Chapter 10 – Standard Costing: A Managerial Tool
1. Managers develop quantity standards when they decide what amount of input should be used per unit of output.
a.
True
b.
False
True
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
True
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
True
4. In setting standards, historical experience should be used with caution because it can perpetuate operating
inefficiencies.
a.
True
b.
False
True
5. Engineering studies are often too rigorous and may not be achievable by operating personnel.
a.
True
b.
False
True
6. Ideal standards can be achieved under efficient operating conditions.
a.
True
b.
False
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
True
8. Currently attainable standards offer the most behavioral benefits because higher performance levels are attained
through challenging, yet achievable, standards.
a.
True
b.
False
True
Chapter 10 – Standard Costing: A Managerial Tool
9. Currently attainable standards can be achieved under efficient operating conditions.
a.
True
b.
False
True
10. One reason for adopting a standard cost system is to make product costing easier.
a.
True
b.
False
False
11. The benefits of operational control under a standard cost system can extend to all manufacturing environments.
a.
True
b.
False
False
12. Standard costs are developed for direct materials, direct labor, and variable overhead only.
a.
True
b.
False
False
No. Standard costs are assigned for direct materials, direct labor, and variable and fixed overhead.
13. The standard quantity of materials allowed can be calculated by multiplying the unit labor standard by the actual
output.
a.
True
b.
False
False
14. To compute the standard direct labor hours allowed, multiply the unit labor standard by the actual output.
a.
True
b.
False
True
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
True
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
True
Chapter 10 – Standard Costing: A Managerial Tool
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
False
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
True
19. The total budget variance is the difference between the actual cost of the input and its planned cost.
a.
True
b.
False
True
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
True
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
True
22. An unfavorable usage variance would occur when the actual usage of inputs is greater than the standard usage.
a.
True
b.
False
True
23. An unfavorable price variance occurs whenever the actual prices are greater than the standard prices.
a.
True
b.
False
True
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
True
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
Chapter 10 – Standard Costing: A Managerial Tool
b.
False
True
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
False
27. For better control, the materials price variance is computed using actual quantity of materials purchased.
a.
True
b.
False
True
28. The sum of the labor rate and labor efficiency variances will always add up to the total labor variance.
a.
True
b.
False
True
29. Kaizen costing provides fixed standards which reflect continuous improvement efforts.
a.
True
b.
False
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
True
31. Favorable variances are credits and unfavorable variances are debits.
a.
True
b.
False
True
32. _______________ often means the difference between success and failure or between above-average profits and
lesser profits.
Chapter 10 – Standard Costing: A Managerial Tool
33. The amount of input that should be used per unit of output is known as the _______________.
34. The amount that should be paid for the quantity of the input to be used is known as the ______________.
35. ___________________ can provide an initial guideline for setting standards, but should be used with caution because
they can perpetuate existing inefficiencies.
36. Standards are set by using historical experiences, ___________________, and input from operating personnel,
marketing, and accounting.
37. ________________ demands maximum efficiency and can be achieved only if everything operates perfectly.
38. In a ____________________, costs are assigned to products using quantity and price standards for all three
manufacturing costs: direct materials, direct labor, and overhead.
39. The __________________ provides the products data needed to calculate the standard unit cost.
40. The ______________________ can be used to compute the total amount of inputs allowed for the actual output.
41. ___________________ is calculated by multiplying the unit labor standard by the actual output.
42. The ____________________ is the difference between the actual cost of the input and its planned cost.
43. ____________________ is the difference between the actual and standard unit price of an input multiplied by the
number of inputs used.
44. _________________ occur whenever actual prices or actual usage of inputs are greater than standard prices or
standard usage.
45. The ____________________ measures the difference between the actual costs of materials and their budgeted costs
for actual level of activity.
46. The ____________________ measures the difference between what should have been paid for raw materials and what
was actually paid.
