Question 1

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

Accepted Answer

A budget performance report does indeed compare actual results with the budgeted amounts and reports any differences, which can then be investigated to identify the reasons for any variations.

Question 2

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

Accepted Answer

Standard costs are determined by multiplying the expected price per unit by the expected quantity of units to be produced.

Question 3

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 (Standard quantity - Actual quantity) x Standard price.

In this case, the standard quantity is 1,000 units and the actual quantity is 800 units, resulting in a difference of 200 units.

However, the question states that the standard price is $11 per unit, but the actual price is $12 per unit. This means that there is also a direct materials price variance to consider.

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

(1,000 - 800) x $11 = $2,200 favorable

Therefore, the statement is false and the answer is B.

Question 4

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

Accepted Answer

A favorable cost variance means that the actual cost is less than the budgeted cost, which is a positive outcome for the company.

Question 5

Standards are designed to evaluate price and quantity variances separately.

Accepted Answer

Standards are established for both price and quantity, and separating the variances allows management to identify which factors caused the variance and take appropriate action.

Question 6

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 calculation for direct materials price variance is:

(Actual price - Standard price) x Actual quantity

Using the given information:

(12 - 11) x 800 = $800 unfavorable

Therefore, the correct answer is B.

Question 7

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 given information is not sufficient to calculate the rate variance. The rate variance formula is (Standard rate - Actual rate) x Actual hours. We are given the standard rate and actual hours, but we need the actual rate to calculate the variance. Therefore, the statement may or may not be true, but we cannot confirm without additional information.

Question 8

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 time variance would be (500 hours - 600 hours) x $15, which equals -$1,500 (unfavorable). The actual rate of $17 is not relevant to the time variance calculation.

Question 9

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 10

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 may play a role in developing standard costs, other professionals such as operations managers and engineers also contribute to the process. Setting standard costs is a collaborative effort that involves individuals from different areas of the organization with relevant expertise.

Question 11

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 12

Principle of exceptions allows managers to focus on correcting variances between standard costs and actual costs.

Accepted Answer

The principle of exceptions states that managers should focus on investigating and correcting significant variances from the standard cost, rather than spending time on every small variance. This allows for more efficient use of resources and helps to identify areas of the business that may require improvement.

Question 13

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

The direct materials quantity variance can be calculated as follows:
Standard quantity - Actual quantity x Standard price = Quantity variance
(2,000 - 1,600) x $12 = $4,800 unfavorable
Therefore, the statement given in the question is false.

Question 14

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 15

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

Accepted Answer

The direct labor time variance compares the actual amount of time taken by the direct labor force to complete a task with the expected or standard time for that task, in order to determine the efficiency or productivity of the labor force.

Question 16

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 statement is true. The controllable variance in factory overhead results when actual costs differ from the budgeted costs for the achieved level of operations, and this variance is considered controllable because it is influenced by management decisions and actions.

Question 17

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

Accepted Answer

Managers should always account for potential spoilage or machine breakdowns in their calculations to ensure that realistic goals and standards are set. Failure to do so could result in unattainable goals and demotivate employees.

Question 18

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.

Question 19

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 question asks for the time variance, which is calculated by multiplying the difference in actual and standard hours by the standard rate. 
Time variance = (Actual hours - Standard hours) x Standard rate
Time variance = (500 - 600) x $17 = -$1,700 (unfavorable)
Therefore, the statement provided is false.

Question 20

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

The statement is true. The variance resulting from operating at a level above or below normal capacity is called the volume variance.

Quiz 22: Performance Evaluation Using Variances From Standard Costs

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

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

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.

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

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 price variance was $800 favorable.

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.

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.

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.

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

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.

Principle of exceptions allows managers to focus on correcting variances between standard costs and actual costs.

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.

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.

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

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.

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

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

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.

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.