CHAPTER 11
Standard Costs and Variance Analysis
Summary of Questions by Objectives and Bloom’s Taxonomy
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True-False Statements
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Multiple Choice Questions
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Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
11-2
Challenge Exercises
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Short-Answer Essays
TRUE-FALSE STATEMENTS
1. In a standard costing system, manufactured goods are recorded at the variable cost that
should have been incurred to produce the items.
2. Differences between standard and budgeted costs are referred to as standard cost
variances.
3. The use of standard costs is limited to manufacturing companies.
4. Budgeted costs are the same as standard costs.
5. Ideal standards are developed under the assumption that no obstacles to the production
process will be encountered.
6. For planning purposes, ideal standards are more useful than attainable standards.
7. A variance analysis generally involves decomposing the difference between standard
and actual costs into three components—direct materials, direct labor, and
manufacturing overhead.
8. Ideal standards are synonymous with favorable variances, while attainable standards
are synonymous with unfavorable variances.
9. A material price variance measures whether more or less material was used in
producing inventory.
10. Unfavorable variances are red flags that a manager has performed poorly.
11. The material quantity variance compares the actual quantity of material purchased with
the quantity of material used.
12. The material price variance is equal to the standard price per unit of material times the
actual quantity of material used.
13. The labor rate variance is also known as the labor efficiency variance.
14. The labor rate variance measures whether the rate paid to employees is more or less
than the company’s standard rate.
15. The labor rate variance is equal to the difference between the actual number of labor
hours worked and the standard labor hours allowed, times the standard labor wage rate.
Chapter 11 Standard Costs and Variance Analysis
11-3
16. A favorable labor efficiency variance indicates that employees worked more quickly than
expected.
17. The total variance for manufacturing overhead is the difference between the flexible
budget for overhead and actual overhead costs.
18. An unfavorable controllable overhead variance indicates that more cost was incurred on
overhead costs than allowed in the flexible budget.
19. A favorable overhead volume variance is a signal that the actual quantity produced was
greater than the quantity anticipated.
20. An unfavorable overhead volume variance always indicates that overhead is overapplied
during the period.
21. The controllable variable overhead variance is inappropriately named, because
managers are not expected to be able to control it.
22. If a management by exception approach is used to investigate variances, only variances
that cause costs to be more than expected are investigated.
23. Variances that are large in absolute dollar value or as a percent of budgeted amounts
are generally considered exceptional in a management by exception approach.
24. In some instances, process improvement can lead to unfavorable variances.
25. If actual demand is greater than anticipated, an overall favorable variance will exist for
each of the three production costs.
26. The materials storeroom clerk is responsible for material price variances.
27. A purchasing manager might be tempted to buy inferior materials because it will create
favorable material quantity variance.
*28. In a standard costing system, the cost transferred out of Work in Process inventory is
equal to the standard cost per items produced time the number of completed units.
*29. A standard costing system simplifies accounting by carrying inventory at standard cost.
*30. All insignificant variances are closed to Cost of Goods Sold.
*31. A favorable material quantity variance is recorded with a credit to the Material Quantity
Variance account.
Material from the appendix to the chapter is marked with an asterisk (*)
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
11-4
MULTIPLE CHOICE
32. Which of the following statements is true of standard cost?
A. It is equal to the actual cost of one unit of product.
B. It is the amount management thinks that one unit of product should cost.
C. It allows companies to generate more favorable than unfavorable variances.
D. It is often calculated after production for the period is complete.
33. What are standard cost variances?
A. Differences between standard and actual costs
B. Amounts that exceed budgeted amounts
C. Useful industry-developed amounts that can be used by companies to evaluate
their performance
D. Differences between budgeted and standard amounts
34. The difference between standard and actual costs is
A. considered to be an ideal standard.
B. a variance by exception.
C. the budgeted cost of one item of product.
D. a standard cost variance.
35. What is the cost that management believes should be incurred to produce a product
under anticipated conditions called?
