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FOR INSTRUCTOR USE ONLY
CHAPTER 23
STANDARD COSTS AND BALANCED SCORECARD
SUMMARY OF QUESTIONS BY LEARNING OBJECTIVES AND BLOOM’S TAXONOMY
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True-False Statements
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Multiple Choice Questions
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Test Bank for Accounting, Tools for Business Decision Making Fifth Edition
FOR INSTRUCTOR USE ONLY
23 - 2
Brief Exercises
191
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a199.
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192
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a198.
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a200.
10
AP
sg This question also appears in the Study Guide.
st This question also appears in a self-test at the student companion website.
a This question covers a topic in an appendix to the chapter.
SUMMARY OF QUESTIONS BY LEARNING OBJECTIVES AND BLOOM’S TAXONOMY
Exercises
201
1,3
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4,5,10
AN
a219.
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9,10
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3,4
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Completion Statements
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Matching
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Short-Answer Essay
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SUMMARY OF LEARNING OBJECTIVES BY QUESTION TYPE
Item
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Item
Type
Learning Objective 1
1.
TF
4.
TF
40.
MC
43.
MC
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MC
201.
Ex
240.
SA
2.
TF
31.
TF
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MC
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C
244.
SA
3.
TF
39.
MC
42.
MC
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MC
191.
BE
239.
Ma
Learning Objective 2
5.
TF
48.
MC
50.
MC
52.
MC
54.
MC
32.
TF
49.
MC
51.
MC
53.
MC
180.
MC
Learning Objective 3
6.
TF
13.
TF
56.
MC
63.
MC
70.
MC
77.
MC
203.
Ex
7.
TF
14.
TF
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MC
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MC
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MC
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MC
230.
C
8.
TF
15.
TF
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MC
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MC
181.
MC
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TF
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TF
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MC
66.
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73.
MC
182.
MC
10.
TF
17.
TF
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MC
67.
MC
74.
MC
192.
BE
11.
TF
33.
TF
61.
MC
68.
MC
75.
MC
201.
Ex
12.
TF
55.
MC
62.
MC
69.
MC
76.
MC
202.
Ex
Standard Costs and Balanced Scorecard
FOR INSTRUCTOR USE ONLY
23 - 3
Learning Objective 4
18.
TF
83.
MC
97.
MC
111.
MC
125.
MC
194.
BE
217.
Ex
19.
TF
84.
MC
98.
MC
112.
MC
126.
MC
203.
Ex
218.
Ex
20.
TF
85.
MC
99.
MC
113.
MC
127.
MC
204.
Ex
219.
Ex
21.
TF
86.
MC
100.
MC
114.
MC
128.
MC
205.
Ex
231.
C
22.
TF
87.
MC
101.
MC
115.
MC
129.
MC
206.
Ex
232.
C
23.
TF
88.
MC
102.
MC
116.
MC
130.
MC
207.
Ex
233.
C
24.
TF
89.
MC
103.
MC
117.
MC
131.
MC
208.
Ex
241.
K
25.
TF
90.
MC
104.
MC
118.
MC
132.
MC
209.
Ex
242.
K
34.
TF
91.
MC
105.
MC
119.
MC
133.
MC
210.
Ex
245.
K
35.
TF
92.
MC
106.
MC
120.
MC
183.
MC
212.
Ex
79.
MC
93.
MC
107.
MC
121.
MC
184.
MC
213.
Ex
80.
MC
94.
MC
108.
MC
122.
MC
185.
MC
214.
Ex
81.
MC
95.
MC
109.
MC
123.
MC
186.
MC
215.
Ex
82.
MC
96.
MC
110.
MC
124.
MC
193.
BE
216.
Ex
Learning Objective 5
26.
TF
137.
MC
195.
BE
214.
Ex
222.
Ex
234.
C
134.
MC
138.
MC
211.
Ex
215.
Ex
226.
Ex
235.
C
135.
MC
139.
MC
212.
Ex
220.
Ex
227.
Ex
136.
MC
140.
MC
213.
Ex
221.
Ex
228.
Ex
Learning Objective 6
27.
TF
141.
MC
143.
MC
216.
Ex
236.
C
36.
TF
142.
