CHAPTER 9: STANDARD COSTING: A FUNCTIONAL-BASED CONTROL
APPROACH
1. Developing standards for input prices and quantities allows for a more detailed understanding of flexible budget
variances.
a. True
b. False
2. Price standards specify amounts and quantity standards specify prices.
a. True
b. False
3. Standard costs are the amount that should be spent to produce a product or service.
a. True
b. False
4. Standard costing is used in process industries because it’s more difficult to utilize.
a. True
b. False
5. Both manufacturing and service firms may use standard costing systems.
a. True
b. False
6. The standard cost sheet shows costs needed to make many units of output.
a. True
b. False
7. The unit quantity standards can be used to compute the total amount of inputs allowed for the actual output.
a. True
b. False
Chapter 9: Standard Costing: A Functional-Based Control Approach
8. In computing efficiency variances, managers compute the standard quantity of materials used and the standard
hours allowed.
a. True
b. False
9. All variances accounts are closed out at the end of the year.
a. True
b. False
10. The total budget variances are categorized into price variances and usage variances.
a. True
b. False
11. Unfavorable variances occur whenever actual prices or usage are less than standard prices or usage, and the
opposite for a favorable variance.
a. True
b. False
12. The direct materials price variance is the difference between actual and standard pricing.
a. True
b. False
13. The direct materials usage variance is the sum of the actual quantities and the standard quantities of units.
a. True
b. False
14. The most detailed method to compute overhead variances is the four-variance method.
a. True
b. False
15. The three–variance method requires dividing costs into fixed and variable amounts.
a. True
b. False
Chapter 9: Standard Costing: A Functional-Based Control Approach
16. The variable overhead efficiency variance measures the change in variable overhead consumption due to efficient
or inefficient use of the activity driver used to assign overhead costs to products.
a. True
b. False
17. In standard costing, overhead is applied to a product by debiting work in process and crediting variable and fixed
overhead control accounts.
a. True
b. False
18. the direct materials mix variance is the difference in the standard cost of actual inputs and the standard costs of
inputs that should have been used.
a. True
b. False
19. A mix variance is created whenever the actual mix of inputs is equal to the standard mix.
a. True
b. False
20. A yield variance occurs when the actual output is the same as the standard output.
a. True
b. False
21. The condition where everything operates perfectly and demands maximum efficiency is
called __________ .
22. The factors where actual performance differs from planned are called: .
23. standards are the standards used for continuous improvement.
24. The costing that establishes price and quantity standards for inputs is called costing.
Chapter 9: Standard Costing: A Functional-Based Control Approach
25. The document that shows the amount and cost of direct materials, direct labor, and overhead to make a unit of
output is called the standard __________ .
26. The variances that focus on the difference between actual quantity and standard quantity are
called the variances.
27. All variances accounts are at the end of the operating year.
28. The sum of the standard plus allowable deviation is called the upper .
29. A production would most likely be responsible for an unfavorable variable overhead efficiency
variance.
30. The variance shows the difference between actual output and expected output for a given amount
of input.
31. The following condition which demands maximum efficiency and can be achieved only if everything operates
perfectly is called:
a. Ideal standards
b. Currently attainable standards
c. Budget standards
d. Personnel standards
32. 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.
33. The unit standard cost is
a. the product of the standard price times the standard quantity for each unit.
b. the price standard for each unit.
c. the actual cost for a standard product.
d. the amount of actual cost to produce a unit in a standardized process.
Chapter 9: Standard Costing: A Functional-Based Control Approach
34. In setting price standards, the purchasing manager must consider
a. freight.
b. quality.
c. discounts.
d. all of these.
35. Price standards are the responsibility of
a. accounting.
b. purchasing.
c. personnel.
d. all of these.
36. All of the following are true of currently attainable standards EXCEPT
a. Currently attainable standards are based on an efficiently operating work force.
b. Currently attainable standards are based on ideal conditions.
c. Currently attainable standards allow for downtime and rest periods.
d. Currently attainable standards are based on present production processes and technology.
37. 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.
