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Financial and Managerial Accounting: The Basis for Business Decisions, 12/e

Jan R. Williams, University of Tennessee
Susan F. Haka, Michigan State University
Mark S. Bettner, Bucknell University
Robert F. Meigs

Standard Cost Systems

Multiple Choice Quiz

Please answer all questions


1	Which of the following is not true regarding the setting of cost standards:
		A)	The level of production plays an important role in determining cost standards.
		B)	Cost standards should correspond to management's expectations under ideal conditions.
		C)	Different firms and industries determine cost standards differently.
		D)	Cost standards need to be periodically reviewed and revised.


2	If more units are produced than the "normal" level, and the overhead spending variance is favorable, then:
		A)	Manufacturing overhead will be underapplied.
		B)	The labor efficiency variance will be favorable.
		C)	Manufacturing overhead will be overapplied.
		D)	An unfavorable overhead volume variance will result.


3	In a standard cost system, products costs are transferred to finished goods by:
		A)	Debiting the Finished Goods Inventory account for the standard cost of goods manufactured.
		B)	Debiting the Finished Goods Inventory account for the actual cost of goods manufactured.
		C)	Crediting the Finished Goods Inventory account for the actual cost of goods manufactured.
		D)	Crediting the Finished Goods Inventory account for the standard cost of goods manufactured.


4	Which of the following unfavorable cost variances would be the least relevant in evaluating the performance of a production supervisor?
		A)	Materials price variance.
		B)	Labor efficiency (usage) variance.
		C)	Overhead spending variance.
		D)	Materials quantity variance.


5	If the actual number of direct labor hours worked is less than the standard labor hours allowed for equivalent units produced, this indicates:
		A)	An unfavorable labor rate variance.
		B)	A favorable total labor variance.
		C)	An unfavorable labor efficiency variance.
		D)	A favorable labor efficiency variance.


6	Gable Company annually hires inexperienced college students at minimum wage to help the Production Department fill Christmas orders. If standard costs are not adjusted to reflect this practice, this situation is most likely to result in:
		A)	An unfavorable labor rate variance as well as an unfavorable labor efficiency variance.
		B)	An unfavorable labor rate variance but a favorable labor efficiency variance.
		C)	A favorable labor rate variance but an unfavorable labor efficiency variance.
		D)	A favorable labor rate variance as well as a favorable labor efficiency variance.


7	A difference between the overhead applied to work in process at a standard and the overhead budgeted for the level of output achieved:
		A)	Will not occur because the amount of overhead budgeted is used to determine the amount of overhead applied.
		B)	Is called the overhead volume variance.
		C)	Is called the overhead spending variance.
		D)	Is largely due to controllable overhead costs.

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