Chapter 10 – Standard Costing: A Managerial Tool
materials price variance
47. The _____________________ measures the difference between the direct materials actually used and the direct
materials that should have been used for the actual output.
materials usage variance
48. The _______________ computes the difference between the rate paid to direct laborers and the rate that should have
been paid.
labor rate variance
49. The ___________________ measures the difference between the labor hours that were actually used and the labor
hours that should have been used.
labor efficiency variance
50. ______________ focuses on the continuous reduction of the manufacturing costs of existing products and processes.
Kaizen costing
51. A ______________ is the difference between the sales price needed to capture a predetermined market share and the
desired per-unit profit.
target cost
52. Standards based on the amount of input that should be used per unit of output are called
a.
quantity standards.
b.
price standards.
c.
ideal standards.
d.
currently attainable standards.
e.
kaizen standards.
53. Price standards are based on
a.
the amount of input that should be used per unit of output.
b.
the amount that should be paid for the total quantity of input to be used.
c.
the amount that should be paid per unit of output.
d.
the amount that should be paid per unit of input purchased.
e.
None of these.
54. The sources of quantitative standards include
a.
historical experience.
b.
engineering studies.
c.
input from operating personnel.
d.
historical experience, engineering studies, and input from operating personnel.
e.
None of these.
Chapter 10 – Standard Costing: A Managerial Tool
55. Which of the following is true regarding historical experience in standard setting?
a.
It provides very rigorous guidelines.
b.
Operating personnel may not be able to achieve operating standards based on historical experience.
c.
It should be used with caution because it can perpetuate inefficiencies.
d.
Standards based on historical experience are better than standards based on engineering studies.
e.
None of these.
56. Which of the following is not true regarding engineering studies?
a.
They can determine the most efficient way to operate.
b.
They are often achievable by operating personnel.
c.
They provide very rigorous guidelines.
d.
All of these statements are true.
e.
More than two of these statements are true.
Engineering studies are typically so rigorous they are often not achievable by operating personnel.
57. In setting price standards for materials and labor,
a.
the purchasing department must consider discounts, freight, and quality.
b.
personnel must consider payroll taxes, fringe benefits, and qualifications.
c.
it is the joint responsibility of operations, purchasing, personnel, and accounting.
d.
All of these.
e.
None of these.
58. Ideal standards
a.
do not allow for machine breakdowns, slack, or lack of skill (even momentarily).
b.
demand maximum efficiency.
c.
can be achieved only if everything operates perfectly.
d.
All of these.
e.
None of these.
59. Which of the following is true regarding currently attainable standards?
a.
They can be achieved under efficient operating conditions.
b.
Allowance is made for normal breakdowns, interruptions, etc.
c.
They are challenging but achievable.
d.
They tend to achieve higher performance levels from personnel.
e.
All of these.
60. Standard cost systems are adopted
a.
to improve planning and control.
Chapter 10 – Standard Costing: A Managerial Tool
b.
to facilitate product costing.
c.
to improve planning and control, and to facilitate product costing.
d.
to enhance the operational control of firms that emphasize continuous improvement.
e.
for all of these reasons.
61. Standard cost systems can enhance operational control through the use of
a.
efficiency variances which indicate the need for corrective action.
b.
price variances which indicate the need for better spending control.
c.
standard costs which indicate the desired cost of a unit of input.
d.
actual costs which indicate the price received for units sold.
e.
All of these.
a
62. Which of the following is true regarding standard cost systems in manufacturing environments that emphasize
continuous improvement and just–in-time manufacturing and purchasing?
a.
The standard cost system enhances the operational control.
b.
The materials price variance may encourage the purchasing department to buy in smaller quantities to reduce
inventories.
c.
Variances can be computed and presented in reports to higher-level managers.
d.
The operational level will benefit from the detailed computation of variances.
e.
None of these.
63. In a standard cost system, costs are assigned to all of the following, except for
a.
direct materials.
b.
direct labor.
c.
variable overhead.
d.
fixed overhead.
e.
none of these.
e
64. The standard cost system differs from the actual cost system in the assignment of
a.
direct materials.
b.
direct labor.
c.
overhead.
d.
all of the manufacturing inputs.
e.
none of the manufacturing inputs.