A. Budgeted cost
B. Ideal cost
C. Actual cost
D. Standard cost
36. In what industries are standard costs used?
A. Manufacturing companies only
B. Service companies only
C. Both manufacturing and service companies
D. None of these answer options are correct.
37. For which one of the following will standard costs be most useful?
A. A soft drink bottling company
B. A caterer
C. A cabinet manufacturer
D. An event planner
Chapter 11 Standard Costs and Variance Analysis
11-5
38. What is a standard cost?
A. The difference between an attainable standard and an ideal standard
B. The budgeted cost of the total number of budgeted units
C. The budgeted cost of a single unit
D. None of these answer choices are correct.
39. Which one of the following is true concerning standard and budgeted costs?
A. Standard cost times the expected production level equals the budgeted cost.
B. Standard cost times the predetermined overhead rate equals the budgeted cost.
C. Total budgeted cost divided by actual units equals the standard cost.
D. None of these answer choices are correct.
40. The difference between standard costs and budgeted costs is that standard cost
A. refers to a single unit while budgeted costs refer to the cost, at standard, for the
total number of budgeted units.
B. is calculated under ideal conditions, while budgeted costs are calculated for
attainable conditions.
C. is calculated for raw material while budgeted costs are calculated for direct labor.
D. is part of the management accounting system, while budgets are part of the
financial accounting system.
41. For which one of the following are standard production costs not developed?
A. Direct materials
B. Commission per unit
C. Manufacturing overhead
D. Fixed costs
42. Which one of the following is often used to determine a standard price for materials?
A. Time-and-motion studies
B. A union labor contract
C. Price lists provided by suppliers
D. Materials requisition forms
43. Which of the following is a method of determining the standard quantity of direct labor?
A. An analysis of past data regarding overhead required for various levels of
production
B. Labor contract negotiated with the union employees
C. Time-and–motion studies conducted by industrial engineers
D. Suppliers’ estimates of labor quantities to be used
44. A company developed a standard cost for overhead. Which of the following involves
standard development procedures that are similar to developing overhead standard
costs?
A. Standard costs for materials
B. Total number of units to be produced
C. Predetermined overhead rates
D. Budgeted direct labor costs
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
11-6
45. Management of Wilson, Inc. developed standards under the assumption that a variety of
factors may lead to less than perfect performance. Which type of standard was
developed?
A. Ideal standards
B. Actual standards
C. Attainable standards
D. Questionable standards
46. Which of the following is a reason that most managers support the use of attainable
standards rather than ideal standards?
A. Attainable standards allow for an occasional equipment failure.
B. Attainable standards recognize that suppliers must provide raw materials with no
defects.
C. Attainable standards are required in order to have zero variances.
D. Attainable standards motivate employees to achieve perfection.
47. Which of the following may cause an unfavorable material variance?
I. More material was used than planned.
II. A company paid a higher price for materials than expected.
III. More materials were used than purchased.
A. I and II
B. II and III
C. I and III
D. I, II, and III
48. What are the two most likely reasons an unfavorable total materials variance may exist?
A. Inflation caused an increase in the cost to acquire materials of the same quality,
and due to this inflation, the company purchased fewer materials than used.
B. The company used less material than it purchased, and the amount paid for the
material was more than the standard price.
C. The price paid was more than the standard price, and the quantity budgeted was
less than quantity used.
D. The price paid was more than the standard price, and the quantity used was less
than the quantity budgeted
49. Lander Foods applied management by exception. Which of the following would have
occurred?
A. The company’s managers prepared a flexible budget.
B. Management created a poorly conceived budget.
C. Management forecasted its sales for the budget period.
D. Management investigated all significant variances.
Chapter 11 Standard Costs and Variance Analysis
11-7
50. Scotto Designs has the following standards for the production of scarves:
Standard Quantity Standard Price
Direct materials 1.2 yards per scarf $4.70 per yard
Direct labor 0.15 hours per scarf $11.00 per hour
The company used 985 yards of material in order to make 800 scarves in April. The
company purchased 1,100 yards at $4.60 per yard. How much is the direct materials
quantity variance?
A. $110 favorable
B. $118 unfavorable
C. $8 unfavorable
D. $705 unfavorable
51. Scotto Designs has the following standards to make one scarf:
Standard Quantity Standard Price
Direct materials 1.2 yards per scarf $4.70 per yard
Direct labor 0.15 hours per scarf $11.00 per hour
The company used 985 yards of material in order to make 800 scarves in April. The
company purchased 1,100 yards at $4.60 per yard. How much is the direct materials
price variance?
A. $110 favorable
B. $118 unfavorable
C. $8 unfavorable
D. $98.50 favorable
52. An automobile parts company has a standard material price of $2 per pound. In October
the company produced 4,500 units using 6,000 pounds of material. The company
experienced a favorable materials quantity variance of $1,200. How much is the
standard quantity of materials per unit?