MC
187.
MC
223.
Ex
Learning Objective 7
37.
TF
145.
MC
147.
MC
149.
MC
144.
MC
146.
MC
148.
MC
224.
Ex
Learning Objective 8
150.
MC
151.
MC
152.
MC
153.
MC
154.
MC
243.
K
Learning Objective 9a
28.
TF
155.
MC
158.
MC
188.
MC
216.
Ex
219.
Ex
29.
TF
156.
MC
159.
MC
198.
BE
217.
Ex
225.
Ex
30.
TF
157.
MC
160.
MC
199.
BE
218.
Ex
226.
Ex
Learning Objective 10a
38.
TF
166.
MC
172.
MC
178.
MC
200.
BE
222.
Ex
161.
MC
167.
MC
173.
MC
179.
MC
213.
Ex
226.
Ex
162.
MC
168.
MC
174.
MC
189.
MC
214.
Ex
227.
Ex
163.
MC
169.
MC
175.
MC
190.
MC
215.
Ex
228.
Ex
164.
MC
170.
MC
176.
MC
196.
BE
220.
Ex
237.
C
165.
MC
171.
MC
177.
MC
197.
BE
221.
Ex
238.
C
Note: TF = True-False BE = Brief Exercise C = Completion
MC = Multiple Choice Ex = Exercise SA = Short Answer
MA = Matching
Test Bank for Accounting, Tools for Business Decision Making Fifth Edition
FOR INSTRUCTOR USE ONLY
23 - 4
CHAPTER LEARNING OBJECTIVES
1. Distinguish between a standard and a budget. Both standards and budgets are predeter-
mined costs. The primary difference is that a standard is a unit amount, whereas a budget is a
total amount. A standard may be regarded as the budgeted cost per unit of product.
2. Identify the advantages of standard costs. Standard costs offer a number of advantages.
They (a) facilitate management planning, (b) promote greater economy (c) are useful in
setting selling prices, (d) contribute to management control, (e) permit "management by
exception," and (f) simplify the costing of inventories and reduce clerical costs.
3. Describe how companies set standards. The direct materials price standard should be
based on the delivered cost of raw materials plus an allowance for receiving and handling.
The direct materials quantity standard should establish the required quantity plus an
allowance for waste and spoilage.
The direct labor price standard should be based on current wage rates and anticipated
adjustments such as COLAs. It also generally includes payroll taxes and fringe benefits.
Direct labor quantity standards should be based on required production time plus an
allowance for rest periods, cleanup, machine setup, and machine downtime.
For manufacturing overhead, a standard predetermined overhead rate is used. It is based on
an expected standard activity index such as standard direct labor hours or standard machine
hours.
4. State the formulas for determining direct materials and direct labor variances. The
formulas for direct materials variances are:
(Actual quantity × Actual price) – (Standard quantity × Standard price) = Total materials variance
(Actual quantity × Actual price) – (Actual quantity × Standard price) = Materials price variance
(Actual quantity × Standard price) – (Standard quantity × Standard price) = Materials quantity variance
The formulas for the direct labor variances are:
(Actual hours × Actual rate) – (Standard hours × Standard rate) = Total labor variance
(Actual hours × Actual rate) – (Actual hours × Standard rate) = Labor price variance
(Actual hours × Standard rate) – (Standard hours × Standard rate) = Labor quantity variance
5. State the formula for determining the total manufacturing overhead variance. The
formula for the total manufacturing overhead variance is:
(Actual overhead) – (Overhead applied at standard hours allowed) = Total overhead variance
6. Discuss the reporting of variances. Variances are reported to management in variance
reports. The reports facilitate management by exception by highlighting significant
differences.
7. Prepare an income statement for management under a standard costing system. Under
a standard costing system, an income statement prepared for management will report cost of
goods sold at standard cost and then disclose each variance separately,
8. Describe the balanced scorecard approach to performance evaluation. The balanced
scorecard incorporates financial and nonfinancial measures in an integrated system that links
performance measurement and a company’s strategic goals. It employs four perspectives:
financial, customer, internal processes, and learning and growth. Objectives are set within
each of these perspectives that link to objectives within the other perspectives.
