Chapter 13: Budgeting and Standard Cost Systems
107. Which of the following conditions normally would not indicate that standard costs should be
revised?
a. The engineering department has revised product specifications in responding to customer
suggestions.
b. The company has signed a new union contract that increases the factory wages on average
by $2.00 an hour.
c. Actual costs differed from standard costs for the preceding week.
d. The world price of raw materials increased.
108. Standards that represent levels of operation that can be attained with reasonable effort are
called:
a. theoretical standards.
b. ideal standards.
c. reasonable standards.
d. normal standards.
109. Periodic comparisons between planned objectives and actual performance are reported in:
a. zero-base reports.
b. budget performance reports.
c. master budgets.
d. budgets.
110. The standard price and quantity of direct materials are separated because:
a. GAAP reporting requires this separation.
b. direct materials prices are controlled by the purchasing department, and quantity used is
controlled by the production department.
c. standard quantities are more difficult to estimate than standard prices.
d. standard prices change more frequently than standard quantities.
Chapter 13: Budgeting and Standard Cost Systems
Following is the information about Standard Inc.
The standard costs and actual costs for direct materials, direct labor, and factory overhead for
the manufacture of 2,500 units of product are as follows:
Standard Costs
Direct materials 2,500 kilograms @ $8
Direct labor 7,500 hours @ $12
Actual Costs
Direct materials 2,600 kilograms @ $8.75
Direct labor 7,400 hours @ $11.40
Factory overhead (100% capacity – 10,000 hrs.):
Variable cost @ $2 per hour
Total variable cost, $18,000
Fixed cost @ $0.80 per hour
Total fixed cost, $8,000
111. Refer to the information provided for Standard Inc. The amount of the direct materials
quantity variance is:
a. $875 favorable.
b. $875 unfavorable.
c. $800 favorable.
d. $800 unfavorable.
112. Refer to the information provided for MetalHead Inc. What is the direct materials price
variance?
a. $1,700 favorable
b. $1,950 favorable
c. $1,900 unfavorable
d. $1,950 unfavorable
113. Refer to the information provided for MetalHead Inc. What is the direct materials quantity
variance?
a. $650 unfavorable
b. $650 favorable
c. $700 favorable
d. $700 unfavorable
Chapter 13: Budgeting and Standard Cost Systems
114. If the actual quantity of direct materials used in producing a commodity differs from the
standard quantity, the variance is termed:
a. controllable variance.
b. price variance.
c. quantity variance.
d. rate variance.
115. If the price paid per unit differs from the standard price per unit for direct materials, the
variance is termed:
a. variable variance.
b. controllable variance.
c. price variance.
d. volume variance.
Efficient Corporation uses a standard cost system. The following information was provided for
the period that just ended:
Actual price per gallon
$11.75
Actual gallons of material used
5,000
Actual hourly labor rate
$17.00
Actual hours of production
24,300
Standard price per gallon
$12.00
Standard gallons per completed unit
1/2
Standard hourly labor rate
$12.00
Standard time per completed unit
3 hrs.
Units completed during the period
9,000
116. Refer to the information provided for Efficient Corporation. The direct materials cost variance
is:
a. $1,125 favorable.
b. $4,750 unfavorable.
c. $6,000 unfavorable.
d. $7,125 unfavorable.
117. Refer to the information provided for Efficient Corporation. The direct labor time variance is:
a. $31,725 favorable.
b. $32,400 favorable.
c. $89,100 unfavorable.
d. $121,500 unfavorable.
Chapter 13: Budgeting and Standard Cost Systems
118. Refer to the information provided for Efficient Corporation. The direct labor rate variance is:
a. $135,000 unfavorable.
b. $89,100 favorable.
c. $89,100 unfavorable.
d. $121,500 unfavorable.
119. Refer to the information provided for Efficient Corporation. The total direct labor variance is:
a. $216,000 favorable.
b. $32,400 favorable.
c. $89,100 unfavorable.
d. $121,500 unfavorable.
