Chapter 17 – Standard costing and variance analysis 1
MULTIPLE CHOICE
1. To determine the unit standard cost for a particular input, a company must decide how much
a.
input should be used per unit of output and how much should be paid for the quantity of
the input to be used.
b.
input should be used per unit of output and how much output should be produced.
c.
output should be produced and how much should be paid for each unit produced.
d.
should be paid for the quantity of the input to be used and how much input should be
purchased.
2. Standard cost systems can enhance operational control through the use of
a.
price variances, which indicate the need for enhanced spending control.
b.
efficiency variances, which indicate the need for corrective action.
c.
standard costs, which indicate the desired cost of a unit of input.
d.
actual costs, which indicate the price received for units sold.
3. Variances indicate
a.
the cause of the variance.
b.
who is responsible for the variance.
c.
that actual performance is not going according to plan.
d.
when the variance should be investigated.
4. Which of the following is information that would be included in the standard cost card (sheet)?
a.
quantity and price of direct materials for each unit of output
b.
retail price of the product charged to the customers
c.
delivery cost per unit of product
d.
all of the above
5. Price variances focus on the difference between
a.
actual price and standard price for actual quantity allowed for units actually produced.
b.
actual price and standard price for standard quantity allowed for units actually produced.
c.
actual price and standard price for actual quantity allowed for estimated activity.
d.
none of the above.
6. Efficiency variances focus on the difference between
a.
actual quantity used and standard quantity allowed for estimated activity.
b.
actual quantity used and standard quantity allowed for units actually produced.
c.
quantity allowed for estimated production and standard quantity allowed for units actually
produced.
d.
none of the above.
7. An unfavourable materials price variance may be caused by
a.
excessive rework.
b.
a special price offered by suppliers.
c.
use of experienced workers.
d.
none of the above.
8. A favourable materials price variance may be caused by
a.
excessive rework.
b.
a special price offered by suppliers.
c.
use of experienced workers.
d.
none of the above.
9. For better control of direct material prices, when should direct material price variance be recognized?
a.
when material is purchased
b.
when material is issued from the storeroom
c.
when material is put into production
d.
when production is completed
10. The purchase of inferior direct materials at a lower price might affect which of the following
variances?
a.
materials price variance
b.
materials usage variance
c.
labour efficiency variance
d.
all of the above
11. An unfavourable materials usage variance may be caused by
a.
excessive rework.
b.
a special price offered by suppliers.
c.
use of experienced workers.
d.
none of the above.
12. A favourable materials usage variance may be caused by
a.
excessive rework.
b.
a special price offered by suppliers.
c.
use of experienced workers.
d.
none of the above.
13. An unfavourable materials price variance with a favourable materials usage variance would most
likely be the result of
a.
machines breaking down.
b.
problems with labour efficiency.
c.
purchase of high quality materials.
d.
problems with labour rates.
14. The labour rate variance is calculated as
a.
(Actual hourly wage rate – Standard hourly wage rate) Actual direct labour hours used.
b.
(Actual hourly wage rate – Standard hourly wage rate) Standard direct labour hours that
should have been used.
c.
(Actual direct labour hours used – Standard direct labour hours that should have been
used) Actual hourly wage rate.
d.
(Actual direct labour hours used – Standard direct labour hours that should have been
used) Standard hourly wage rate.
15. A 5 per cent wage increase for all factory employees would affect which of the following variances?
a.
materials price variance
b.
labour rate variance
c.
labour efficiency variance
d.
variable manufacturing overhead efficiency variance
16. Using more highly skilled direct labourers might affect which of the following variances?
a.
materials usage variance
b.
labour efficiency variance
c.
variable manufacturing overhead efficiency variance
d.
all of the above
17. Labour rate variances can be the result of
a.
the use of an average wage rate.
b.
unexpected overtime.
c.
seniority mix changes.
d.
all of the above.
18. Labour efficiency variances may be caused by
a.
the use of highly skilled workers.
b.
frequent machinery breakdowns.
c.
the use of marginally skilled workers.
d.
all of the above.
19. Who is responsible for unfavourable labour efficiency variances caused by poor quality materials?
a.
warehouse manager
b.
production manager
c.
purchasing manager
d.
engineering manager
20. The two variances for variable overhead are
a.
spending and efficiency variances.
b.
spending and budget variances.
c.
budget and volume variances.
d.
budget and efficiency variances.
21. If a company was concerned with controlling expenditures on overhead items, which variance would
be useful?
a.
fixed overhead volume variance
b.
variable overhead efficiency variance
c.
variable overhead spending variance
d.
both b and c
22. If variable overhead is applied based on direct labour hours and there is an unfavourable labour
efficiency variance,
a.
the materials usage variance will be unfavourable.
b.
the labour rate variance will be favourable.
c.
the variable overhead efficiency variance will be unfavourable.
d.
the variable overhead spending variance will be unfavourable.