Standard Costs and Balanced Scorecard
23 - 5
a9. Identify the features of a standard cost accounting system. In a standard cost accounting
system, companies journalize and post standard costs, and they maintain separate variance
accounts in the ledger.
a10.Compute overhead controllable and volume variance. The total overhead variance is
generally analyzed through a price variance and a quantity variance. The name usually given
to the price variance is the overhead controllable variance. The quantity variance is referred
to as the overhead volume variance.
TRUE-FALSE STATEMENTS
1. Inventories cannot be valued at standard cost in financial statements.
2. Standard cost is the industry average cost for a particular item.
3. A standard is a unit amount, whereas a budget is a total amount.
4. Standard costs may be incorporated into the accounts in the general ledger.
5. An advantage of standard costs is that they simplify costing of inventories and reduce
clerical costs.
6. Setting standard costs is relatively simple because it is done entirely by accountants.
7. Normal standards should be rigorous but attainable.
8. Actual costs that vary from standard costs always indicate inefficiencies.
9. Ideal standards will generally result in favorable variances for the company.
10. Normal standards incorporate normal contingencies of production into the standards.
11. Once set, normal standards should not be changed during the year.
Test Bank for Accounting, Tools for Business Decision Making Fifth Edition
23 - 6
12. In developing a standard cost for direct materials, a price factor and a quantity factor must
be considered.
13. A direct labor price standard is frequently called the direct labor efficiency standard.
14. The standard predetermined overhead rate must be based on direct labor hours as the
standard activity index.
15. Standard cost cards are the subsidiary ledger for the Work in Process account in a
standard cost system.
16. A variance is the difference between actual costs and standard costs.
17. If actual costs are less than standard costs, the variance is favorable.
18. A materials quantity variance is calculated as the difference between the standard direct
materials price and the actual direct materials price multiplied by the actual quantity of
direct materials used.
19. An unfavorable labor quantity variance indicates that the actual number of direct labor
hours worked was greater than the number of direct labor hours that should have been
worked for the output attained.
20. Standard cost + price variance + quantity variance = Budgeted cost.
21. The overhead controllable variance relates primarily to fixed overhead costs.
22. The overhead volume variance relates only to fixed overhead costs.
23. If production exceeds normal capacity, the overhead volume variance will be favorable.
Standard Costs and Balanced Scorecard
23 - 7
24. There could be instances where the production department is responsible for a direct
materials price variance.
25. The starting point for determining the causes of an unfavorable materials price variance is
the purchasing department.
26. The total overhead variance is the difference between actual overhead costs and
overhead costs applied to work done.
27. Variance analysis facilitates the principle of "management by exception."
28. A credit to a Materials Quantity Variance account indicates that the actual quantity of
direct materials used was greater than the standard quantity of direct materials allowed.
29. A standard cost system may be used with a job order cost system but not with a process
cost system.
30. A debit to the Overhead Volume Variance account indicates that the standard hours
allowed for the output produced was greater than the standard hours at normal capacity.
31. In concept, standards and budgets are essentially the same.
32. Standards may be useful in setting selling prices for finished goods.
33. The materials price standard is based on the purchasing department's best estimate of
the cost of raw materials.
34. The materials price variance is normally caused by the production department.
35. The use of an inexperienced worker instead of an experienced employee can result in a
favorable labor price variance but probably an unfavorable quantity variance.
Test Bank for Accounting, Tools for Business Decision Making Fifth Edition
23 - 8
36. In using variance reports, top management normally looks carefully at every variance.
37. The use of standard costs in inventory costing is prohibited in financial statements.
Reporting
a38. The overhead controllable variance is the difference between the actual overhead costs
incurred and the budgeted costs for the standard hours allowed.
MULTIPLE CHOICE QUESTIONS
39. What is a standard cost?
a. The total number of units times the budgeted amount expected
b. Any amount that appears on a budget
c. The total amount that appears on the budget for product costs
d. The amount management thinks should be incurred to produce a good or service
40. A standard cost is
a. a cost which is paid for a group of similar products.
b. the average cost in an industry.
c. a predetermined cost.
d. the historical cost of producing a product last year.