Frogue Corporation uses a standard cost system. The following information was provided for
the period that just ended:
Actual price per kilogram $2.50
Actual kilograms of material used 31,000
Actual hourly labor rate $18.10
Actual hours of production 4,900 labor hrs.
Standard price per kilogram $2.80
Standard kilograms per completed unit 6 kilograms
Standard hourly labor rate $18.00
Standard time per completed unit 1 hr.
Actual total factory overhead $34,900
Actual fixed factory overhead $18,000
Standard fixed factory overhead rate $1.20 per labor hour
Standard variable factory overhead rate $3.80 per labor hour
Maximum plant capacity 15,000 hours
Units completed during the period 5,000
120. Refer to the information provided for Frogue Company. The direct materials cost variance is:
a. $6,500 unfavorable.
b. $9,000 unfavorable.
c. $9,000 favorable.
d. $6,500 favorable.
121. Refer to the information provided for Frogue Company. The variable factory overhead
controllable variance is:
a. $6,000 favorable.
b. $2,100 favorable.
c. $2,100 unfavorable.
d. $6,000 unfavorable.
Chapter 13: Budgeting and Standard Cost Systems
122. Refer to the information provided for Frogue Company. The total factory overhead cost
variance is:
a. $3,900 favorable.
b. $10,400 favorable.
c. $10,400 unfavorable.
d. $9,900 unfavorable.
123. If the wage rate paid per hour differs from the standard wage rate per hour for direct labor, the
variance is termed:
a. variable variance.
b. rate variance.
c. quantity variance.
d. volume variance.
124. If the actual direct labor hours spent producing a commodity differ from the standard hours,
the variance is termed:
a. time variance.
b. price variance.
c. quantity variance.
d. rate variance.
The following data relate to direct labor costs for the current period of Executive Inc.:
Standard costs 6,000 hours at $12.00
Actual costs 7,500 hours at $11.60
125. Refer to the information provided for Executive Inc. What is the direct labor time variance?
a. $17,400 favorable
b. $17,400 unfavorable
c. $18,000 favorable
d. $18,000 unfavorable
126. Refer to the information provided for Executive Inc. What is the direct labor rate variance?
a. $3,000 unfavorable
b. $3,000 favorable
c. $2,400 unfavorable
d. $2,400 favorable
Chapter 13: Budgeting and Standard Cost Systems
127. The following data relate to direct labor costs for the current period:
Standard costs 36,000 hours at $23.50
Actual costs 35,000 hours at $23.00
What is the direct labor time variance?
a. $23,000 unfavorable
b. $23,500 unfavorable
c. $23,500 favorable
d. $23,000 favorable
Answer Corporation uses standard cost system. The standard costs and actual costs for direct
materials, direct labor, and factory overhead for the manufacture of 2,500 units of product are
as follows:
Standard Costs
Direct materials 2,500 kilograms @ $8
Direct labor 7,500 hours @ $12
Actual Costs
Direct materials 2,600 kilograms @ $8.75
Direct labor 7,400 hours @ $11.40
Factory overhead (100% capacity – 10,000 hrs.):
Variable cost @ $2 per hour
Total variable cost, $18,000
Fixed cost @ $0.80 per hour
Total fixed cost, $8,000
128. Refer to the information provided for Answer Corporation. The amount of the direct labor
time variance is:
a. $1,200 favorable.
b. $1,140 unfavorable.
c. $1,200 unfavorable.
d. $1,140 favorable.
129. Refer to the information provided for Answer Corporation. The amount of the direct labor rate
variance is:
a. $4,440 unfavorable.
b. $4,500 favorable.
c. $4,440 favorable.
d. $4,500 unfavorable.
Chapter 13: Budgeting and Standard Cost Systems
130. The standard costs and actual costs for direct materials for the manufacture of 2,500 actual
units of product are as follows:
Standard Costs
Direct materials (per completed unit) 1.04 kilograms @$8.75
Actual Costs
Direct materials 2,500 kilograms @ $8
The amount of direct materials price variance is:
a. $1,875 unfavorable.
b. $1,950 favorable.
c. $1,875 favorable.
d. $1,950 unfavorable.