23. The two variances for fixed overhead are
a.
spending and efficiency variances.
b.
efficiency and volume variances.
c.
spending and volume variances.
d.
budget and efficiency variances.
24. The volume variance provides information to management about
a.
utilization of plant facilities.
b.
cost control.
c.
performance for evaluation purposes.
d.
all of the above.
25. The standard fixed overhead rate is calculated as
a.
Actual fixed overhead/Actual activity.
b.
Budgeted fixed overhead/Budgeted activity.
c.
Budgeted fixed overhead/Actual activity.
d.
Budgeted overhead/Budgeted activity.
26. During May, 6,000 pounds of raw materials were purchased at a cost of £2.60 per pound. If there was
a favourable materials price variance of £900 for December, the standard cost per pound must be
a.
£2.75.
b.
£2.60.
c.
£2.45.
d.
none of the above.
27. During December, 6,000 pounds of raw materials were purchased at a cost of £16 per pound. If there
was an unfavourable materials price variance of £6,000 for December, the standard cost per pound
must be
a.
£17.
b.
£16.
c.
£15.
d.
none of the above.
28. During September, 40,000 units of product were produced. The standard quantity of material allowed
per unit was four pounds at a standard cost of £6.00 per pound. If there was a favourable materials
usage variance of £30,000 for April, the actual quantity of materials used must be
a.
41,250 pounds.
b.
38,750 pounds.
c.
165,000 pounds.
d.
155,000 pounds.
29. During April, 80,000 units of product were produced. The standard quantity of material allowed per
unit was two pounds at a standard cost of £5 per pound. If there was a favourable materials usage
variance of £40,000 for April, the actual quantity of materials used must have been
a.
168,000 pounds.
b.
152,000 pounds.
c.
84,000 pounds.
d.
76,000 pounds.
30. During October, 16,000 direct labour hours were worked at a standard cost of £6 per hour. If the
labour rate variance for October was £4,000 unfavourable, the actual cost per labour hour must be
a.
£6.25.
b.
£6.00.
c.
£5.75.
d.
none of the above.
Figure 17-1
Max Company has developed the following standards for one of its products:
Direct materials
15 pounds £16 per pound
Direct labour
4 hours £24 per hour
Variable overhead
4 hours £14 per hour
The following activities occurred during the month of October:
Materials purchased
10,000 pounds costing £170,000
Materials used
7,200 pounds
Units produced
500 units
Direct labour
2,300 hours at £23.60 per hour
Actual variable overhead
£30,000
The company records materials price variances at the time of purchase.
31. Refer to Figure 17-1. Max’s variable standard cost per unit would be
a.
£392.
b.
£336.
c.
£296.
d.
£152.
Direct materials (15 pounds £16)
Direct labour (4 hours £24)
Variable overhead (4 hours £14)
32. Refer to Figure 17-1. Max’s materials price variance would be
a.
£50,000 favourable.
b.
£50,000 unfavourable.
c.
£10,000 unfavourable.
d.
£10,000 favourable.
33. Refer to Figure 17-1. Max’s materials usage variance would be
a.
£40,000 unfavourable.
b.
£40,000 favourable.
c.
£4,800 unfavourable.
d.
£4,800 favourable.
34. Refer to Figure 17-1. Max’s labour rate variance would be
a.
£920 unfavourable.
b.
£920 favourable.
c.
£800 unfavourable.
d.
£800 favourable.
35. Refer to Figure 17-1. Max’s labour efficiency variance would be
a.
£7,200 unfavourable.
b.
£7,200 favourable.
c.
£6,280 unfavourable.
d.
£6,280 favourable.
Figure 17-2
Rax Company has developed the following standards for one of its products:
Direct materials
12 pounds £14 per pound
Direct labour
3 hours £18 per hour
Variable overhead
3 hours £8 per hour
The following activities occurred during the month of October:
Materials purchased
10,000 pounds at £13.60 per pound
Materials used
9,000 pounds
Units produced
800 units
Direct labour
2,500 hours at £19.00 per hour
Actual variable overhead
£22,000
The company records materials price variances at the time of purchase.
36. Refer to Figure 17-2. Rax’s variable standard cost per unit would be
a.
£78.
b.
£192.
c.
£246.
d.
£222.
37. Refer to Figure 17-2. Rax’s materials price variance would be
a.
£4,000 unfavourable.
b.
£4,000 favourable.
c.
£1,600 unfavourable.
d.
