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a177. The following information
was taken from the annual manufacturing overhead cost budget of Fergie
Manufacturing.

Variable
manufacturing overhead costs $92,400

Fixed
manufacturing overhead costs $55,440

Normal
production level in labor hours 30,800

Normal
production level in units 5,775

Standard
labor hours per unit 4

During the year, 5,600 units were
produced, 18,340 hours were worked, and the actual manufacturing overhead was $151,200.
Actual fixed manufacturing overhead costs equaled budgeted fixed manufacturing
overhead costs. Overhead is applied on the basis of direct labor hours. Fergie’s
total overhead variance is

a. $1,680
U.

b. $6,160
U.

c. $7,840
U.

d. $22,400
U.

a178. The following information
was taken from the annual manufacturing overhead cost budget of Fergie
Manufacturing.

Variable
manufacturing overhead costs $92,400

Fixed
manufacturing overhead costs $55,440

Normal
production level in labor hours 30,800

Normal
production level in units 5,775

Standard
labor hours per unit 4

During the year, 5,600 units were
produced, 18,340 hours were worked, and the actual manufacturing overhead was $151,200.
Actual fixed manufacturing overhead costs equaled budgeted fixed manufacturing
overhead costs. Overhead is applied on the basis of direct labor hours. Fergie’s
controllable overhead variance is

a. $1,680
U.

b. $6,160
U.

c. $7,840
U.

d. $22,400
U.

a179. The following information
was taken from the annual manufacturing overhead cost budget of Fergie
Manufacturing.

Variable
manufacturing overhead costs $92,400

Fixed
manufacturing overhead costs $55,440

Normal
production level in labor hours 30,800

Normal
production level in units 5,775

Standard
labor hours per unit 4

During the year, 5,600 units were
produced, 18,340 hours were worked, and the actual manufacturing overhead was $151,200.
Actual fixed manufacturing overhead costs equaled budgeted fixed manufacturing
overhead costs. Overhead is applied on the basis of direct labor hours. Fergie’s
volume overhead variance is

a. $1,680
U.

b. $6,160
U.

c. $7,840
U.

d. $22,400
U.

180. All of the following are advantages of
standard costs except they

a. facilitate
management planning.

b. are
useful in setting selling prices.

c. simplify
costing in inventories.

d. increase net income.

181. Standards based on the optimum level of performance under
perfect operating conditions are

a. attainable
standards.

b. ideal
standards.

c. normal
standards.

d. practical standards.

182. The direct
materials price standard should include an amount for all of the
following except

a. receiving
costs.

b. storing
costs.

c. handling
costs.

d. normal spoilage costs.

183. The standard unit cost is used in the
calculation of which of the following variances?

Materials Price
Variance Materials Quantity
Variance

a. No No

b. No Yes

c. Yes No

d. Yes Yes

184. The difference between the actual labor
rate multiplied by the actual labor hours worked and the standard labor rate
multiplied by the standard labor hours is the

a. total
labor variance.

b. labor
price variance.

c. labor
quantity variance.

d. labor
efficiency variance.

185. The
formula for the labor price variance is

a. (AH)
x (SR) less (SH) x (SR).

b. (AH)
x (AR) less (AH) x (SR).

c. (AH)
x (AR) less (SH) x (SR).

d. (AH) x (SR) less (AH) x (SR).

186. Which department is
usually responsible for a labor price variance attributable to misallocation of
workers?

a. Quality
control

b. Purchasing

c. Engineering

d. Production

187. In reporting
variances,

a. promptness
is relatively unimportant.

b. management
normally investigates all variances.

c. the
reports should facilitate management by exception.

d. the
reports are not departmentalized.