A. 1.20 pounds
B. 1 pound
C. 2.4 pounds
D. 1.47 pounds
53. A manufacturing company has a standard quantity of direct materials of 7 pounds per
unit at a standard price of $2.20 per pound. In April the actual material price was $2.40
per pound and the company produced 5,500 units. If the company experienced a
favorable material quantity variance of $6,600 during the month, how much was the
actual quantity of material used?
A. 35,500 pounds
B. 32,542 pounds
C. 38,500 pounds
D. 41,500 pounds
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
11-8
54. Blue Box Beach Chairs has the following standards to make beach chairs:
Standard Quantity Standard Price
Direct materials 2.2 pounds of polywood per chair $3.50 per pound
Direct labor 0.65 hours per chair $13.00 per hour
The static budget was based on the production of 6,200 beach chairs. The company
used 13,000 pounds of polywood in order to make 6,000 chairs in April. The company
purchased 7,000 pounds of polywood at a total cost of $24,150. How much is the direct
materials quantity variance?
A. $700 favorable
B. $2,240 favorable
C. $350 favorable
D. $1,050 favorable
55. Blue Box Beach Chairs has the following standards to make beach chairs:
Standard Quantity Standard Price
Direct materials 2.2 pounds of polywood per chair $3.50 per pound
Direct labor 0.65 hours per chair $13.00 per hour
The static budget was based on the production of 6,200 beach chairs. The company
used 13,000 pounds of polywood in order to make 6,000 chairs in April. The company
purchased 7,000 pounds of polywood at a total cost of $24,150. How much is the direct
materials price variance?
A. $700 favorable
B. $2,240 favorable
C. $350 favorable
D. $1,050 favorable
56. Last month, Investly Widgets purchased 16,400 pounds of material and used 16,600
pounds in the production of 4,200 widgets. The actual cost per pound of the material
was $7.80 and the standard price was $7.75 per pound. The company budgeted 4,500
widgets for production. How much is the material quantity variance?
A. $820 unfavorable
B. $730 favorable
C. $1,550 favorable
D. More information is needed to determine the answer.
57. Which variances are most important to investigate?
A. Variable costs variances, because they are controllable
B. Those that are material in amount
C. Those that are immaterial in amount
D. Those that are unfavorable
58. Which one of the following determines the material price variance?
A. The difference between actual price per unit and standard price per unit times the
quantity of material purchased from suppliers
B. The difference between actual price per unit and standard price per unit times
standard quantity of material used for the achieved level of production
C. The difference between actual quantity of material purchased and the actual
quantity of material used times the standard price of material per unit
D. The difference between actual quantity of material purchased and the actual
quantity of material used times the actual price of material per unit purchased
Chapter 11 Standard Costs and Variance Analysis
11-9
59. What will result if the actual price per unit of material is greater than the standard price?
A. A favorable material price variance
B. An unfavorable material quantity variance
C. An unfavorable material price variance
D. A favorable material quantity variance
60. If the material quantity variance is favorable, the
A. material price variance will be unfavorable.
B. material price variance must also be favorable.
C. quantity purchased is less than the quantity used.
D. actual quantity used is less than the standard quantity allowed.
61. Electric Zero produces relay units for generators. Each relay has a standard material
cost of $67. Standards call for two relays per generator. In July, the company purchased
120 relays for $7,560. The company used 104 relays in the production of 50 generators,
with 4 relays damaged in the installation process. The standard quantity of labor is 20
hours per generator, with a standard wage rate of $23. The company incurred 1,020
labor hours at a cost of $22,950. How much is the material price variance?
A. $480 favorable
B. $268 unfavorable
C. $1,340 unfavorable
D. $592 unfavorable
62. Electric Zero produces relay units for generators. Each relay has a standard material
cost of $67. Standards call for two relays per generator. In July, the company purchased
120 relays for $7,560. The company used 104 relays in the production of 50 generators,
with 4 relays damaged in the installation process. The standard quantity of labor is 20
hours per generator, with a standard wage rate of $23. The company incurred 1,020
labor hours at a cost of $22,950. How much is the material quantity variance?
A. $480 favorable
B. $268 unfavorable
C. $1,340 unfavorable
D. $592 unfavorable
63. Siggy Inc. budgeted 12,000 and produced 11,000 tape dispensers during June. Resin
used to make the dispensers is purchased by the pound. Manufacturing overhead is
applied based on units produced. Manufacturing standards and actual costs follow:
Standards
Actual
Materials
2 pounds @ $5.00 a pound
20,900 pounds @ $4.90 per pound
Labor
0.25 hours @ $15.00 per hour
2,700 hours @ $15.30 per hour
Variable overhead
$39,000
$36,500
Fixed overhead
$1.50 per dispenser
$17,250
How much is the standard cost of a tape dispenser?