38. Quantity price standards
a. are standard price multiplied by standard quantity.
b. specify how much of the quantity of input should be used for the standard price.
c. specify how much should be paid for the quantity of input to be used.
d. specify how much of the quantity of input should be used for the actual price.
39. The standard cost sheet includes all of the following EXCEPT
a. the standard quantity per unit.
b. the standard material costs per unit.
c. the standard cost per unit.
d. the standard labor hours allowed for actual production.
Chapter 9: Standard Costing: A Functional-Based Control Approach
40. The standard cost sheet includes all of the following EXCEPT
a. the standard cost per unit.
b. the standard quantity allowed for actual production.
c. the standard price.
d. the standard quantity per unit.
41. Standard costing
a. establishes price and quantity standards for inputs.
b. provides journal entry support.
c. is not used in unit costing.
d. none of these.
42. Rowing Company has developed the following standards for one of its products:
Direct materials: 7 pounds × $8 per pound
Direct labor: 2 hours × $12.50 per hour
Variable manufacturing overhead: 2.5 hours × $7 per hour
The following activity occurred during the month of 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
Actual variable manufacturing overhead: $7,500
The company records materials price variances at the time of purchase.
The variable standard cost per unit is
a. $81.00
b. $91.00
c. $98.50
d. $42.50
Chapter 9: Standard Costing: A Functional-Based Control Approach
43. Which of the following equations measures the total budget variance?
a. AQ × (AP – SP)
b. SP × (AQ – SQ)
c. SQ × (AP – SP)
d. (AQ × AP) – (SQ × SP)
44. Which of the following equations measures a price variance?
a. AQ × (AP – SP)
b. SP × (AQ – SQ)
c. SQ × (AP – SP)
d. (AQ – SQ) × (AP – SP)
45. The usage variances focus on the difference between
a. actual quantity used and standard quantity allowed for actual production.
b. actual costs of inputs and standard costs of inputs.
c. actual quantity used and standard quantity allowed for budgeted production.
d. both a and b.
46. During November, 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 November, the
actual quantity of materials used must be
a. 23,438 pounds.
b. 93,750 pounds.
c. 31,875 pounds.
d. 106,250 pounds.
47. During September, 12,000 pounds of materials were purchased at a cost of $8 per pound. If there was an
unfavorable direct materials price variance of $6,000 for June, the standard cost per pound must be
a. $8.50.
b. $8.00.
c. $7.00.
d. $7.50.
Chapter 9: Standard Costing: A Functional-Based Control Approach
48. Price/rate variances focus on the differences between
a. actual and standard inputs multiplied by actual prices.
b. actual and standard unit prices of an input multiplied by the actual quantity of inputs.
c. actual and standard inputs multiplied by standard prices.
d. actual and standard unit prices of an input multiplied by the budgeted quantity of inputs.
49. Firecracker 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 manufacturing 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
Actual variable manufacturing overhead: $30,000
The company records materials price variances at the time of purchase.
The direct materials price variance is
a. $50,000 favorable.
b. $50,000 unfavorable.
c. $10,000 favorable.
d. $10,000 unfavorable.
Chapter 9: Standard Costing: A Functional-Based Control Approach
Figure 9-1
Bender Corporation produced 100 units of Product AA. The total standard and actual costs for materials and direct
labor for the 100 units of Product AA are as follows:
Materials: Standard Actual
Standard: 210 pounds at $3.00 per pound $630
Actual: 240 pounds at $2.85 per pound $684
Direct labor:
Standard: 400 hours at $15.00 per hour 6,000
Actual: 368 hours at $16.50 per hour 6,072
50. Refer to Figure 9-1. What is the material usage variance for Bender Corporation?
a. $90 (F)
b. $90 (U)
c. $36 (F)
d. $36 (U)
51. Refer to Figure 9-1. What is the material price variance for Bender Corporation?
a. $30 (U)
b. $90 (F)
c. $36 (U)
d. $36 (F)
52. 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.