Ans: C, LO: 6, Bloom: K, Difficulty: Easy, Min: 1,
AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement,
AICPA PC: None, IMA: Cost Management

a188. A standard cost system may be used in

Job Order Costing Process Costing

a. No No

b. Yes No

c. No Yes

d. Yes Yes

a189. The
formula for computing the overhead volume variance is

a. fixed
overhead rate times (actual hours less standard hours allowed).

b. variable
overhead rate times (actual hours less standard hours allowed).

c. fixed
overhead rate times (normal capacity hours less standard hours
allowed).

d. variable
overhead rate times (normal capacity hours less standard hours
allowed).

a190. The overhead
controllable variance is the difference between the

a. budgeted
overhead based on standard hours allowed and the overhead applied to
production.

b. budgeted
overhead based on standard hours allowed and budgeted overhead based on actual
hours worked.

c. actual
overhead and the overhead applied to production.

d. actual
overhead and budgeted overhead based on standard hours allowed.

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141. When
is a variance considered to be ‘material’?

a. When
it is large compared to the actual cost

b. When
it is infrequent

c. When
it is unfavorable

d. When it could have been
controlled more effectively

142. Variance
reports are

a. external
financial reports.

b. SEC
financial reports.

c. internal
reports for management.

d. all
of these.

143. In using variance reports, management looks
for

a. total
assets invested.

b. significant
variances.

c. competitors’
costs in comparison to the company’s costs.

d. more
efficient ways of valuing inventories.

144. Parnell Company prepared its income
statement for internal use. How would amounts for cost of goods sold and
variances appear?

a. Cost
of goods sold would be at actual costs, and variances would be reported
separately.

b. Cost
of goods sold would be combined with the variances, and the net amount reported
at standard cost.

c. Cost
of goods sold would be at standard costs, and variances would be reported
separately.

d. Cost
of goods sold would be combined with the variances, and the net amount reported
at actual cost.

145. Alex Co. prepared its income statement for
management using a standard cost accounting system. Which of the following
appears at the “standard” amount?

a. Sales

b. Selling
expenses

c. Gross
profit

d. Cost
of goods sold

146. The costing of inventories at standard cost
for external financial statement reporting purposes is

a. not
permitted.

b. preferable
to reporting at actual costs.

c. in
accordance with generally accepted accounting principles if significant
differences exist between actual and standard costs.

d. in
accordance with generally accepted accounting principles if significant
differences do not exist between actual and standard costs.

147. Income statements prepared internally for
management often show cost of goods sold at standard cost and variances are

a. separately
disclosed.

b. deducted
as other expenses and revenues.

c. added
to cost of goods sold.

d. closed
directly to retained earnings.

148. In Zero Company’s income statement, they report gross
profit of $55,000 at standard and the following variances:

Materials price $ 420 F

Materials quantity 600 F

Labor price 420 U

Labor quantity 1,000 F

Overhead 900 F

Zero
would report actual gross profit of

a. $51,660.

b. $52,500.

c. $57,500.

d. $58,340.

149. In Zero Company’s income
statement, they report actual gross profit of $52,500 and the following
variances:

Materials price $ 420 F

Materials quantity 600 F

Labor price 420 U

Labor quantity 1,000 F

Overhead 900 F

Zero
would report gross profit at standard of

a. $46,660.

b. $47,500.

c. $55,000.

d. $53,340.

150. The balanced
scorecard

a. incorporates
financial and nonfinancial measures in an integrated system.

b. is
based on financial measures.

c. is
based on nonfinancial measures.

d. does
not use financial or nonfinancial measures.

151. Which is not one of
the four most commonly used perspectives on a balanced scorecard?

a. The
financial perspective

b. The
customer perspective

c. The
external process perspective

d. The
learning and growth perspective

152. The balanced scorecard
approach

a. uses
only financial measures to evaluate performance.

b. uses
rather vague, open statements when setting objectives in order to allow
managers and employees flexibility.

c. normally
sets the financial objectives first, and then sets the objectives in the other
perspectives to accomplish the financial objectives.

d. evaluates
performance using about 10 different perspectives in order to effectively incorporate
all areas of the organization.

153. The customer perspective of
the balanced scorecard approach

a. is
the most traditional view of the company.

b. evaluates
the internal operating processes critical to the success of the organization.

c. evaluates
how well the company develops and retains its employees.

d. evaluates
the company from the viewpoint of those people who buy its products or services.