A. $18.50
B. $13.75
C. $24.75
D. $18.80
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
11–10
64. Master Auto Parts has a standard labor rate of $10.50 per hour. In September, the
company produced 10,000 gears using 24,000 labor hours. The company experienced a
favorable labor rate variance of $18,000 during September. How much is Master Auto
Parts’ actual labor rate per hour?
A. $9.75
B. $11.25
C. $13.50
D. $7.50
65. Blue Box Beach Chairs has the following standards to make beach chairs:
Standard Quantity Standard Price
Direct materials 2.2 pounds of polywood per chair $3.50 per pound
Direct labor 0.65 hours per chair $13.00 per hour
The static budget was based on the production of 6,200 beach chairs. The company
used 13,000 pounds of polywood in order to make 6,000 chairs in April. The company
purchased 7,000 pounds of polywood at a total cost of $24,150. It also used 3,840 labor
hours at a cost of $12.70 per hour. How much is the direct labor efficiency variance?
A. $1,932 unfavorable
B. $1,152 favorable
C. $780 favorable
D. $2,470 favorable
66. Blue Box Beach Chairs has the following standards to make beach chairs:
Standard Quantity Standard Price
Direct materials 2.2 pounds of polywood per chair $3.50 per pound
Direct labor 0.65 hours per chair $13.00 per hour
The static budget was based on the production of 6,200 beach chairs. The company
used 13,000 pounds of polywood in order to make 6,000 chairs in April. The company
purchased 7,000 pounds of polywood at a total cost of $24,150. It also used 3,840 labor
hours at a cost of $12.70 per hour. How much is the direct labor rate variance?
A. $1,932 unfavorable
B. $1,152 favorable
C. $780 favorable
D. $2,470 favorable
67. Standard Faucets uses standard costing and recorded the following data for the month
of August:
Standard direct labor rate $10.00 per hour
Standard hours allowed for actual production 20,000 hours
Actual direct labor rate $10.50 per hour
Labor efficiency variance $5,000 favorable
How much is the labor rate variance for August?
A. $9,750 unfavorable
B. $14,750 unfavorable
C. $4,750 unfavorable
D. $0
Chapter 11 Standard Costs and Variance Analysis
11–11
68. Paradise Energy Company produces a product with a direct labor standard of 4.5 hours
per unit at a rate of $13.50 per hour. During July 2,200 units were produced using 9,825
labor hours at an actual cost of $135,094. How much is the total direct labor variance for
July?
A. $2,456 unfavorable
B. $1,013 favorable
C. $1,444 unfavorable
D. $3,469 favorable
69. Which of the following would cause a variance to be unfavorable?
A. The actual price is less than the standard price.
B. The standard hours allowed are less than the actual hours worked.
C. The overhead costs incurred are less than the flexible budget amount.
D. All of these answer choices are correct.
70. Why is the point of purchase the best time to compute material price variances?
A. This is when the company is able to determine the total cost of production.
B. This is when the cost of material will be known.
C. This is when the company knows the amount of materials used in production.
D. This is the only point when the company is able to determine a standard material
price.
71. Which one of the following is a possible cause of an unfavorable labor rate variance?
A. The company used attainable standards rather than ideal standards.
B. The company hired new, inexperienced employees.
C. The company produced fewer units than had been planned.
D. The company used more experienced workers than planned.
72. Paradise Energy Company produces a product with a direct labor standard of 4.5 hours
per unit at a rate of $13.50 per hour. During July 2,200 units were produced using 9,825
labor hours at an actual cost of $135,094. How much is the direct labor efficiency
variance for July?
A. $2,456 unfavorable
B. $1,013 favorable
C. $1,444 favorable
D. $3,469 unfavorable
73. Electric Zero produces relay units for generators. Each relay has a standard cost of $67.
Standards call for two relays per generator. In July, the company purchased 120 relays
for $7,560. The company used 104 relays in the production of 50 generators, with four
relays damaged in the installation process. The standard quantity of labor is 20 hours
per generator, with a standard wage rate of $23. In July, the company incurred 1,020
labor hours at a cost of $22,950. How much is the labor rate variance?