41. The difference between a budget and a standard is that
a. a budget expresses what costs were, while a standard expresses what costs should
be.
b. a budget expresses management's plans, while a standard reflects what actually
happened.
c. a budget expresses a total amount, while a standard expresses a unit amount.
d. standards are excluded from the cost accounting system, whereas budgets are
generally incorporated into the cost accounting system.
Standard Costs and Balanced Scorecard
23 - 9
42. Standard costs may be used by
a. universities.
b. governmental agencies.
c. charitable organizations.
d. all of these.
43. Which of the following statements is false?
a. A standard cost is more accurate than a budgeted cost.
b. A standard is a unit amount.
c. In concept, standards and budgets are essentially the same.
d. The standard cost of a product is equivalent to the budgeted cost per unit of product.
44. Budget data are not journalized in cost accounting systems with the exception of
a. the application of manufacturing overhead.
b. direct labor budgets.
c. direct materials budgets.
d. cash budget data.
45. It is possible that a company's financial statements may report inventories at
a. budgeted costs.
b. standard costs.
c. both budgeted and standard costs.
d. none of these.
46. A standard differs from a budget because a standard
a. is a predetermined cost.
b. contributes to management planning and control.
c. is a unit amount.
d. none of the above; a standard does not differ from a budget.
47. Marburg Co. expects direct materials cost of $6 per unit for 100,000 units (a total of
$600,000 of direct materials costs). Marburg’s standard direct materials cost and
budgeted direct materials cost is
Standard Budgeted
a. $6 per unit $600,000 per year
b. $6 per unit $6 per unit
c. $600,000 per year $6 per unit
d. $600,000 per year $600,000 per year
Test Bank for Accounting, Tools for Business Decision Making Fifth Edition
23 - 10
48. Using standard costs
a. makes employees less “cost-conscious.”
b. provides a basis for evaluating cost control.
c. makes management by exception more difficult.
d. increases clerical costs.
49. Using standard costs
a. can make management planning more difficult.
b. promotes greater economy.
c. does not help in setting prices.
d. weakens management control.
50. If standard costs are incorporated into the accounting system,
a. it may simplify the costing of inventories and reduce clerical costs.
b. it can eliminate the need for the budgeting process.
c. the accounting system will produce information which is less relevant than the
historical cost accounting system.
d. approval of the shareholders is required.
51. Standard costs
a. may show past cost experience.
b. help establish expected future costs.
c. are the budgeted cost per unit in the present.
d. all of these.
52. Which of the following statements about standard costs is false?
a. Properly set standards should promote efficiency.
b. Standard costs facilitate management planning.
c. Standards should not be used in "management by exception."
d. Standard costs can simplify the costing of inventories.
53. Which of the following is not considered an advantage of using standard costs?
a. Standard costs can reduce clerical costs.
b. Standard costs can be useful in setting prices for finished goods.
c. Standard costs can be used as a means of finding fault with performance.
d. Standard costs can make employees "cost-conscious."
Standard Costs and Balanced Scorecard
23 - 11
54. If a company is concerned with the potential negative effects of establishing standards, it
should
a. set loose standards that are easy to fulfill.
b. offer wage incentives to those meeting standards.
c. not employ any standards.
d. set tight standards in order to motivate people.
55. A standard which represents an efficient level of performance that is attainable under
expected operating conditions is called a(n)
a. ideal standard.
b. loose standard.
c. tight standard.
d. normal standard.
56. Ideal standards
a. are rigorous but attainable.
b. are the standards generally used in a master budget.
c. reflect optimal performance under perfect operating conditions.
d. will always motivate employees to achieve the maximum output.
57. The final decision as to what standard costs should be is the responsibility of
a. the quality control engineer.
b. the managerial accountants.
c. the purchasing agent.
d. management.
58. The labor time requirements for standards may be determined by the
a. sales manager.
b. product manager.
c. industrial engineers.
d. payroll department manager.
59. The two levels that standards may be set at are
a. normal and fully efficient.
b. normal and ideal.
c. ideal and less efficient.
d. fully efficient and fully effective.
Test Bank for Accounting, Tools for Business Decision Making Fifth Edition
23 - 12
60. The most rigorous of all standards is the
a. normal standard.
b. realistic standard.
c. ideal standard.
d. conceivable standard.
