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Chapter 24 Standard Cost Systems Answer Key
True / False Questions
1.
A standard cost is the per unit cost actually incurred under normal operating conditions.
2.
A good standard cost system should always generate unfavorable variances.
3.
Standard cost systems are generally compatible with job cost systems or with process cost
systems.
4.
Standard costs actually are ideal costs per unit.
5.
A standard cost is predetermined, that is, determined before actual costs of the current
period have been computed.
6.
In a standard cost system actual costs are recorded in Material, Direct Labor, and
Overhead accounts, but standard costs are charged to Work in Process.
7.
In a standard cost system, actual costs are charged to work in process as they are
incurred.
8.
In most companies using standard cost procedures, the costs charged to Work in Process,
Finished Goods, and Cost of Goods Sold are the actual costs, not the standard costs.
9.
In setting standards, management's level of performance expectation must be something
less than ideal.
10.
Standard costs are typically reviewed once per year.
11.
In setting standard costs, management's expectations are that the standard costs will
always be met.
12.
The level of production plays an important role in determining cost standards.
13.
A materials price variance is arrived at by taking standard quantity times actual price, less
standard price.
14.
A materials quantity variance is the standard price times standard quantity, less actual
quantity.
15.
A favorable variance would be credited to a cost variance account.
16.
A labor efficiency variance relates to the number of hours actually worked, compared to the
standard hours.
17.
Standard costs are established only for direct labor and direct materials.
18.
The materials price variance is calculated by multiplying the difference between actual unit
price and standard unit price, by the standard units purchased.
19.
The use of excessive quantities of material in manufacturing a product causes an
unfavorable materials quantity variance.
20.
A favorable materials price variance indicates that actual prices paid in acquiring materials
were more than standard prices.
21.
A favorable variance occurs when actual costs are less than standard costs.
22.
A difference between a standard cost and an actual cost would be recorded in the Work in
Process account.
23.
A variance is said to be unfavorable when actual costs exceed standard costs.
24.
An unfavorable cost variance will be debited to a cost variance account.
25.
A spending variance results from incurring more overhead costs than allowed for the actual
level of activity achieved.
26.
The presence of fixed costs in manufacturing overhead causes the actual amount of
manufacturing overhead per unit of output to vary, depending on the actual production
volume attained.
27.
It is possible for the overhead volume variance to be favorable and the overhead spending
variance to be unfavorable.
28.
External auditors are often called upon to evaluate cost variances.
29.
In evaluating cost variances, the accounting department determines whether variances are
favorable or unfavorable.
30.
The company's CEO is the only person who analyzes costs variances.
31.
The purchasing manager is often included in evaluating cost variances.
32.
A total cost variance for materials can be caused by differences in the quantity used, or in
the price paid, but not by both.
Multiple Choice Questions
33.
An important advantage of a standard cost system is that standard costs:
34.
Standard costs:
35.
Which of the following is
not
an advantage of using a standard cost system?
36.
Which statement is true regarding a standard cost system?
37.
In a system designed to measure cost variances, goods transferred from the Work in
Process account to the Finished Goods Inventory are valued at:
38.
A standard cost is the per-unit cost incurred under:
39.
Refer to the information above. What is the standard cost for direct materials per unit for
Starbright's single product?
40.
Refer to the information above. What is the standard cost for direct labor per unit for
Starbright's single product (closest to)?
41.
Refer to the information above. What is the standard total manufacturing overhead cost?
42.
In establishing standard costs for labor, management must look at all of the following
except
:
43.
When standard costs are used in a cost accounting system:
44.
If the standard quantity of materials is 84,500 units @ $0.15 per unit and the actual
quantity is 95,000 units @ $0.12 per unit, then the total materials cost variance is:
45.
If the standard quantity of materials is 84,500 units @ $0.15 per unit and the actual
quantity is 95,000 units @ $0.12 per unit, then the materials quantity variance is:
46.
If the standard quantity of materials is 84,500 units @ $0.15 per unit and the actual
quantity is 95,000 units @ $0.12 per unit, then the materials price variance is:
47.
If the standard quantity of materials is 84,500 units @ $0.15 per unit and the actual
quantity is 95,000 units @ $0.12 per unit, then the journal entry to record the cost of
materials used includes:
48.
If actual direct labor cost was $7,560 and standard labor cost was $7,000, the journal entry
to record this would include:
49.
There will be a favorable materials price variance if:
