead. The fixed overhead cost spending variance is:
A) $10,000 favorable.
B) $10,000 unfavorable.
C) $5,000 favorable.
D) $5,000 unfavorable.

Accepted Answer

The fixed overhead cost spending variance is calculated by subtracting the budgeted fixed overhead cost from the actual fixed overhead cost.

Fixed Overhead Cost Spending Variance = Actual Fixed Overhead Cost - Budgeted Fixed Overhead Cost

= $210,000 - $200,000

= $10,000 unfavorable

Therefore, the correct answer is B, which is $10,000 unfavorable.

Question 15

Which range of difficulty should normally be used to develop standards?
A) Practical standards
B) Lax standards
C) Ideal standards
D) Inflated standards

Accepted Answer

Practical standards should be used to ensure that standards are achievable and realistic. Setting lax standards would result in poor performance, while setting ideal or inflated standards may be too difficult to achieve and demotivating for employees. Therefore, practical standards are the most appropriate range of difficulty to develop standards.

Question 16

Which of the following factors should be considered in establishing standards for use with a standard costing system?
A) Historical data.
B) Current and planned technology, plant layout, and operating procedures.
C) Behavioral implications.
D) All of these answers are correct.

Accepted Answer

All of these factors should be considered in establishing standards for use with a standard costing system. Historical data is important to provide a basis for calculating standard costs, current and planned technology, plant layout, and operating procedures are important to ensure accuracy and relevance of standards, and behavioral implications are important to ensure standards are achievable and motivate employees to meet them. Therefore, all of these answers are correct.

Question 17

Which of the following is not an advantage of using a standard cost system?
A) Promotes the efficient use of management talent to control costs
B) Provides immediate feedback that permits rapid response to problems
C) The easiest cost system to develop and maintain
D) Can boost morale and motivate employees

Accepted Answer

Standard cost systems can be complex and time-consuming to develop and maintain, so they are not the easiest cost system to maintain. A, B, and D are all potential advantages of using a standard cost system.

Question 18

Shia Company makes a product that is expected to require 2 hours of labor per unit of product.The standard cost of labor is $5.20.Shia actually used 2.1 hours of labor per unit of product.The actual cost of labor was $5.30 per hour.Shia made 1,000 units of product during the period.Based on this information alone,the labor price variance is:
A) $200 unfavorable.
B) $200 favorable.
C) $210 favorable.
D) $210 unfavorable.

Accepted Answer

First, let's calculate the standard labor cost per unit:
2 hours of labor x $5.20 per hour = $10.40

Then, let's calculate the actual labor cost per unit:
2.1 hours of labor x $5.30 per hour = $11.13

Now, we can calculate the labor price variance using the formula:

Labor Price Variance = (Actual Labor Rate - Standard Labor Rate) x Actual Hours of Labor

Labor Price Variance = ($5.30 - $5.20) x 2.1 hours = $0.21 unfavorable per unit

To calculate the total labor price variance, we need to multiply the labor price variance per unit by the number of units produced:

Total Labor Price Variance = $0.21 x 1,000 units = $210 unfavorable

Therefore, the correct answer is D, $210 unfavorable.

Question 19

The Russell Company provides the following standard cost data per unit of product: $\begin{array}{lrr}
  \text {Direct material (3 gallons @ \$6 per gallon)  } &\$18.00\
 \text {Direct labor (2 hours@\$10per hour)  } &\$20.00\
\end{array}$
 During the period,the company produced and sold 22,000 units,incurring the following costs:
$\begin{array}{llll}
\text { Direct material } & 68,00 \text { Cgallons } & @ & \$ 5.90 \text { per gallon } \
\text { Direct labor } & 45,500 \text { hours } & @ & \$ 9.75 \text { per hour }
\end{array}$
 The direct labor usage variance was:
A) $15,000 unfavorable.
B) $15,000 favorable.
C) $14,625 unfavorable.
D) $14,625 favorable.

Accepted Answer

The answer of The Russell Company provides the following standard...

Question 20

The Landrum Company provides the following standard cost data per unit of product: $\begin{array}{l}
\text { Var'iable overhead }&\$ 8.00
\end{array}$
 Landrum anticipated that they would produce and sell 24,000 units.During the period,the company produced and sold 25,000 units,incurring $210,000 of variable overhead costs.
The variable overhead flexible budget variance was:
A) $8,000 unfavorable.
B) $10,000 unfavorable.
C) $8,000 favorable.
D) $10,000 favorable.

Accepted Answer

The answer of The Landrum Company provides the following standard...

Quiz 8: Performance Evaluation

Select the correct statement from the following,assuming Carmichael Company had a favorable direct materials price variance of $3,000 and an unfavorable direct materials usage variance of $2,000.

The resources used in the manufacturing process are frequently called:

All of the following factors should influence the decision to investigate a variance except:

Abbot Company spent less than expected for materials and more than expected for labor.Select the incorrect statement from the following.

White Company budgeted for $200,000 of fixed overhead cost and volume of 40,000 units.During the year,the company produced and sold 39,000 units and spent $210,000 on fixed overhead. The fixed overhead cost volume variance is:

Standard cost systems facilitate the management practice known as:

Which of the following equations can be used to compute the total materials variance? (A = Actual; S = Standard; Q = Quantity; P = Price)

White Company budgeted for $200,000 of fixed overhead cost and volume of 40,000 units.During the year,the company produced and sold 39,000 units and spent $210,000 on fixed overhead. The fixed overhead cost spending variance is:

Which range of difficulty should normally be used to develop standards?

Which of the following factors should be considered in establishing standards for use with a standard costing system?

Which of the following is not an advantage of using a standard cost system?