65. Which of the following is not true regarding normal costing systems?
Chapter 10 – Standard Costing: A Managerial Tool
a.
A normal costing system predetermines overhead costs.
b.
A normal costing system assigns direct materials and direct labor to products using a predetermined rate.
c.
In a normal costing system overhead is assigned using a budgeted rate and actual activity.
d.
A normal costing system has less capacity for control than a standard costing system.
e.
All of these statements are true.
A normal costing system assigns direct materials and direct labor to products using actual costs.
66. Which of the following is not an advantage of standard costing over normal costing and actual costing?
a.
A greater capacity for control.
b.
Ability to easily distinguish the FIFO and weighted average methods of accounting for beginning inventory
costs.
c.
Computing a unit cost for each equivalent unit cost category is not necessary.
d.
Providing for readily available unit cost information.
e.
All of these are advantages of standard costing.
67. The production data needed to calculate the standard unit cost as well as the underlying details for the standard cost
per unit are provided in
a.
the standard cost sheet.
b.
the standard production budget.
c.
the balance sheet.
d.
the standard work-in-process account.
e.
None of these.
68. Standard hours allowed are computed using the equation
a.
unit labor standard × actual output.
b.
unit labor standard × standard output.
c.
unit labor standard × actual input.
d.
unit labor standard × standard input.
e.
not shown here.
69. The standard quantity of materials allowed is computed by the equation
a.
unit quantity standard × standard output.
b.
unit quantity standard × actual input.
c.
unit quantity standard × standard input.
d.
unit quantity standard × actual output.
e.
not shown here.
70. An accountant would refer to a cost sheet to perform which of the following actions?
Chapter 10 – Standard Costing: A Managerial Tool
a.
Calculate standard cost per unit.
b.
Calculate efficiency variances.
c.
Calculate the total amount of inputs allowed for the actual output.
d.
All of these.
Figure 10–1.
Flying High Company manufactures model airplanes. During the month, it manufactured 10,000 airplanes. Each one used
an average of 6.5 direct labor hours and an average of 1.5 sheets of aluminum. It normally manufactures 7,500 airplanes.
Materials and labor standards for making the airplanes are:
Direct Materials (1 sheet of aluminum @ $10.00)
$10.00
Direct Materials (other accessories @ $8.75)
8.75
Direct Labor (6 hours @ $7.00)
42.00
71. Refer to Figure 10–1. Compute the standard hours allowed for a volume of 10,000 airplanes.
a.
60,000 hours
b.
420,000 hours
c.
70,000 hours
d.
65,000 hours
72. Refer to Figure 10–1. Compute the standard number of sheets of aluminum allowed for a volume of 10,000 airplanes.
a.
15,000 sheets
b.
10,000 sheets
c.
7,500 sheets
d.
11,250 sheets
73. Variances indicate
a.
that actual performance is not going according to plan.
b.
the cause of the variance.
c.
who is responsible for the variance.
d.
when the variance should be investigated.
e.
none of these.
74. The difference between the actual cost of the input and its planned cost is
a.
the total budget variance.
b.
the usage variance.
c.
the price variance.
d.
the efficiency variance.
e.
the budget variance.
Chapter 10 – Standard Costing: A Managerial Tool
75. Which of the following is true concerning the materials price variance?
a.
It is the difference between the actual and standard unit price of an input multiplied by the number of inputs
used.
b.
It is the difference between the actual and standard unit price of an output multiplied by the number of inputs
used.
c.
It is the difference between the actual and standard unit price of an input multiplied by the number of inputs
purchased.
d.
It is the difference between the actual and standard unit price of an output multiplied by the number of inputs
purchased.
e.
None of these.
76. The usage variance is the difference between the actual and standard quantity of inputs
a.
multiplied by the standard unit price of the input.
b.
budgeted multiplied by the standard unit price of the input.
c.
multiplied by the actual unit price of the input.
d.
purchased multiplied by the actual unit price of the input.
e.
