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Exam 23: Performance Evaluation Using Variances From Standard Costs

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Question 21

Multiple Choice

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Incurring actual indirect factory wages in excess of budgeted amounts for actual production results in a:

A) quantity variance
B) controllable variance
C) volume variance
D) rate variance

E) A) and C)
F) None of the above

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Question 22

Multiple Choice

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The standard price and quantity of direct materials are separated because:

A) GAAP reporting requires this separation
B) direct materials prices are controlled by the purchasing department, and quantity used is controlled by the production department
C) standard quantities are more difficult to estimate than standard prices
D) standard prices change more frequently than standard quantities

E) A) and B)
F) A) and C)

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Question 23

Multiple Choice

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The standard costs and actual costs for direct labor for the manufacture of 2,500 actual units of product are as follows: The amount of the direct labor rate variance is:

Normally standard costs should be revised when labor rates change to incorporate new union contracts.

Define ideal and currently attainable standards. Which type of standard should be used and why?

A variable cost system is an accounting system where standards are set for each manufacturing cost element.

The following data is given for the Zoyza Company: Overhead is applied on standard labor hours. The factory overhead controllable variance is:

Favorable volume variances may be harmful when:

Ruby Company produces a chair that requires 5 yds. of material per unit. The standard price of one yard of material is $7.50. During the month, 8,500 chairs were manufactured, using 43,600 yards at a cost of $7.55 per yard. Determine the (a) price variance, (b) quantity variance, and (c) cost variance.

If the actual direct labor hours spent producing a commodity differs from the standard hours, the variance is termed a:

The formula to compute direct materials price variance is to calculate the difference between

If the standard to produce a given amount of product is 600 direct labor hours at $15 and the actual was 500 hours at $17, the time variance was $1,700 unfavorable.

The following data is given for the Taylor Company: Overhead is applied on standard labor hours. Compute the direct material price and quantity variances for Taylor Company.

If the standard to produce a given amount of product is 1,000 units of direct materials at $11 and the actual was 800 units at $12, the direct materials price variance was $800 unfavorable.

It is correct to rely exclusively on past cost data when establishing standards.

Hsu Company produces a part with a standard of 5 yds. of material per unit. The standard price of one yard of material is $8.50. During the month, 8,800 parts were manufactured, using 45,700 yards of material at a cost of $8.30. Required: Determine the (a) price variance, (b) quantity variance, and (c) cost variance.

Standard costs should always be revised when they differ from actual costs.

Ruby Company produces a chair that requires 5 yds. of material per unit. The standard price of one yard of material is $7.50. During the month, 8,400 chairs were manufactured, using 43,700 yards at a cost of $7.30 per yard. Determine the (a) price variance, (b) quantity variance, and (c) cost variance.

In most businesses, cost standards are established principally by accountants.

Which of the following is not a reason standard costs are separated in two components?