A. $460 unfavorable
B. $50 favorable
C. $510 favorable
D. $460 favorable
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
11–12
74. Electric Zero produces relay units for generators. Each relay has a standard cost of $67.
Standards call for two relays per generator. In July, the company purchased 120 relays
for $7,560. The company used 104 relays in the production of 50 generators, with four
relays damaged in the installation process. The standard quantity of labor is 20 hours
per generator, with a standard wage rate of $23. In July, the company incurred 1,020
labor hours at a cost of $22,950. How much is the labor efficiency variance?
A. $460 unfavorable
B. $50 favorable
C. $510 favorable
D. $460 favorable
75. Steep, Inc. budgeted 6,000 cup holders for March. Each holder is sold for $12. Actual
production for March was 6,300 cup holders. Standards and actual costs follow for
March:
Standards
Actual
Materials
1.1 pounds @ $2.40 a pound
6,400 pounds purchased for $15,040;
6,450 pounds used
Labor
0.10 hours @ $14.00 per hour
620 hours @ $14.30 per hour
Variable overhead
$16,800
$18,400
Fixed overhead
$9,600
$10,300
How much is the labor rate variance?
A. $140 favorable
B. $186 unfavorable
C. $46 unfavorable
D. $280 favorable
76. Steep, Inc. budgeted 6,000 cup holders for March. Each holder is sold for $12. Actual
production for March was 6,300 cup holders. Standards and actual costs follow for
March:
Standards
Actual
Materials
1.1 pounds @ $2.40 a pound
6,400 pounds purchased for $15,040;
6,450 pounds used
Labor
0.10 hours @ $14.00 per hour
620 hours @ $14.30 per hour
Variable overhead
$16,800
$18,400
Fixed overhead
$9,600
$10,300
How much is the labor efficiency variance?
A. $140 favorable
B. $186 unfavorable
C. $46 unfavorable
D. $280 favorable
77. Which of the following will determine the total variance for manufacturing overhead?
A. The difference between the overhead applied to inventory at standard and the
actual overhead costs
B. The difference between fixed overhead and variable overhead
C. The difference between the efficiency variance and the rate variance
D. The difference between the controllable overhead variance and the overhead
volume variance
Chapter 11 Standard Costs and Variance Analysis
11–13
78. If the controllable overhead variance is favorable, the overhead volume variance
A. will be favorable.
B. may be favorable or unfavorable.
C. will not be significant and may be omitted from the analysis.
D. will be zero.
79. What is the difference between the actual amount of overhead and the amount of
overhead that would be included in a flexible budget called?
A. Total overhead variance
B. Actual overhead variance
C. Controllable overhead variance
D. Overhead volume variance
80. What will result if the actual overhead costs incurred are greater than the amount in the
flexible budget?
A. The controllable overhead variance will be unfavorable.
B. The overhead volume variance will be favorable.
C. The overhead volume variance will be unfavorable.
D. The controllable overhead variance will be favorable.
81. For which of the following reasons does the volume variance arise?
A. Overhead costs incurred were greater or less than the amount budgeted.
B. The company operated at more or less units of production activity than expected
during the period.
C. Actual activity equaled the volume used to establish the overhead cost per unit.
D. The company purchased more or less materials for production than the amount
used.
82. What does an unfavorable overhead volume variance indicate?
A. The quantity of production was less than what was anticipated.
B. The company spent more costs on overhead than expected.
C. Production took longer than expected.
D. The company produced more units than it budgeted.
83. In which of the following situations will the overhead volume variance be favorable?
A. When more units are produced than were originally planned
B. When actual overhead costs are less than the flexible budget
C. When the predetermined overhead rate was set too low
D. When there are units remaining in ending inventory
84. Which of the following values is used in the calculations for both the controllable
overhead variance and the overhead volume variance?
A. Overhead applied to production using the predetermined overhead rate
B. Flexible budget level of overhead for the actual level of production
C. Actual overhead incurred
D. None of these answer choices are used in both calculations.
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
11–14
85. Steep, Inc. budgeted 6,000 cup holders for March. Each holder is sold for $12. Actual
production for March was 6,300 cup holders. Manufacturing overhead is applied based
on units produced. Standards and actual costs follow for March:
Standards
Actual
Materials
1.1 pounds @ $2.40 a pound
6,400 pounds purchased for $15,040;
6,450 pounds used
Labor
0.10 hours @ $14.00 per hour
620 hours @ $14.30 per hour
Variable
overhead
$16,800
$18,400
Fixed overhead
$9,600
$10,300
How much is the overhead controllable variance?