131. The standard costs and actual costs for direct materials, direct labor, and factory overhead for
the manufacture of 2,500 units of product are as follows:
Standard Costs
Direct labor 7,500 hours @ $12
Actual Costs
Direct labor 7,400 hours @ $11.40
The amount of the direct labor time variance is:
a. $1,200 favorable.
b. $1,140 unfavorable.
c. $1,200 unfavorable.
d. $1,140 favorable.
132. The following data relate to direct labor costs for the current period:
Standard costs 8,850 hours at $6.50
Actual costs 7,500 hours at $6.25
What is the direct labor rate variance?
a. $1,875.00 unfavorable
b. $2,212.50 unfavorable
c. $1,875.00 favorable
d. $2,212.50 favorable
Chapter 13: Budgeting and Standard Cost Systems
Standard hourly labor rate
$14 per hour
Standard hours allowed per completed unit
4.5
Actual labor hours worked
4,560
Actual total labor costs
$62,928
133. The following data is given for the Walker Company:
Budgeted production 1,000 units
Actual production 980 units
Materials:
Standard price per lb $2.00
Standard pounds per completed unit 12
Actual pounds purchased and used in production 11,800
Actual price paid for materials $23,000
Labor:
Overhead:
Actual and budgeted fixed overhead $27,000
Standard variable overhead rate $3.50 per standard direct labor hour
Actual variable overhead costs $15,500
Overhead is applied on standard labor hours.
The variable factory overhead controllable variance is:
a. $65 unfavorable.
b. $65 favorable.
c. $250 unfavorable.
d. $250 favorable.
134. Which of the following will not affect direct materials quantity variance?
a. Malfunctioning equipment
b. Purchasing of inferior raw materials
c. Material requiring rework
d. Spoilage of materials
135. Which of the following formula is used to calculate direct labor rate variance?
a. Actual Costs + (Actual hours × Standard Rate)
b. Actual costs – Standard cost
c. (Actual hours × Standard rate) – Standard costs
d. Actual costs – (Actual hours × Standard rate)
Chapter 13: Budgeting and Standard Cost Systems
136. The formula to compute direct labor time variance is:
a. actual costs – standard costs.
b. actual costs + standard costs.
c. (actual hours × standard rate) – standard costs.
d. actual costs – (actual hours × standard rate).
137. The formula to compute direct materials price variance is:
a. actual costs – (actual quantity × standard price).
b. actual cost + standard costs.
c. actual cost – standard costs.
d. (actual quantity × standard price) – standard costs.
138. Variances from standard costs are usually reported to:
a. suppliers.
b. stockholders.
c. management.
d. creditors.
139. The standard costs and actual costs for direct labor for the manufacture of 2,500 actual units of
product are as follows:
Standard Costs
Direct labor 7,500 hours @ $12
Actual Costs
Direct labor 7,400 hours @ $11.40
The amount of the direct labor rate variance is:
a. $4,440 unfavorable.
b. $4,500 favorable.
c. $4,440 favorable.
d. $4,500 unfavorable.
140. The formula to compute direct material quantity variance is:
a. actual costs – standard costs.
b. standard costs – actual costs.
c. (actual quantity × standard price) – standard costs.
d. actual costs – (standard price × standard costs).
Chapter 13: Budgeting and Standard Cost Systems
141. Which of the following would not lend itself to applying direct labor variances?
a. Computer help desk operator
b. Administrative assistant
c. Customer service personnel
d. Telemarketer
142. Frogue Corporation uses a standard cost system. The following information was provided for
the period that just ended:
Actual price per kilogram $3.00
Actual kilograms of material used 31,000
Actual hourly labor rate $18.20
Actual hours of production 4,900 labor hours
Standard price per kilogram $2.80
Standard kilograms per completed unit 6 kilograms
Standard hourly labor rate $18.00
Standard time per completed unit 1 hr.