Chapter 9: Standard Costing: A Functional-Based Control Approach
53. Montana Company uses a standard costing system. The following information pertains to direct labor costs for the
month of February:
Standard direct labor rate per hour $15.00
Actual direct labor rate per hour $13.50
Labor rate variance $18,000 favorable
Actual output 1,000 units
Standard hours allowed for actual production 10,000 hours
How many actual labor hours were worked during February for Montana Company?
a. 10,000
b. 12,000
c. 1,200
d. 2,000
54. Montana Company uses a standard costing system. The following information pertains to direct labor costs for the
month of February:
Standard direct labor rate per hour $15.00
Actual direct labor rate per hour $13.50
Labor rate variance $18,000 favorable
Actual output 1,000 units
Standard hours allowed for actual production 10,000 hours
What is the total labor budget variance for Montana Company?
a. $18,000 (F)
b. $12,000 (U)
c. $18,000 (U)
d. $12,000 (F)
Chapter 9: Standard Costing: A Functional-Based Control Approach
55. Which of the following equations measures the direct labor rate variance?
a. (SR × AH) – (SR × SH)
b. (AR × SH) – (SR × AH)
c. (AR × AH) – (SR × AH)
d. none of these
56. Malkovich Company uses a standard costing system. The following information pertains to direct materials for the
month of 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
Malkovich Company reports its material price variances at the time of purchase. What is the standard quantity of
direct materials per unit for Malkovich Company?
a. 3.50 lbs.
b. 3.00 lbs.
c. 3.10 lbs.
d. 3.25 lbs.
Chapter 9: Standard Costing: A Functional-Based Control Approach
57. Malkovich Company uses a standard costing system. The following information pertains to direct materials for the
month of 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
Malkovich Company reports its material price variances at the time of purchase. What is the material usage variance
for Malkovich Company?
a. $2,850 (F)
b. $1,950 (F)
c. $900 (F)
d. $900 (U)
58. Malkovich Company uses a standard costing system. The following information pertains to direct materials for the
month of 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
Malkovich Company reports its material price variances at the time of purchase. What is the journal entry to record
material purchases?
a. Materials 55,800
Materials Price Variance 4,650
Accounts Payable 51,150
b. Accounts Payable 55,800
Materials 55,800
c. Materials 55,800
Accounts Payable 55,800
d. Materials 51,150
Materials Price Variance 4,650
Accounts Payable 55,800
Chapter 9: Standard Costing: A Functional-Based Control Approach
59. If the actual labor rate exceeds the standard labor rate and the actual labor hours exceed the number of hours
allowed, the labor rate variance and labor efficiency variance will be
Labor Rate Variance Labor Efficiency Variance
a. Favorable Favorable
b. Favorable Unfavorable
c. Unfavorable Favorable
d. Unfavorable Unfavorable
60. During January, 7,175 direct labor hours were worked at a standard cost of $20 per hour. If the direct labor rate
variance for January was $17,500 favorable, the actual cost per direct labor hour must be
a. $20.50.
b. $25.50.
c. $23.00.
d. $17.56.
61. During October, 10,000 direct labor hours were worked at a standard cost of $10 per hour. If the direct labor rate
variance for October was $4,000 unfavorable, the actual cost per direct labor hour must be
a. $10.40.
b. $10.00.
c. $9.60.
d. $9.20.
Chapter 9: Standard Costing: A Functional-Based Control Approach
Figure 9-2
Bodacious Corporation produced 100 units of Product AA. The total standard and actual costs for materials and
direct labor for the 100 units of Product AA are as follows:
Materials: Standard Actual
Standard: 200 pounds at $3.00 per pound $600
Actual: 220 pounds at $2.85 per pound $627
Direct labor:
Standard: 400 hours at $15.00 per hour 6,000
Actual: 368 hours at $16.50 per hour 6,072
62. Refer to 9-2. What is the labor efficiency variance for Bodacious Corporation?
a. $480 (U)
b. $480 (F)
c. $552 (U)
d. $552 (F)
63. Refer to Figure 9-2. What is the journal entry to record labor variances?
a. Work in Process 6,072
Payroll 6,072
b. Payroll 6,072
Work in Process 6,072
c. Work in Process 6,000
Labor Rate Variance 552
Labor Efficiency Variance 480
Payroll 6,072
d. Work in Process 6,000
Labor Efficiency Variance 552
Labor Rate Variance 480
Payroll 6,072
64. As a general rule, an investigation of a variance should be undertaken only if the
a. variance is isolated
b. anticipated benefits are greater than the expected costs.
c. variance is negative.
d. variance is positive.