61. Most companies that use standards set them at
a. the normal level.
b. a conceivable level.
c. the ideal level.
d. last year's level.
62. A managerial accountant
1. does not participate in the standard setting process.
2. provides knowledge of cost behaviors in the standard setting process.
3. provides input of historical costs to the standard setting process.
a. 1
b. 2
c. 3
d. 2 and 3
63. The cost of freight-in
a. is to be included in the standard cost of direct materials.
b. is considered a selling expense.
c. should have a separate standard apart from direct materials.
d. should not be included in a standard cost system.
64. The direct materials quantity standard would not be expressed in
a. pounds.
b. barrels.
c. dollars.
d. board feet.
65. The direct materials quantity standard should
a. exclude unavoidable waste.
b. exclude quality considerations.
c. allow for normal spoilage.
d. always be expressed as an ideal standard.
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66. The direct labor quantity standard is sometimes called the direct labor
a. volume standard.
b. effectiveness standard.
c. efficiency standard.
d. quality standard.
67. A manufacturing company would include setup and downtime in their direct
a. materials price standard.
b. materials quantity standard.
c. labor price standard.
d. labor quantity standard.
68. Allowance for spoilage is part of the direct
a. materials price standard.
b. materials quantity standard.
c. labor price standard.
d. labor quantity standard.
69. The total standard cost to produce one unit of product is shown
a. at the bottom of the income statement.
b. at the bottom of the balance sheet.
c. on the standard cost card.
d. in the Work in Process Inventory account.
70. An unfavorable materials quantity variance would occur if
a. more materials were purchased than were used.
b. actual pounds of materials used were less than the standard pounds allowed.
c. actual labor hours used were greater than the standard labor hours allowed.
d. actual pounds of materials used were greater than the standard pounds allowed.
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71. Oxnard Industries produces a product that requires 2.6 pounds of materials per unit. The
allowance for waste and spoilage per unit is .3 pounds and .1 pounds, respectively. The purchase
price is $2 per pound, but a 2% discount is usually taken. Freight costs are $.10 per pound, and
receiving and handling costs are $.07 per pound. The hourly wage rate is $12.00 per hour, but a
raise which will average $.30 will go into effect soon. Payroll taxes are $1.20 per hour, and fringe
benefits average $2.40 per hour. Standard production time is 1 hour per unit, and the allowance
for rest periods and setup is .2 hours and .1 hours, respectively.
The standard direct materials price per pound is
a. $1.96.
b. $2.00.
c. $2.13
d. $2.17
72. Oxnard Industries produces a product that requires 2.6 pounds of materials per unit. The
allowance for waste and spoilage per unit is .3 pounds and .1 pounds, respectively. The purchase
price is $2 per pound, but a 2% discount is usually taken. Freight costs are $.10 per pound, and
receiving and handling costs are $.07 per pound. The hourly wage rate is $12.00 per hour, but a
raise which will average $.30 will go into effect soon. Payroll taxes are $1.20 per hour, and fringe
benefits average $2.40 per hour. Standard production time is 1 hour per unit, and the allowance
for rest periods and setup is .2 hours and .1 hours, respectively.
The standard direct materials quantity per unit is
a. 2.6 pounds.
b. 2.7 pounds.
c. 2.9 pounds.
d. 3.0 pounds.
73. Oxnard Industries produces a product that requires 2.6 pounds of materials per unit. The
allowance for waste and spoilage per unit is .3 pounds and .1 pounds, respectively. The purchase
price is $2 per pound, but a 2% discount is usually taken. Freight costs are $.10 per pound, and
receiving and handling costs are $.07 per pound. The hourly wage rate is $12.00 per hour, but a
raise which will average $.30 will go into effect soon. Payroll taxes are $1.20 per hour, and fringe
benefits average $2.40 per hour. Standard production time is 1 hour per unit, and the allowance
for rest periods and setup is .2 hours and .1 hours, respectively.
The standard direct labor rate per hour is
a. $ 12.00.
b. $ 12.30.
c. $15.60.
d. $15.90.