154. The perspectives included in the balanced
scorecard approach include all of the following except the

a. internal
process perspective.

b. capacity
utilization perspective.

c. learning
and growth perspective.

d. customer
perspective.

a155. If 10,000 pounds of direct
materials are purchased for $9,300 on account and the standard cost is $.90 per
pound, the journal entry to record the purchase is

a. Raw
Materials Inventory……………………………………………….. 9,300

Accounts
Payable………………………………………………… 9,300

b. Work
In Process Inventory……………………………………………. 9,300

Accounts
Payable………………………………………………… 9,000

Materials
Quantity Variance………………………………….. 300

c. Raw
Materials Inventory……………………………………………….. 9,300

Accounts
Payable………………………………………………… 9,000

Materials
Price Variance………………………………………. 300

d. Raw
Materials Inventory……………………………………………….. 9,000

Materials
Price Variance………………………………………………. 300

Accounts
Payable………………………………………………… 9,300

a 156. Debit balances in variance accounts represent

a. unfavorable
variances.

b. favorable
variances.

c. favorable
for price variances; unfavorable for quantity variances.

d. favorable
for quantity variances; unfavorable for price variances.

a 157. If a company purchases
raw materials on account for $19,830 when the standard cost is $18,900, it will

a. debit
Materials Price Variance for $930.

b. credit
Materials Price Variance for $930.

c. debit
Materials Quantity Variance for $930.

d. credit
Material Quantity Variance for $930.

a158. If a company
issues raw materials to production at a cost of $18,900 when the standard cost
is $18,300, it will

a. debit
Materials Price Variance for $600.

b. credit
Materials Price Variance for $600.

c. debit
Materials Quantity Variance for $600.

d. credit
Material Quantity Variance for $600.

a159. If a company incurs direct labor cost of $82,000 when
the standard cost is $84,000, it will

a. debit
Labor Price Variance for $2,000.

b. credit
Labor Price Variance for $2,000.

c. debit
Labor Quantity Variance for $2,000.

d. credit
Labor Quantity Variance for $2,000.

a160. If a company assigns factory labor to
production at a cost of $84,000 when standard cost is $80,000, it will

a. debit
Labor Price Variance for $4,000.

b. credit
Labor Price Variance for $4,000.

c. debit
Labor Quantity Variance for $4,000.

d. credit
Labor Quantity Variance for $4,000.

a161. The overhead variances
measure whether overhead costs

Are Effectively
Managed Were Used
Effectively

a. Controllable Controllable
and Volume

b. Controllable Volume

c. Controllable and
Volume Controllable

d. Volume Controllable

a162. The overhead volume
variance is

a. actual
overhead less overhead budgeted for actual hours.

b. actual
overhead less overhead budgeted for standard hours allowed.

c. overhead
budgeted for actual hours less applied overhead.

d. the
fixed overhead rate times the difference between normal capacity hours and
standard hours allowed.

a163. Budgeted
overhead for Cinnabar Industries at normal capacity of 30,000 direct labor
hours is $6 per hour variable and $4 per hour fixed. In May, $310,000 of
overhead was incurred in working 31,500 hours when 32,000 standard hours were
allowed. The overhead controllable variance is

a. $5,000
favorable.

b. $2,000
favorable.

c. $10,000
favorable.

d. $10,000
unfavorable.

a164. Budgeted
overhead for Cinnabar Industries at normal capacity of 30,000 direct labor
hours is $6 per hour variable and $4 per hour fixed. In May, $310,000 of
overhead was incurred in working 31,500 hours when 32,000 standard hours were
allowed. The overhead volume variance is

a. $8,000
favorable.

b. $11,000
favorable.

c. $5,000
favorable.

d. $10,000
favorable.

a165. Budgeted
overhead for Haft, Inc. at normal capacity of 60,000 direct labor hours is $3
per hour variable and $2 per hour fixed.
In May, $310,000 of overhead was incurred in working 63,000 hours when 64,000
standard hours were allowed. The overhead
controllable variance is

a. $5,000
favorable.

b. $2,000
favorable.

c. $10,000
favorable.

d. $10,000
unfavorable.

a166. Budgeted
overhead for Haft, Inc. at normal capacity of 60,000 direct labor hours is $3
per hour variable and $2 per hour fixed.
In May, $310,000 of overhead was incurred in working 63,000 hours when 64,000
standard hours were allowed. The overhead volume variance is

a. $8,000 favorable.