Chapter 9: Standard Costing: A Functional-Based Control Approach
65. The standard plus the allowable deviation is called the:
a. standard quantity
b. standard price
c. upper control limit
d. total budget variance
66. A materials price variance would NOT be caused by
a. ordering the wrong quality of materials.
b. ordering from the wrong supplier.
c. not taking a quantity discount.
d. requiring laborers to work overtime.
67. Which of the following factors would cause an unfavorable material quantity variance?
a. using poorly maintained machinery
b. using higher quality materials
c. using more highly skilled workers
d. receiving discounts for purchasing larger than normal quantities
68. Which of the following factors would cause an unfavorable labor rate variance?
a. using higher quality materials
b. using low–efficiency workers
c. using more unskilled workers
d. using more highly skilled workers
69. Using more highly skilled direct laborers might affect which of the following variances?
a. direct materials usage variance
b. direct labor efficiency variance
c. variable manufacturing overhead efficiency variance
d. all of these
70. A five-percent wage increase for all factory employees would affect which of the following variances?
a. direct materials price variance
b. direct labor rate variance
c. direct labor efficiency variance
d. variable manufacturing overhead efficiency variance
Chapter 9: Standard Costing: A Functional-Based Control Approach
71. Which is NOT an acceptable method of disposing of variances?
a. closing them to cost of goods sold
b. closing them to raw materials, work–in–process, and finished goods
c. closing them to work–in–process, finished goods, and cost of goods sold
d. all are acceptable methods
72. The standard overhead cost assigned to each unit of product manufactured is called the
a. total manufacturing cost.
b. predetermined overhead cost.
c. applied overhead cost.
d. estimated overhead cost.
73. An unfavorable variable overhead spending variance may be caused by
a. the use of excessive quantities of variable overhead items.
b. the payment of lower prices for variable overhead items used.
c. the use of excessive quantities of the variable overhead allocation base.
d. both a and b.
74. Colina Production Company uses a standard costing system. The following information pertains to 2016. Direct
labor hours is the driver used to assign overhead costs to products.
Actual production 5,500 units
Actual factory overhead costs ($16,500 is fixed) $40,125
Actual direct labor costs (11,250 hours) $131,625
Standard direct labor for 5,500 units:
Standard hours allowed 11,000 hours
Labor rate $12.00
The factory overhead rate is based on an activity level of 10,000 direct labor hours. Standard cost data for 5,000
units is as follows:
Variable factory overhead $22,500
Fixed factory overhead 13,500
Total factory overhead $36,000
What is the variable overhead efficiency variance for Colina Production Company?
a. $562.50 (F)
b. $3,000.00 (U)
c. $1,687.50 (F)
d. $562.50 (U)
Chapter 9: Standard Costing: A Functional-Based Control Approach
75. Colina Production Company uses a standard costing system. The following information pertains to 2016. Direct
labor hours is the driver used to assign overhead costs to products.
Actual production 5,500 units
Actual factory overhead costs ($16,500 is fixed) $40,125
Actual direct labor costs (11,250 hours) $131,625
Standard direct labor for 5,500 units:
Standard hours allowed 11,000 hours
Labor rate $12.00
The factory overhead rate is based on an activity level of 10,000 direct labor hours. Standard cost data for 5,000
units is as follows:
Variable factory overhead $22,500
Fixed factory overhead 13,500
Total factory overhead $36,000
What is the fixed overhead volume variance for Colina Production Company?
a. $3,600 (F)
b. $1,350 (F)
c. $4,125 (U)
d. $1,350 (U)
76. If variable manufacturing overhead is applied based on direct labor hours and there is an unfavorable direct labor
efficiency variance
a. the direct materials usage variance will be unfavorable.
b. the direct labor rate variance will be favorable.
c. the variable manufacturing overhead efficiency variance will be unfavorable.
d. the variable manufacturing overhead spending variance will be unfavorable.