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74. Oxnard Industries produces a product that requires 2.6 pounds of materials per unit. The
allowance for waste and spoilage per unit is .3 pounds and .1 pounds, respectively. The purchase
price is $2 per pound, but a 2% discount is usually taken. Freight costs are $.10 per pound, and
receiving and handling costs are $.07 per pound. The hourly wage rate is $12.00 per hour, but a
raise which will average $.30 will go into effect soon. Payroll taxes are $1.20 per hour, and fringe
benefits average $2.40 per hour. Standard production time is 1 hour per unit, and the allowance
for rest periods and setup is .2 hours and .1 hours, respectively.
The standard direct labor hours per unit is
a. 1 hour.
b. 1.1 hours.
c. 1.2 hours.
d. 1.3 hours.
75. The standard direct materials quantity does not include allowances for
a. unavoidable waste.
b. normal spoilage.
c. unexpected spoilage.
d. all of the above are included.
76. Allowances should not be made in the direct labor quantity standard for
a. wasted time.
b. rest periods.
c. cleanup.
d. machine downtime.
77. The standard predetermined overhead rate used in setting the standard overhead cost is
determined by dividing
a. budgeted overhead costs by an expected standard activity index.
b. actual overhead costs by an expected standard activity index.
c. budgeted overhead costs by actual activity.
d. actual overhead costs by actual activity.
78. Hofburg’s standard quantities for 1 unit of product include 2 pounds of materials and 1.5
labor hours. The standard rates are $2 per pound and $7 per hour. The standard
overhead rate is $8 per direct labor hour. The total standard cost of Hofburg’s product is
a. $14.50.
b. $17.00.
c. $22.50.
d. $26.50.
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79. Which of the following statements is true?
a. Variances are the differences between total actual costs and total standard costs.
b. When actual costs exceed standard costs, the variance is favorable.
c. An unfavorable variance results when actual costs are decreasing but standards are
not changed.
d. All of the above are true.
80. Unfavorable materials price and quantity variances are generally the responsibility of the
Price Quantity
a. Purchasing department Purchasing Department
b. Purchasing department Production Department
c. Production department Production Department
d. Production Department Purchasing Department
81. Scorpion Production Company planned to use 1 yard of plastic per unit budgeted at $81 a
yard. However, the plastic actually cost $80 per yard. The company actually made 3,900
units, although it had planned to make only 3,300 units. Total yards used for production
were 3,960. How much is the total materials variance?
a. $48,600 U
b. $4,860 U
c. $3,960 F
d. $900 U
82. If actual direct materials costs are greater than standard direct materials costs, it means
that
a. actual costs were calculated incorrectly.
b. the actual unit price of direct materials was greater than the standard unit price of
direct materials.
c. the actual unit price of raw materials or the actual quantities of raw materials used was
greater than the standard unit price or standard quantities of raw materials expected.
d. the purchasing agent or the production foreman is inefficient.
83. If actual costs are greater than standard costs, there is a(n)
a. normal variance.
b. unfavorable variance.
c. favorable variance.
d. error in the accounting system.
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84. A total materials variance is analyzed in terms of
a. price and quantity variances.
b. buy and sell variances.
c. quantity and quality variances.
d. tight and loose variances.
85. A company developed the following per-unit standards for its product: 2 pounds of direct
materials at $4 per pound. Last month, 1,500 pounds of direct materials were purchased
for $5,700. The direct materials price variance for last month was
a. $5,700 favorable.
b. $300 favorable.
c. $150 favorable.
d. $300 unfavorable.
86. The per-unit standards for direct materials are 2 gallons at $4 per gallon. Last month,
11,200 gallons of direct materials that actually cost $42,400 were used to produce 6,000
units of product. The direct materials quantity variance for last month was
a. $3,200 favorable.
b. $2,400 favorable.
c. $3,200 unfavorable.
d. $5,600 unfavorable.
87. The purchasing agent of the Poplin, Inc. ordered materials of lower quality in an effort to
economize on price. What variance will most likely result?
a. Favorable materials quantity variance
b. Favorable total materials variance
c. Unfavorable materials price variance
d. Unfavorable labor quantity variance
88. The per-unit standards for direct labor are 2 direct labor hours at $15 per hour. If in
producing 1,800 units, the actual direct labor cost was $48,000 for 3,000 direct labor
hours worked, the total direct labor variance is
a. $1,800 unfavorable.
b. $6,000 favorable.
c. $3,750 unfavorable.
d. $6,000 unfavorable.