£1,600 favourable.
38. Refer to Figure 17-2. Rax’s materials usage variance would be
a.
£8,400 unfavourable.
b.
£8,400 favourable.
c.
£5,600 unfavourable.
d.
£5,600 favourable.
Direct materials (12 £14)
Direct labour (3 £18)
Variable overhead (3 £8)
39. Refer to Figure 17-2. Rax’s labour rate variance would be
a.
£4,300 favourable.
b.
£4,300 unfavourable.
c.
£2,500 favourable.
d.
£2,500 unfavourable.
40. Refer to Figure 17-2. Rax’s labour efficiency variance would be
a.
£4,300 unfavourable.
b.
£4,300 favourable.
c.
£1,800 unfavourable.
d.
£1,800 favourable.
PTS: 1 REF: 17.11
Figure 17-3
Tuvok Ltd. has developed the following standards for one of its products:
Standard cost of materials
£0.50 per pound
Materials purchased and used
20,000 pounds
Total paid to suppliers
£11,000
Standard quantity allowed
18,000 pounds
41. Refer to Figure 17-3. Tuvok’s material price variance is
a.
£1,000 unfavourable.
b.
£2,000 unfavourable.
c.
£1,100 unfavourable.
d.
cannot be computed from the information given.
42. Refer to Figure 17-3. Tuvok’s materials usage variance is
a.
£1,000 unfavourable.
b.
£1,100 unfavourable.
c.
£2,000 unfavourable.
d.
cannot be determined from the information given.
43. During October, 14,000 direct labour hours were worked at a standard cost of £40 per hour. If the
labour rate variance for October was £70,000 favourable, the actual cost per labour hour must be
a.
£35.
b.
£40.
c.
£45.
d.
none of the above.
Figure 17-4
Shannon Ltd.’s standard cost card contained the following information:
Direct labour: 1.25 hours £8.00 per hour = £10.00
Shannon planned to make 12,000 units. Shannon actually made 10,000 units using 13,000 hours.
44. Refer to Figure 17-4. Shannon’s standard hours allowed for production was
a.
12,500.
b.
15,000.
c.
16,250.
d.
13,000.
45. Refer to Figure 17-4. Shannon’s labour efficiency variance was
a.
£4,625 unfavourable.
b.
£4,000 unfavourable.
c.
£27,750 unfavourable.
d.
£24,000 unfavourable.
46. Refer to Figure 17-4. If Shannon’s actual labour cost was £136,500, Shannon’s labour rate variance
was
a.
£32,500 unfavourable.
b.
£32,500 favourable.
c.
£6,500 unfavourable.
d.
£6,500 favourable.
Figure 17-5
Ebola Company has developed the following standards for one of its products:
Direct materials
20 pounds £4 per pound
Direct labour
5 hours £18 per hour
Variable overhead
5 hours £4 per hour
The following activities occurred during the month of October:
Materials purchased
230,000 pounds at £4.20 per pound
Materials used
220,000 pounds
Units produced
10,000 units
Direct labour
51,000 hours at £17.70 per hour
Actual variable overhead
£240,000
The company records materials price variances at the time of purchase.
47. Refer to Figure 17-5. Ebola’s materials price variance would be
a.
£46,000 favourable.
b.
£46,000 unfavourable.
c.
£44,000 favourable.
d.
£44,000 unfavourable.
48. Refer to Figure 17-5. Ebola’s materials usage variance would be
a.
£120,000 favourable.
b.
£120,000 unfavourable.
c.
£80,000 unfavourable.
d.
£80,000 favourable.
49. Refer to Figure 17-5. Ebola’s labour rate variance would be
a.
£15,000 unfavourable.
b.
£15,000 favourable.
c.
£15,300 unfavourable.
d.
£15,300 favourable.
50. Refer to Figure 17-5. Ebola’s labour efficiency variance would be
a.
£18,000 favourable.
b.
£18,000 unfavourable.
c.
£17,700 unfavourable.
d.
£17,700 favourable.
51. Refer to Figure 17-5. Ebola’s variable overhead spending variance would be
a.
£36,000 favourable.
b.
£36,000 unfavourable.
c.
£40,000 favourable.
d.
£40,000 unfavourable.
52. Refer to Figure 17-5. Ebola’s variable overhead efficiency variance would be
a.
£4,000 favourable.
b.
£4,000 unfavourable.
c.
£8,000 favourable.
d.
£12,000 unfavourable.
53. If actual fixed overhead was £120,000 and there was a £2,600 favourable spending variance and a
£2,000 unfavourable volume variance, budgeted fixed overhead must have been
a.
£124,600.
b.
£122,000.
c.
£120,000.
d.
£122,600.