None of these.
77. Which of the following is true regarding variances?
a.
Unfavorable variances occur whenever actual prices or actual usage of inputs are greater than standard prices
or standard usage.
b.
Favorable variances occur whenever actual prices or actual usage of inputs are greater than standard prices or
standard usage.
c.
Unfavorable variances are always credits.
d.
Favorable variances are always debits.
e.
None of these.
78. All of the following are true regarding variance investigation except
a.
the investigation should be undertaken only if the anticipated benefits are greater than the expected costs.
b.
managers must consider whether a variance will recur.
c.
it is difficult to assess the costs and benefits of variance analysis on a case-by-case basis.
d.
variances are not investigated unless they are large enough to be of a concern.
e.
every variance is investigated.
79. Which of the following is not true concerning control limits?
a.
Control limits are the top and bottom measures of the allowable range.
b.
The upper control limit is the standard plus the allowable deviation.
c.
The lower control limit is the standard minus the allowable deviation.
d.
In current practice, control limits are set objectively using standard formulas.
e.
Variances that fall outside the control limits are investigated.
Chapter 10 – Standard Costing: A Managerial Tool
80. Acme Company’s standard cost is $500,000. The allowable deviation is ±10%. Its actual costs for three months are
January
$520,000
February
$550,000
March
$575,000
The upper and lower control limits are, respectively,
a.
$550,000 and $450,000
b.
$500,000 and $450,000
c.
$550,000 and $500,000
d.
$575,000 and $520,000
Figure 10–2.
Highland Company’s standard cost is $250,000. The allowable deviation is ±10%. Its actual costs for six months are
January
$235,000
February
220,000
March
245,000
April
265,000
May
270,000
June
280,000
81. Refer to Figure 10–2. The upper and lower control limits are, respectively,
a.
$250,000 and $225,000
b.
$305,000 and $195,000
c.
$275,000 and $250,000
d.
$275,000 and $225,000
82. Refer to Figure 10–2. The actual cost which is higher than the upper control limit is
a.
$220,000
b.
$280,000
c.
$265,000
d.
$235,000
83. Refer to Figure 10–2. The actual cost which is lower than the lower control limit is
a.
$220,000
b.
$280,000
c.
$265,000
d.
$235,000
a
Chapter 10 – Standard Costing: A Managerial Tool
84. Which of the following is not true concerning direct materials variances?
a.
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.
b.
The materials price variance uses the actual quantity of materials purchased rather than the actual quantity of
materials used.
c.
The materials price variance always uses the actual quantity of materials used rather than the actual quantity of
materials purchased.
d.
The materials usage variance uses the actual quantity of materials used.
e.
Separate materials variances can be computed for each type of material used.
Typically, the quantity of material purchased is used to determine the materials price variance.
85. The materials price variance is computed using the equation
a.
(Actual Price × Actual Quantity) − (Standard Price × Standard Quantity).
b.
(Standard Price × Actual Quantity) − (Actual Price × Actual Quantity).
c.
(Standard Price × Standard Quantity) − (Actual Price × Actual Quantity).
d.
(Actual Price × Actual Quantity) − (Standard Price × Actual Quantity).
e.
None of these.
86. The materials usage variance is calculated by the equation
a.
(Standard Price × Actual Quantity) − (Standard Price × Standard Quantity).
b.
(Standard Price × Standard Quantity) + (Standard Price × Actual Quantity).
c.
(Actual Price × Actual Quantity) − (Standard Price × Actual Quantity).
d.
(Actual Price × Standard Quantity) + (Actual Quantity × Standard Price).
e.
None of these.
a
87. Which of the following is not true regarding the use of materials variance information?
a.
The purchasing agent has the responsibility for controlling the materials price variance.
b.
The production manager is generally responsible for materials usage.
c.
The production manager is concerned with minimizing scrap, waste, and rework.
d.
The purchasing department is responsible for acquiring quality materials.
e.