Actual total factory overhead $34,900
Actual fixed factory overhead $18,000
Standard fixed factory overhead rate $1.20 per labor hour
Standard variable factory overhead rate $3.80 per labor hour
Maximum plant capacity 15,000 hours
Units completed during the period 5,000
The direct labor cost variance is:
a. $1,310 favorable.
b. $820 favorable.
c. $1,310 unfavorable.
d. $820 unfavorable.
143. The standard fixed factory overhead rate is based on 100% capacity of 135,000 machine hours
for Interile Inc. The standard costs and the actual costs of factory overhead for the production
of 32,000 units during March were as follows:
Actual: Factory overhead $860,000
Standard: 100,000 hours at $8.00 800,000
If there was a $70,000 unfavorable volume variance for March, what is the standard fixed
factory overhead cost rate?
a. $2.00
b. $2.50
c. $3.00
d. $3.50
Chapter 13: Budgeting and Standard Cost Systems
144. The standard fixed factory overhead rate is based on 100% capacity of 50,000 direct labor
hours. The standard costs and the actual costs for factory overhead for the production of 8,000
units during the current month were as follows:
Standard:
40,000 hours at $3
Actual:
Factory overhead
(41,000 direct labor hours)
If there was a $9,000 unfavorable volume variance for December, what is the standard fixed
factory overhead cost rate?
a. $1.00
b. $0.90
c. $2.40
d. $0.80
145. The standard factory overhead rate is $7.50 per machine hour ($6.20 for variable factory
overhead and $1.30 for fixed factory overhead) based on 100% capacity of 80,000 machine
hours. The standard cost and the actual cost of factory overhead for the production of 15,000
units during August were as follows:
Actual:
Variable factory overhead
$360,000
Fixed factory overhead
104,000
Standard:
60,000 hours at $7.50
450,000
What is the amount of the fixed factory overhead volume variance?
a. $26,000 unfavorable
b. $12,000 favorable
c. $26,000 favorable
d. $12,000 unfavorable
146. It would be most appropriate to develop direct labor time standards for use in administrative
activities when the activity involves:
a. repetitive task that produces common output.
b. nonrepetitive task that produces common output.
c. top-level management.
d. task related to nonmeasurable output.
Chapter 13: Budgeting and Standard Cost Systems
Standard hourly labor rate
$14 per hour
Standard hours allowed per completed unit
4.5
Actual labor hours worked
4,560
Actual total labor costs
$62,928
147. The standard costs and actual costs for direct materials, direct labor, and factory overhead for
the manufacture of 2,500 units of product are as follows:
Standard Costs
Direct materials 2,500 kilograms @ $8
Direct labor 7,500 hours @ $12
Actual Costs
Direct materials 2,600 kilograms @ $8.75
Direct labor 7,400 hours @ $11.40
Factory overhead (100% capacity – 10,000 hrs.):
Variable cost @ $2 per hour
Total variable cost, $18,000
Fixed cost @ $0.80 per hour Total fixed cost, $8,000
The amount of the fixed factory overhead volume variance is:
a. $2,000 favorable.
b. $2,500 favorable.
c. $2,500 unfavorable.
d. $2,000 unfavorable.
148. The following data is given for the Walker Company:
Budgeted production 1,000 units
Actual production 980 units
Materials:
Standard price per lb $2.00
Standard pounds per completed unit 12
Actual pounds purchased and used in production 11,800
Actual price paid for materials $23,000
Labor:
Overhead:
Actual and budgeted fixed overhead $27,000
Standard variable overhead rate $3.50 per standard labor hour
Actual variable overhead costs $15,500
Overhead is applied on standard labor hours.
The factory overhead volume variance is:
a. $65 unfavorable.
b. $65 favorable.
c. $540 unfavorable.
d. $540 favorable.