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89. The standard rate of pay is $20 per direct labor hour. If the actual direct labor payroll was
$117,600 for 6,000 direct labor hours worked, the direct labor price (rate) variance is
a. $2,400 unfavorable.
b. $2,400 favorable.
c. $3,000 unfavorable.
d. $3,000 favorable.
90. The standard number of hours that should have been worked for the output attained is
6,000 direct labor hours and the actual number of direct labor hours worked was 6,300. If
the direct labor price variance was $3,150 unfavorable, and the standard rate of pay was
$9 per direct labor hour, what was the actual rate of pay for direct labor?
a. $8.50 per direct labor hour
b. $7.50 per direct labor hour
c. $9.50 per direct labor hour
d. $9.00 per direct labor hour
91. Which one of the following statements is true?
a. If the materials price variance is unfavorable, then the materials quantity variance
must also be unfavorable.
b. If the materials price variance is unfavorable, then the materials quantity variance
must be favorable.
c. Price and quantity variances move in the same direction. If one is favorable, the others
will be as well.
d. There is no correlation of favorable or unfavorable for price and quantity variances.
92. Variances from standards are
a. expressed in total dollars.
b. expressed on a per-unit basis.
c. expressed on a percentage basis.
d. all of these.
93. A favorable variance
a. is an indication that the company is not operating in an optimal manner.
b. implies a positive result if quality control standards are met.
c. implies a positive result if standards are flexible.
d. means that standards are too loosely specified.
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94. The total materials variance is equal to the
a. materials price variance.
b. difference between the materials price variance and materials quantity variance.
c. product of the materials price variance and the materials quantity variance.
d. sum of the materials price variance and the materials quantity variance.
95. Information on Jayhawk's direct labor costs for the month of August is as follows:
Actual rate $10
Standard hours 11,000
Actual hours 10,000
Direct labor price variance—unfavorable $4,000
What was the standard rate for August?
a. $9.96 c. $10.40
b. $9.60 d. $10.04
96. The total variance is $35,000. The total materials variance is $14,000. The total labor
variance is twice the total overhead variance. What is the total overhead variance?
a. $3,500
b. $7,000
c. $10,500
d. $14,000
97. The formula for the materials price variance is
a. (AQ × SP) – (SQ × SP).
b. (AQ × AP) – (AQ × SP).
c. (AQ × AP) – (SQ × SP).
d. (AQ × SP) – (SQ × AP).
98. The formula for the materials quantity variance is
a. (SQ × AP) – (SQ × SP).
b. (AQ × AP) – (AQ × SP).
c. (AQ × SP) – (SQ × SP).
d. (AQ × AP) – (SQ × SP).
99. A company uses 8,400 pounds of materials and exceeds the standard by 300 pounds.
The quantity variance is $1,800 unfavorable. What is the standard price?
a. $2
b. $4
c. $6
d. Cannot be determined from the data provided.
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100. A company purchases 20,000 pounds of materials. The materials price variance is $4,000
favorable. What is the difference between the standard and actual price paid for the
materials?
a. $1.00
b. $0.20
c. $5.00
d. Cannot be determined from the data provided.
101. A company uses 20,000 pounds of materials for which it paid $6.00 a pound. The
materials price variance was $15,000 unfavorable. What is the standard price per pound?
a. $0.75
b. $5.25
c. $6.00
d. $6.75
102. If the materials price variance is $3,600 F and the materials quantity and labor variances
are each $2,700 U, what is the total materials variance?
a. $3,600 F
b. $2,700 U
c. $900 F
d. $4,050 U
103. Edgar, Inc. has a materials price standard of $2.00 per pound. Six thousand pounds of
materials were purchased at $2.20 a pound. The actual quantity of materials used was
6,000 pounds, although the standard quantity allowed for the output was 5,400 pounds.
Edgar, Inc.'s materials price variance is
a. $120 U.
b. $1,200 U.
c. $1,080 U.
d. $1,200 F.