All of these are true.
e
88. During the month of March, Baker’s Express purchased 10,000 pounds of flour at $1 per pound. At the end of March,
Baker’s Express found that it had an unfavorable materials price variance of $500. The standard cost per pound must be
a.
$1.95
b.
$1.00
c.
$1.05
d.
$0.95
= (AP − SP) × AQ
$500
= ($1 − SP) × 10,000
Chapter 10 – Standard Costing: A Managerial Tool
89. During the month of March, Baker’s Express purchased 10,000 pounds of flour at $1 per pound. At the end of March,
Baker’s Express found that it had a favorable materials price variance of $500. The standard cost per pound must be
a.
$0.95
b.
$1.00
c.
$1.05
d.
$1.95
= (AP − SP) × AQ
= ($1 − SP) × 10,000
= $1.05
$10,500 / 10,000 = $1.05
90. During June, Cisco Company produced 12,000 chainsaw blades. The standard quantity of material allowed per unit
was 1.5 pounds of steel per blade at a standard cost of $8 per pound. Cisco determined that it had a favorable materials
usage variance of $1,000 for June. Calculate the actual quantity of materials Cisco used.
a.
17,875 pounds
b.
12,125 pounds
c.
11,875 pounds
d.
18,125 pounds
MUV
= (AQ − SQ) × SP
= (AQ − 18,000) × $8
= 17,875 pounds
91. During June, Cisco Company produced 12,000 chainsaw blades. The standard quantity of material allowed per unit
was 1.5 pounds of steel per blade at a standard cost of $8 per pound. The actual cost was $7 per pound. The actual pounds
of steel that Cisco purchased were 19,500 pounds. All materials purchased were used. Calculate Cisco’s materials usage
variance.
a.
$10,500 U
b.
$12,000 F
c.
$12,000 U
d.
$10,500 F
MUV
= (AQ − SQ) × SP
= (19,500 − 18,000) × $8
= $12,000 U
92. Perfect Builders makes all sorts of moldings. Its standard quantity of material allowed is 1 foot of wood per 1 foot of
molding at a standard price of $2.00 per foot. During August, it purchased 500,000 feet of wood at a cost of $1.90 per
= $0.95
Chapter 10 – Standard Costing: A Managerial Tool
foot, which produced only 499,000 feet of molding. Calculate the materials price variance and the materials usage
variance, respectively.
a.
$50,000 F and $2,000 U
b.
$49,900 U and $2,000 F
c.
$50,000 F and $1,900 U
d.
$49,900 F and $1,900 U
= (AP − SP) × AQ
= ($1.90 − $2.00) × 500,000
= $50,000 F
MUV
= (AQ − SQ) × SP
= (499,000 − 500,000) × $2.00
= $2,000 U
93. Mover Company has developed the following standards for one of its products:
Direct materials:
7.5 pounds × $8 per pound
Direct labor:
2 hours × $12 per hour
The following activity occurred during March:
Materials purchased:
5,000 pounds costing $42,500
Materials used:
3,600 pounds
Units produced:
500 units
Direct labor:
1,150 hours at $11.80/hour
The company records materials price variances at the time of purchase. The variable standard cost per unit for materials
and labor is
a.
$98.
b.
$84.
c.
$74.
d.
$38.
Direct materials (7.5 pounds × $8)
Direct labor (2 hours × $12)
94. Roberts Company uses a standard costing system. The following information pertains to direct materials for the July:
Standard price per lb.
$18.00
Actual purchase price per lb.
$16.50
Quantity purchased
3,100 lbs.
Quantity used
2,950 lbs.
Standard quantity allowed for actual output
3,000 lbs.
Actual output
1,000 units
Roberts Company reports its material price variances at the time of purchase. What is the material usage variance for
Roberts Company?
a.
$900 F
b.
$1,950 F
c.
$2,850 F
d.
$900 U
Chapter 10 – Standard Costing: A Managerial Tool
(2,950 − 3,000) × $18 = $900 F
95. During August, 10,000 units were produced. The standard quantity of material allowed per unit was 10 pounds at a
standard cost of $3 per pound. If there was an unfavorable usage variance of $18,750 for August, the actual quantity of
materials used must be
a.