b. $11,000
favorable.

c. $5,000
favorable.

d. $10,000
favorable.

a167. An overhead volume variance is calculated as
the difference between normal capacity hours and standard hours allowed

a. times
the total predetermined overhead rate.

b. times
the predetermined variable overhead rate.

c. times
the predetermined fixed overhead rate.

d. divided
by actual number of hours worked.

a168. Which of the following statements is false?

a. The
overhead volume variance indicates whether plant facilities were used
efficiently during the period.

b. The
costs that cause the overhead volume variance are usually controllable costs.

c. The
overhead volume variance relates solely to fixed costs.

d. The
overhead volume variance is favorable if standard hours allowed for output are
greater than the standard hours at normal capacity.

a169. If the standard hours allowed are less than
the standard hours at normal capacity,

a. the
overhead volume variance will be unfavorable.

b. variable
overhead costs will be underapplied.

c. the
overhead controllable variance will be favorable.

d. variable
overhead costs will be overapplied.

a170. Which of the following
statements about overhead variances is false?

a. Standard
hours allowed are used in calculating the controllable variance.

b. Standard
hours allowed are used in calculating the volume variance.

c. The
controllable variance pertains solely to fixed costs.

d. The
total overhead variance pertains to both variable and fixed costs.

a171. The overhead volume variance relates only to

a. variable
overhead costs.

b. fixed
overhead costs.

c. both
variable and fixed overhead costs.

d. all
manufacturing costs.

a172. What does the
controllable variance measure?

a. Whether
a company incurred more or less fixed overhead costs compared to the
amount of overhead applied

b. Whether
a company incurred more or less overhead costs than allowed

c. The
efficiency of using variable overhead resources

d. Whether
the production manager is able to control the production
facility

a173. The overhead controllable variance is
calculated as the difference between actual overhead costs incurred and the
budgeted

a. overhead
costs for the standard hours allowed.

b. overhead
costs applied to the product.

c. overhead
costs at the normal level of activity.

d. fixed
overhead costs.

a174. If the standard hours allowed are less than
the standard hours at normal capacity, the volume variance

a. cannot
be calculated.

b. will
be favorable.

c. will
be unfavorable.

d. will
be greater than the controllable variance.

a175. The budgeted overhead costs for standard
hours allowed and the overhead costs applied to the product are the same amount

a. for
both variable and fixed overhead costs.

b. only
when standard hours allowed are less than normal capacity.

c. for
variable overhead costs.

d. for
fixed overhead costs.

a176. The following information
was taken from the annual manufacturing overhead cost budget of Fergie
Manufacturing.

Variable
manufacturing overhead costs $92,400

Fixed
manufacturing overhead costs $55,440

Normal
production level in labor hours 30,800

Normal
production level in units 5,775

Standard
labor hours per unit 4

During the year, 5,600 units were
produced, 18,340 hours were worked, and the actual manufacturing overhead was $151,200.
Actual fixed manufacturing overhead costs equaled budgeted fixed manufacturing
overhead costs. Overhead is applied on the basis of direct labor hours. Fergie’s
total overhead rate is

a. $2.40.

b. $4.00.

c. $6.40.

d. $6.53.

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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.

104. 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 quantity
variance is

a. $1,200
U.

b. $1,200
F.

c. $1,320
F.

d. $1,320
U.

105. 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 total materials variance
is

a. $2,400
U.

b. $2,400
F.

c. $2,520
U.

d. $2,520
F.

106. The standard quantity
allowed for the units produced was 4,500 pounds, the standard price was $2.50
per pound, and the materials quantity variance was $375 favorable. Each unit
uses 1 pound of materials. How many units were actually produced?

a. 4,350

b. 4,500

c. 11,625

d. 4,650

107. The matrix approach to variance analysis

a. will
yield slightly different variances than the formula approach.

b. is
more accurate than the formula approach.

c. does
not separate the price and quantity variance calculations.

d. provides
a convenient structure for determining each variance.

