Question 1

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 occurs when materials are purchased at a lower price than expected, which can happen when sourcing identical materials from a more cost-effective supplier.

Question 2

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 3

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 typically used to develop new products or processes, not to reduce costs of existing products or processes. Reverse engineering, value analysis, and process improvement are all commonly used cost reduction methods to move the actual cost to target cost.

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 20,000Materials price variance 2,500Accounts payable 17,500
B)Materials 20,000Materials price variance 2,500Accounts payable 22,500
C)Materials 17,500Materials price variance 2,500Accounts payable 15,000
D)Materials 20,000Materials price variance 2,750Accounts payable 17,250

Accepted Answer

The correct answer is A because the company purchased 500 bundles of shingles at a price of $35 per bundle, which is $5 less than the standard price of $40 per bundle. The total cost of the purchase is $20,000 (500 bundles x $35 per bundle). The materials price variance is $2,500 (500 bundles x $5 per bundle). The accounts payable is $17,500 (total cost of purchase - materials price variance).

Question 5

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?
$\begin{array}{ll}\text { Materials: }&&&\text { Standard}&\text {  Actual }\
&\text { Standard: } & 200 \mathrm{~kg} \text { at } \$ 3.00 \text { per kilogram }&\$600 \
&\text { Actual: } & 220 \mathrm{~kg} \text { at } \$ 2.85 \text { per kilogram } &&\$627\
\text { Direct labour: }& \
&\text { Standard: } & 400 \text { hours at } \$ 15.00 \text { per hour }&6,000 \
&\text { Actual: } & 368 \text { hours at } \$ 16.50 \text { per hour }&&6,072
\end{array}$
A)$480 (U)
B)$480 (F)
C)$552 (U)
D)$552 (F)

Accepted Answer

The labour efficiency variance is calculated as the difference between the standard labour hours for actual production and the actual labour hours used, multiplied by the standard rate per hour. Here, the standard is 400 hours at $15.00 per hour, and the actual is 368 hours. The calculation is (400 - 368) * $15.00 = 32 * $15.00 = $480. Since actual hours used are less than the standard hours, it's a favorable variance.

Question 6

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 = (actual rate - $10) x 10,000
Actual rate = $14
Actual cost per direct labour hour = Actual rate = $14
Thus, the answer is D) $10.40.

Question 7

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 8

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

Labour rate variance is calculated by comparing the actual cost of labour (actual rate × actual hours) with what the labour should have cost at the standard rate (standard rate × actual hours).

Question 9

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 10

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 11

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

Labour efficiency variance is calculated as the difference between the standard cost for actual production and the actual cost, which is given by (standard hours for actual production × standard rate) - (actual hours worked × standard rate). This matches choice C.

Question 12

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 × SPMaterials Usage Variance (AQ − SQ)SPMaterials AQ × SP
B)Work in Process AQ × SPMaterials Usage Variance (AQ − SQ)SPMaterials AQ × SP
C)Work in Process AQ × APMaterials Usage Variance (AQ − SQ)SPMaterials AQ × SP
D)Work in Process SQ × APMaterials Usage Variance (AQ − SQ)SPMaterials AQ × SP

Accepted Answer

The correct journal entry for a favorable materials usage variance is to debit Work in Process for the standard quantity at the standard price (SQ × SP), credit Materials for the actual quantity at the standard price (AQ × SP), and record the Materials Usage Variance as a credit for the difference (AQ − SQ) × SP.

Question 13

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 approach that focuses on reducing non-value-added costs. This means that the company aims to eliminate or reduce any cost that does not add value to the product or service. The other options, reducing quality of inputs, increasing overhead costs, and reducing the number of employees, do not align with the goals of kaizen costing.

Question 14

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 cost management tool used in the design stage to set cost reduction targets to meet a predetermined market price. It uses market research to determine the price customers are willing to pay, and then works backward to set the cost target. Internal cost factors are used to determine the feasibility of the target cost. Therefore, option A is the correct statement. Option B describes the concept of target profit, not target costing. Option C is incorrect because target costs are market-driven, not internally driven. Option D is incorrect because finding the cause of costs is not the main challenge of target costing.

Question 15

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

Question 16

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 measures the difference between the actual rate paid per hour and the standard rate per hour. As the actual rate exceeds the standard rate, it is unfavourable. 
Labour efficiency variance measures the difference between the actual hours taken and the standard hours allowed. As the actual hours exceed the standard hours, it is unfavourable. Therefore, the answer is D, unfavourable for both variances.

Question 17

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 continuous improvement and cost reduction through small incremental changes in processes and standards. Changing the standards frequently is a key aspect of Kaizen costing as it allows for identification and elimination of waste and inefficiencies. Changing management, outsourcing processes, and creating major ad campaigns are not directly related to Kaizen costing.

Question 18

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 focuses on reducing non-value-added costs while maintaining or improving value-added costs. It does not try to reduce both types of costs.

Question 19

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

Direct labour variances always consist of two components: labour rate variance and labour efficiency variance. These two variances are always connected and will add up to the total labour variance. Option A and C are incorrect because the labour rate variance measures the difference between the actual pay rate paid to direct labourers and the standard pay rate or the difference between the actual labour hours used and the standard labour hours, respectively. Option D is incorrect because the labour rate variance compares the actual labour rate to the standard rate, not the original budgeted rate.

Question 20

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

In the kaizen cycle, the "act" step involves implementing changes and setting new standards based on the results from the "check" step.

Quiz 10: Standard Costing: a Managerial Control Tool

Which of the following is characteristic of variances?

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

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

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 is NOT characteristic of the use of labour variance information?

Which formula is used to calculate the labour rate 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?

What is target cost?

Which formula is used to calculate the labour efficiency variance?

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 company using kaizen costing emphasizes which of the following?

Which of the following statements is characteristic of target costing?

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

Kaizen costing involves which of the following?

Which of the following does NOT describe kaizen costing?

Which of the following is characteristic of direct labour variances?

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