106,250 pounds.
b.
93,750 pounds.
c.
31,875 pounds.
d.
23,438 pounds.
$318,750 / $3 = 106,250 pounds
96. During September, 40,000 units were produced. The standard quantity of material allowed per unit was 5 pounds at a
standard cost of $2.50 per pound. If there was a favorable usage variance of $25,000 for September, the actual quantity of
materials used must have been
a.
210,000 pounds.
b.
190,000 pounds.
c.
105,000 pounds.
d.
95,000 pounds.
97. Max Company has developed the following standards for one of its products.
Direct materials:
15 pounds × $16 per pound
Direct labor:
4 hours × $24 per hour
Variable overhead:
4 hours × $14 per hour
The following activity occurred during the month of October:
Materials purchased:
10,000 pounds costing $170,000
Materials used:
7,200 pounds
Units produced:
500 units
Direct labor:
2,300 hours at $23.60/hour
The company records materials price variances at the time of purchase. The direct materials price variance is
a.
$50,000 F.
b.
$50,000 U.
c.
$10,000 U.
d.
$10,000 F.
$170,000 − (10,000 × $16) = $10,000 U
98. All of the following are true except
Chapter 10 – Standard Costing: A Managerial Tool
a.
A favorable labor efficiency variance could result from using higher quality materials that result in fewer
inspections.
b.
A favorable labor rate variance could result from lower wage workers quitting.
c.
A favorable materials price variance could result from purchasing identical materials from another supplier at
a lower price.
d.
An unfavorable materials usage variance could result from not efficiently utilizing raw materials, thus causing
waste.
e.
An unfavorable labor efficiency variance can be caused by machine downtime, and poor quality materials.
Figure 10–3.
Bortello Corporation produces high-quality leather boots. The company has a standard cost system and has set the
following standards for materials and labor:
Leather (12 strips @ $20)
$240
Direct labor (10 hours @ $12)
$120
Total prime cost
$360
During the year Bortello produced 125 boots. Actual leather purchased was 1,700 strips, at $16 per strip. There were no
beginning or ending inventories of leather. Actual direct labor was 1,500 hours at $15 per hour.
99. Refer to Figure 10–3. Compute the materials price variance and the materials usage variance, respectively.
a.
$9,000 F and $1,200 U
b.
$9,300 U and $1,500 F
c.
$6,800 F and $4,000 U
d.
$6,800 U and $4,000 F
($16 – $20) × 1,700 = $6,800 F
MUV = (AQ – SQ) × SP
(1,700 – 1,500) × $20 = $4,000 U
100. Refer to Figure 10–3. Calculate the labor rate variance and the labor efficiency variance, respectively.
a.
$4,500 U and $3,000 U
b.
$4,500 F and $3,000 F
c.
$4,500 U and $3,000 F
d.
$4,500 F and $3,000 U
LRV = (AR – SR) × AH
($15 – $12) × 1,500 = $4,500 U
(1,500 – 1,250) × $12 = $3,000 U
101. Refer to Figure 10–3. Compute the total budget variances for materials and labor, respectively.
a.
$2,800 F and $7,500 F
b.
$2,800 F and $7,500 U
c.
$2,800 U and $7,500 U
Chapter 10 – Standard Costing: A Managerial Tool
d.
$2,800 U and $7,500 F
102. Refer to Figure 10–3. Compute the costs of leather and direct labor that should have been incurred for the production
of 125 boots.
a.
$36,000 and $36,000
b.
$46,500 and $37,500
c.
$37,200 and $20,000
d.
$30,000 and $15,000
Materials: (SQ × SR) × AQ = $240 × 125 = $30,000
Labor: (SH × SR) × AQ = $120 × 125 = $15,000
Figure 10–5.