Chapter 9: Standard Costing: A Functional-Based Control Approach
77. Harrangue Company’s standard variable overhead rate is $6 per direct labor hour, and each unit requires 2 standard
direct labor hours. During March, Harry recorded 6,000 actual direct labor hours, $37,000 actual variable overhead
costs, and 2,900 units of product manufactured.
What is the total variable overhead variance for March for Harrangue?
a. $2,200 (U)
b. $600 (U)
c. $1,000 (U)
d. $1,200 (U)
78. Harrangue Company’s standard variable overhead rate is $6 per direct labor hour, and each unit requires 2 standard
direct labor hours. During March, Harry recorded 6,000 actual direct labor hours, $37,000 actual variable overhead
costs, and 2,900 units of product manufactured.
What is the variable overhead efficiency variance for March for Harrangue?
a. $2,200 (U)
b. $2,200 (F)
c. $1,200 (U)
d. $600 (U)
Chapter 9: Standard Costing: A Functional-Based Control Approach
79. Biscuit Company has developed the following standards for one of its products. Direct labor hours is the driver used
to assign overhead costs to products.
Direct materials: 10 pounds × $3 per pound
Direct labor: 2.5 hours × $8 per hour
Variable manufacturing overhead: 2.5 hours × $2 per hour
The following activity occurred during the month of June:
Materials purchased: 125,000 pounds at $2.60 per pound
Materials used: 110,000 pounds
Units produced: 10,000 units
Direct labor: 24,000 hours at $7.50 per hour
Actual variable manufacturing overhead: $51,000
The company records materials price variances at the time of purchase.
The direct labor rate variance is
a. $12,000 favorable.
b. $8,000 favorable.
c. $12,000 unfavorable.
d. $8,000 unfavorable.
80. Biscuit Company has developed the following standards for one of its products. Direct labor hours is the driver used
to assign overhead costs to products.
Direct materials: 10 pounds × $3 per pound
Direct labor: 2.5 hours × $8 per hour
Variable manufacturing overhead: 2.5 hours × $2 per hour
The following activity occurred during the month of June:
Materials purchased: 125,000 pounds at $2.60 per pound
Materials used: 110,000 pounds
Units produced: 10,000 units
Direct labor: 24,000 hours at $7.50 per hour
Actual variable manufacturing overhead: $51,000
The company records materials price variances at the time of purchase.
The variable manufacturing overhead efficiency variance is
a. $1,000 favorable.
b. $2,000 favorable.
c. $1,000 unfavorable.
d. $3,000 unfavorable.
Chapter 9: Standard Costing: A Functional-Based Control Approach
81. Biscuit Company has developed the following standards for one of its products. Direct labor hours is the driver used
to assign overhead costs to products.
Direct materials: 10 pounds × $3 per pound
Direct labor: 2.5 hours × $8 per hour
Variable manufacturing overhead: 2.5 hours × $2 per hour
The following activity occurred during the month of June:
Materials purchased: 125,000 pounds at $2.60 per pound
Materials used: 110,000 pounds
Units produced: 10,000 units
Direct labor: 24,000 hours at $7.50 per hour
Actual variable manufacturing overhead: $51,000
The company records materials price variances at the time of purchase.
The direct labor efficiency variance is
a. $8,000 unfavorable.
b. $8,000 favorable.
c. $20,000 unfavorable.
d. $20,000 favorable.
82. Which of the following people is most likely responsible for an unfavorable variable overhead efficiency variance?
a. production supervisor
b. accountant
c. personnel director
d. supplier
83. A variable overhead efficiency variance could be caused by
a. using a poor quality material that needs more labor time to meet production standards.
b. not taking a quantity discount.
c. paying more than the standard rate for labor.
d. price increases on the materials.