A. $1,460 unfavorable
B. $480 favorable
C. $2,300 unfavorable
D. $980 favorable
86. Steep, Inc. budgeted 6,000 cup holders for March. Each holder is sold for $12.
Manufacturing overhead is applied based on units produced. Actual production for
March was 6,300 cup holders. Standards and actual costs follow for March:
Standards
Actual
Materials
1.1 pounds @ $2.40 a pound
6,400 pounds purchased for $15,040;
6,450 pounds used
Labor
0.10 hours @ $14.00 per
hour
620 hours @ $14.30 per hour
Variable overhead
$16,800
$18,400
Fixed overhead
$9,600
$10,300
How much is the overhead volume variance?
A. $1,460 unfavorable
B. $480 favorable
C. $2,300 unfavorable
D. $980 favorable
87. For what reason(s) might the overhead volume variance occur?
I. Overhead cost control is poor.
II. The actual activity level was less than estimated.
III. The expected production level was greater than budgeted.
A. I and II
B. II and III
C. I and III
D. I, II, and III
88. Into what components is the manufacturing overhead variance decomposed when it is
analyzed?
A. Overhead volume variance and controllable overhead variance
B. Overhead rate variance and overhead efficiency variance
C. Fixed overhead variance and variable overhead variance
D. Controllable overhead variance and uncontrollable overhead variance
Chapter 11 Standard Costs and Variance Analysis
11–15
89. Cuevas Company produces magic swords. It uses units as the cost driver for overhead.
The following information was provided concerning its standard cost system for 2017:
Standard/Budgeted Data
Actual Data
Material
½ lb. @ $15.00 per lb.
Produced
2,100 units
Labor
1.2 hrs. @ $12 per hr.
Materials
purchased
1,050 lbs. for $14,700
Fixed overhead
$62,000
Materials used
1,080 lbs.
Variable overhead
$11 per unit
Labor worked
2,500 hrs. costing $29,375
Production
2,000 units
Overhead
$82,000
How much is the standard cost per unit?
A. $21.90
B. $63.90
C. $69.00
D. $62.42
90. Rodchester Company uses standard costing. Overhead is applied at $12 per unit
produced. Data for the month of March follows:
Actual overhead costs $194,000
Actual units produced 17,400
Flexible budget overhead for units produced $210,000
How much is the overhead volume variance?
A. $16,000 favorable
B. $17,200 favorable
C. $1,200 unfavorable
D. $14,800 unfavorable
91. RTC Supply Co. produces cleaning equipment for professional cleaners. At the start of
the year, RTC estimated variable overhead costs to be $13 per unit and total fixed
overhead costs at $300,000 based on a volume of 60,000 units. The detail for the
overhead estimates follows:
Variable Overhead Budget @ 60,000 units Actual Costs
Indirect materials $ 480,000 $ 469,500
Utilities 120,000 93,000
Maintenance 180,000 224,000
Total variable overhead 780,000 786,500
Fixed Overhead
Supervisor salaries 125,000 127,000
Depreciation 150,000 145,000
Other fixed overhead 25,000 26,000
Total fixed overhead 300,000 298,000
Total overhead costs $1,080,000 $1,084,500
Actual production for the year totaled 62,000 units. How much is the variable overhead
flexible budget variance?
A. $4,500 unfavorable
B. $10,000 favorable
C. $21,500 favorable
D. $19,500 favorable
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
11–16
92. At the start of 2017, Capital Cemetery determined its standard labor cost to be 2.5 hours
for each cemetery plot prepared at $14.00 per hour. The budget for variable overhead
was $8 per plot and budgeted fixed overhead was $15,000 for the year. Overhead is
applied based on the number of plots prepared. The company expects to prepare 5,000
plots during 2017. During 2017, the actual cost of labor was $14.30 per hour. Capital
prepared 4,900 cemetery plots requiring 11,700 direct labor hours. Actual overhead for
the year was $52,100. How much is the controllable overhead variance?
A. $1,800 favorable
B. $300 unfavorable
C. $2,100 favorable
D. $800 favorable
93. At the start of 2017, Capital Cemetery determined its standard labor cost to be 2.5 hours
for each cemetery plot prepared at $14.00 per hour. The budget for variable overhead
was $8 per plot and budgeted fixed overhead was $15,000 for the year. Overhead is
applied based on the number of plots prepared. The company expects to prepare 5,000
plots during 2017. During 2017, the actual cost of labor was $14.30 per hour. Capital
prepared 4,900 cemetery plots requiring 11,700 direct labor hours. Actual overhead for
the year was $52,100. How much is the overhead volume variance?