Seaside Company produces picture frames. During the year 190,000 picture
frames were produced. Materials and labor standards for producing the picture
frames are as follows:
Direct materials (2 pieces of wood @ $2.25)
$4.50
Direct labor (2 hours @ $10)
$20.00
Seaside purchased and used 400,000 pieces of wood at $2.00 each and its actual
labor hours were 360,000 hours at a wage rate of $10.50.
103. Refer to Figure 10–5. What is the materials price variance?
a.
$100,000 F
b.
$112,500 U
c.
$135,000 F
d.
$170,000 U
(2.00 – $2.25) × 400,000
$100,000 F
Chapter 10 – Standard Costing: A Managerial Tool
104. Refer to Figure 10–5. What is the materials usage variance?
a.
$112,500 F
b.
$112,500 U
c.
$45,000 F
d.
$45,000 U
($2.25 × 400,000) – ($2.25 × 380,000)
$45,000 U
105. Refer to Figure 10–5. What is Seaside’s labor rate variance?
a.
$180,000 F
b.
$180,000 U
c.
$225,000 U
d.
$217,500 F
LRV = (AR – SR) × AH
($10.50 – $10.00) × 360,000
$180,000 U
106. Refer to Figure 10–5. What is Seaside’s total labor variance?
a.
$20,000 F
b.
$20,000 U
c.
$112,500 F
d.
$120,000 U
(360,000 × $10.50) – (380,000 × $10.00)
$20,000 F
107. Which of the following is true regarding direct labor variances?
a.
The labor efficiency variance measures the difference between what was paid to direct laborers and what
should have been paid.
b.
The labor rate and labor efficiency variances will always add up to the total labor variance.
c.
The labor rate variance measures the difference between the labor hours that were actually used and the labor
hours that should have been used.
d.
The labor rate variance measures the difference between the labor hours that were originally budgeted and the
labor hours that should have been used.
e.
The labor rate variance measures the difference between the labor hours that were actually used and the labor
hours that were originally budgeted.
108. The labor rate variance is computed by
a.
(Actual Rate × Actual Hours) − (Standard Rate × Standard Hours).
b.
(Standard Rate × Actual Rate) − (Actual Rate × Actual Hours).
c.
(Actual Rate × Standard Hours) − (Standard Rate × Actual Hours).
d.
(Actual Rate × Actual Hours) − (Standard Rate × Actual Hours).
Chapter 10 – Standard Costing: A Managerial Tool
e.
None of these.
109. The labor efficiency variance is calculated by the equation
a.
(Standard Hours × Actual Hours) − (Actual Hours × Standard Rate).
b.
(Actual Rate × Actual Hours) − (Standard Rate × Actual Hours).
c.
(Actual Hours × Standard Rate) − (Standard Hours × Standard Rate).
d.
(Standard Hours × Actual Rate) − (Actual Hours × Actual Rate).
e.
None of these.
c
110. Which of the following is not true regarding the use of labor variance information?
a.
The actual wage rate is almost always different from the standard rate.
b.
Unexpected overtime can cause variation in the labor rate.
c.
An average wage rate is chosen as the labor rate standard.
d.
The production manager controls the use of labor.
e.
The actual wage rate is used in determining the labor rate variance.
Typically, the actual wage rate is equal to the standard rate.
111. Kaizen costing involves
a.
changing the standards frequently.
b.
changing management.
c.
outsourcing processes.
d.
major ad campaigns.
112. Which of the following is not true about Kaizen Standards?
a.
Kaizen standards are the standards used for continuous improvement.
b.
Kaizen standards are a currently attainable standard that reflects planned improvement.
c.
Kaizen standards are constantly changing.
d.
Kaizen standards are the standards used in traditional costing systems.
113. Claire Company uses a standard costing system. The following information pertains to direct labor costs for
February:
Standard direct labor rate per hour
$15.00
Actual direct labor rate per hour
$13.50
Labor rate variance
$18,000 F
Actual output
1,000 units
Standard hours allowed for actual production
10,000 hours
What is the total labor budget variance for Claire Company?
a.
$18,000 F