Chapter 10
True / False
1. Managers develop quantity standards when they decide what amount of input should be used per unit of output.
a. True
b. False
2. Managers develop price standards when they determine what amount should be paid for the quantity of input to be
used.
a. True
b. False
3. The standard cost per unit of output for a particular input is calculated by multiplying the standard input price by the
standard input allowed per unit of output produced.
a. True
b. False
Chapter 10
4. In setting standards, historical experience should be used with caution because it can perpetuate operating
inefficiencies.
a. True
b. False
5. Engineering studies are often too rigorous and may not be achievable by operating personnel.
a. True
b. False
Chapter 10
6. Ideal standards can be achieved under efficient operating conditions.
a. True
b. False
7. Ideal standards can be achieved only if everything operates perfectly, meaning that they do not allow for any machine
breakdowns, slack, etc.
a. True
b. False
Chapter 10
8. Currently attainable standards offer the most behavioral benefits because higher performance levels are attained
through challenging, yet achievable, standards.
a. True
b. False
9. Currently attainable standards can be achieved under efficient operating conditions.
a. True
b. False
Chapter 10
10. One reason for adopting a standard cost system is to make product costing easier.
a. True
b. False
11. The benefits of operational control under a standard cost system can extend to all manufacturing environments.
a. True
b. False
Chapter 10
12. Standard costs are developed for direct materials, direct labor, and variable overhead only.
a. True
b. False
13. The standard quantity of materials allowed can be calculated by multiplying the unit labor standard by the actual
output.
a. True
b. False
Chapter 10
14. To compute the standard direct labor hours allowed, multiply the unit labor standard by the actual output.
a. True
b. False
15. The quantity of each input that should be used to produce one unit of output is documented on the standard cost sheet.
a. True
b. False
Chapter 10
16. The standard cost sheet provides the input standards needed to compute the total amount of inputs allowed for the
actual output, an essential component in computing efficiency variances.
a. True
b. False
17. The standard unit cost is developed before the standard costs for direct materials, direct labor, and overhead can be set.
a. True
b. False
Chapter 10
18. The unit standard quantity of inputs is vital to the computation of total amount of inputs allowed for the actual output
and efficiency variances.
a. True
b. False
19. The total budget variance is the difference between the actual cost of the input and its planned cost.
a. True
b. False
Chapter 10
20. The actual quantity of input at the standard price less than the standard quantity of input at the standard price equals
the usage variance.
a. True
b. False
21. The actual quantity of input at the actual price less the actual quantity of input at the standard price is the price
variance.
a. True
b. False
22. An unfavorable usage variance would occur when the actual usage of inputs is greater than the standard usage.
a. True
Chapter 10
b. False
23. An unfavorable price variance occurs whenever the actual prices are greater than the standard prices.
a. True
b. False
24. An acceptable range is established in order to determine if whether variances are significant. The acceptable range is
the standard, plus or minus an allowable deviation.
a. True
b. False
Chapter 10
25. The sum of the price and usage variances will add up to the total materials variance only if the materials purchased is
equal to the materials used.
a. True
b. False
26. The materials price variance is computed using the actual quantity of materials used, and the materials usage variance
is computed using the actual quantity of materials purchased.
a. True
b. False
Chapter 10
27. For better control, the materials price variance is computed using actual quantity of materials purchased.
a. True
b. False
28. The sum of the labor rate and labor efficiency variances will always add up to the total labor variance.
a. True
b. False
Chapter 10
29. Kaizen costing provides fixed standards which reflect continuous improvement efforts.
a. True
b. False
30. A kaizen standard reflects the realized improvements for the past periods and a search for more improvements for the
future.
a. True
b. False
Chapter 10
31. Favorable variances are credits and unfavorable variances are debits.
a. True
b. False
32. Practical capacity is always used to calculate fixed overhead rates
a. True
b. False
Chapter 10
33. Although general responsibility for the volume variance is usually assigned to the purchasing department,
responsibility on occasion may be assigned to the production department.
a. True
b. False
34. Fixed overhead costs are resources acquired as used and needed.
a. True
b. False
Chapter 10
35. The volume variance is often interpreted as a measure of capacity utilization.
a. True
b. False
36. The fixed overhead spending variance is affected primarily by changes in production levels.
a. True
b. False
Chapter 10
37. The variable overhead spending variance is conceptually identical to the price variances of materials and labor.
a. True
b. False
38. When overhead is applied on the basis of direct labor hours, the variable overhead efficiency variance always has the
same sign as the labor efficiency variance.
a. True
b. False
Chapter 10
39. The variable overhead variance is affected by input price changes only.
a. True
b. False
40. Responsibility for variable overhead spending and efficiency variances is generally assigned to production
departments.
a. True
b. False
Chapter 10
41. Price changes of variable overhead items are easily controlled by production supervisors.
a. True
Multiple Choice
42. Which of the following decisions is related to the amount of input that should be used per unit of output?
a. The quantity decision
b. The price decision
c. The planning decision
d. The variance decision
e. The kaizen decision