A. $1,800 favorable
B. $300 unfavorable
C. $2,100 favorable
D. $800 favorable
94. Hanson produces pressure washers. The detail for the overhead estimates follows:
Variable Overhead Budget @ 50,000 units Actual Costs
Indirect materials $ 480,000 $ 469,500
Utilities 120,000 93,000
Maintenance 180,000 224,000
Total variable overhead 780,000 786,500
Fixed Overhead
Supervisor salaries 125,000 127,000
Depreciation 150,000 145,000
Other fixed overhead 25,000 26,000
Total fixed overhead 300,000 298,000
Total overhead costs $1,080,000 $1,084,500
Actual production for the year totaled 62,000 units. How much is the overhead volume
variance?
A. $72,000 favorable
B. $77,580 favorable
C. $63,940 favorable
D. $74,000 favorable
Chapter 11 Standard Costs and Variance Analysis
11–17
95. Sigorny Company uses standard costing and applies overhead on the basis of units
produced. The company provided the following for July:
Predetermined overhead rate per unit produced $6.20
Budgeted fixed overhead $12,600
Variable overhead budgeted per unit $2.00
Actual units produced 3,100
If the controllable overhead variance was $920 favorable in July, how much were total
actual overhead costs?
A. $17,880
B. $18,800
C. $19,220
D. $19,720
96. Sigorny Company uses standard costing and applies overhead on the basis of units
produced. The company provided the following for July:
Predetermined overhead rate per unit produced $6.20
Budgeted fixed overhead $12,600
Variable overhead budgeted per unit $2.00
Actual units produced 3,100
How much is the budgeted variable overhead in July?
A. $18,600
B. $6,200
C. $19,220
D. $6,000
97. What does the overhead controllable variance indicate?
A. The company produced more or less than the quantity planned.
B. Material quantity standards were more or less than the actual quantity used.
C. Material price standards were more or less than the actual price.
D. Actual overhead cost was more or less than the amount indicated in the flexible
budget.
98. Which of the following is not a criterion that a company might use to determine whether
or not a variance is exceptional?
A. The variance is based on a significant percentage of the standard cost.
B. The variance is unfavorable.
C. The variance is for a large dollar amount.
D. The variance is for a significant percentage of the flexible budget amount.
99. Which of the following variances is most likely the responsibility of the purchasing
manager?
A. Material quantity variance
B. Labor efficiency variance
C. Material price variance
D. Overhead volume variance
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
11–18
100. Under what condition(s) might a favorable variance be considered unfavorable?
I. When a manager overproduces to fully utilize labor in a non–bottleneck
department
II. When a manager buys a better quality materials at a cheaper price
A. I only
B. II only
C. Both I and II
D. Neither I nor II
101. How might an emphasis on variances as performance measures lead to overproduction?
A. Managers may produce more units than a bottleneck can handle.
B. Managers may fully utilize the existing labor force.
C. Managers may produce fewer units than needed.
D. Managers may buy more raw materials than needed for production.
*102. Which statement is true concerning a standard costing system?
A. Unfavorable variances are recorded; favorable variances are not recorded in the
accounting records.
B. Only unfavorable variances that are large enough to be investigated under the
company’s management by exception policy are recorded in the accounting
records.
C. The costs added to the inventory accounts are recorded at standard costs rather
than actual costs.
D. No Work in Process Inventory account is used.
*103. Which statement is true concerning unfavorable variances in a standard costing system?
A. They are recorded only if they are significant.
B. They are offset by favorable variances for the same amounts.
C. They are recorded in the cost of goods sold account when incurred.
D. They are recorded with debits.
*104. Which statement is true concerning an insignificant material quantity variance in a
standard costing system?
A. It is recorded in the accounting records as a credit when the material is ordered.
B. It is closed to the manufacturing overhead account at the end of the period.
C. It is recorded at the actual cost of materials used times the standard quantity of
materials allowed.
D. It is closed to the cost of goods sold account at yearend.
*105. Ace Manufacturing uses a standard costing system. What amount is debited to the Work
in Process Inventory when labor is incurred in production?
A. Actual labor hours used times the standard rate per hour
B. Actual labor hours used times the actual rate per hour
C. Standard labor hours used times the actual rate per hour
D. Standard labor hours used times the standard rate per hour
*106. Which statement is true concerning the variance accounts in a standard costing system?
A. They cause the general ledger to be out of balance.
B. They appear on the balance sheet as adjustments to Work in Process Inventory.
C. They are temporary accounts and are closed before financial statements are
prepared.
D. They have debit balances prior to closing.
Chapter 11 Standard Costs and Variance Analysis
11–19
*107. Which statement is true concerning insignificant favorable variance accounts in a
standard costing system?
A. They have a debit balance.
B. They reduce a company’s total expenses.
C. They are closed to Work in Process.
D. They are recorded with a credit to the related inventory accounts.
*108. Which of the following variances is not recorded with a journal entry that involves a debit
to Work in Process in a standard costing system?
A. Material price variance
B. Material quantity variance
C. Labor rate variance
D. Labor efficiency variance
*109. When is a labor rate variance recorded in a standard costing system?
A. At the time the labor costs are incurred
B. At the time employees given rate increases
C. After units of product are completed
D. As part of the closing process
*110. Wilson Manufacturing uses a standard costing system. When Wilson sells its inventory
units, by how much is the Finished Goods Inventory account reduced?
A. The actual cost of the units sold plus the total of the unfavorable variances
B. The standard cost of the units sold
C. The actual direct materials, direct labor, and standard manufacturing overhead
D. The actual cost of the units sold
*111. As a practical matter, to which account are variance accounts with insignificant balances
usually closed?
A. Manufacturing Overhead
B. Work in Process Inventory
C. Finished Goods Inventory
D. Cost of Goods Sold
112. Ultimate Production manufactures radon detectors. The standard for materials for each
detector is 2 pounds of acrylic at a standard cost of $4.30 per pound. During May, the
company purchased 890 pounds and used 830 pounds of acrylic and made 410 radon
detectors. The company paid $4.45 per pound for the acrylic. There were 400 detectors
budgeted for May. How much is the material price variance?
A. $134 unfavorable
B. $43 unfavorable
C. $177 unfavorable
D. $263 unfavorable
113. Ultimate Production manufactures radon detectors. The standard for materials for each
detector is 2 pounds of acrylic at a standard cost of $4.30 per pound. During May, the
company purchased 890 pounds and used 830 pounds of acrylic and made 410 radon
detectors. The company paid $4.45 per pound for the acrylic. There were 400 detectors
budgeted for May. How much is the material quantity variance?
A. $134 unfavorable
B. $43 unfavorable
C. $177 unfavorable
D. $263 unfavorable
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
11–20
114. Straton Company produces one product, the H2001. Each unit of H2001 requires 6.5
pounds of raw material with a standard cost of $12.00 per pound. During July, Straton
purchased 3,500 pounds of this raw material at a price of $12.25 per pound and used
3,280 pounds to produce 500 units of the H2001. How much is the material price
variance?
A. $3,000 unfavorable
B. $360 unfavorable
C. $875 unfavorable
D. $820 unfavorable
115. Thomas Company produces one product, the E4501. The standards for E4501 include
the use of 25 yards of raw material at a standard price of $4.42 per yard. During a recent
month, the company used 65,000 yards of raw material to produce 2,580 units of E4501.
Thomas purchased this material at a cost of $4.37 per yard. How much is the material
quantity variance?
A. $2,185 unfavorable
B. $2,185 favorable
C. $2,210 unfavorable
D. $3,225 favorable
116. Glue For All has developed the following material standard to produce one container of
Glue-It: 96 ounces of Chemical A at $0.15 per ounce. Glue For All planned to produce
2,000 containers of Glue-It during July. The company purchased 1,500 gallons (192,000
ounces) of Chemical A at a cost of $0.14 per ounce in July. The company used 1,480
gallons of materials to produce 1,950 containers of Glue-It. How much is the material
quantity variance?
A. $1,920 favorable
B. $1,894 favorable
C. $336 unfavorable
D. $1,584 unfavorable
117. Glue For All has developed the following material standard to produce one container of
Glue-It: 96 ounces of Chemical A at $0.15 per ounce. Glue For All planned to produce
2,000 containers of Glue-It during July. The company purchased 1,500 gallons (192,000
ounces) of Chemical A at a cost of $0.14 per ounce in July. The company used 1,480
gallons to produce 1,950 containers of Glue-It. How much is the material price variance?
A. $1,920 favorable
B. $1,894 favorable
C. $336 unfavorable
D. $1,584 unfavorable