108. Labor efficiency is measured by the

a. materials
quantity variance.

b. total
labor variance.

c. labor
quantity variance.

d. labor
rate variance.

109. An unfavorable labor quantity variance may
be caused by

a. paying
workers higher wages than expected.

b. misallocation
of workers.

c. worker
fatigue or carelessness.

d. higher
pay rates mandated by union contracts.

110. The investigation of materials price
variance usually begins in the

a. first
production department.

b. purchasing
department.

c. controller’s
office.

d. accounts
payable department.

111. The investigation of a materials quantity
variance usually begins in the

a. production
department.

b. purchasing
department.

c. sales
department.

d. controller’s
department.

112. If the labor quantity variance is
unfavorable and the cause is inefficient use of direct labor, the
responsibility rests with the

a. sales
department.

b. production
department.

c. budget
office.

d. controller’s
department.

113. Monster Company produces a product
requiring 3 direct labor hours at $16.00 per hour. During January, 2,000
products are produced using 6,300 direct labor hours. Monster’s actual payroll
during January was $98,280. What is the
labor quantity variance?

a. $2,280
U

b. $4,800
F

c. $2,520
F

d. $4,800
U

114. A
company developed the following per-unit standards for its product: 2 gallons
of direct materials at $8 per gallon. Last month, 3,000 gallons of direct
materials were purchased for $22,800.
The direct materials price variance for last month was

a. $22,800
favorable.

b. $600
favorable.

c. $1,200
favorable.

d. $1,200
unfavorable.

115. The per-unit standards for direct materials
are 2 pounds at $5 per pound. Last month, 11,200 pounds of direct materials
that actually cost $53,000 were used to produce 6,000 units of product. The
direct materials quantity variance for last month was

a. $4,000
favorable.

b. $3,000
favorable.

c. $4,000
unfavorable.

d. $7,000
unfavorable.

116. The per-unit standards for direct labor are
1.5 direct labor hours at $15 per hour. If in producing 2,400 units, the actual
direct labor cost was $46,000 for 3,000 direct labor hours worked, the total
direct labor variance is

a. $2,400
unfavorable.

b. $8,000
favorable.

c. $5,000
unfavorable.

d. $8,000
unfavorable.

117. The
standard rate of pay is $12 per direct labor hour. If the actual direct labor payroll was $47,040
for 4,000 direct labor hours worked, the direct labor price (rate) variance is

a. $960
unfavorable.

b. $960
favorable.

c. $1,200
unfavorable.

d. $1,200
favorable.

118. The
standard number of hours that should have been worked for the output attained
is 10,000 direct labor hours and the actual number of direct labor hours worked
was 10,500. If the direct labor price variance was $10,500 unfavorable, and the
standard rate of pay was $12 per direct labor hour, what was the actual rate of
pay for direct labor?

a. $11
per direct labor hour

b. $9
per direct labor hour

c. $13
per direct labor hour

d. $12
per direct labor hour

119. A
company purchases 12,000 pounds of materials. The materials price variance is
$6,000 favorable. What is the difference between the standard and actual price
paid for the materials?

a. $1.00

b. $.50

c. $2.00

d. $6.00

120. A company uses 40,000 gallons of materials
for which they paid $7.00 a gallon. The materials price variance was $80,000
favorable. What is the standard price
per gallon?

a. $2

b. $5

c. $7

d. $9

121. All
Urban Company produces a product requiring 4 pounds of material costing $3.50 per
pound. During December, All Urban purchased 4,200 pounds of material for $14,112
and used the material to produce 500 products. What was the materials price
variance for December?

a. $560
F

b. $588
F

c. $112
U

d. $672
U

122. Shipp,
Inc. manufactures a product requiring two pounds of direct material. During 2013,
Shipp purchases 24,000 pounds of material for $99,200 when the standard price
per pound is $4. During 2013, Shipp uses 22,000 pounds to make 12,000 products.
The standard direct material cost per unit of finished product is

a. $8.27.

b. $9.01.

c. $8.00.

d. $8.53.

123. Clark
Company manufactures a product with a standard direct labor cost of two hours
at $18.00 per hour. During July, 2,000 units were produced using 4,200 hours at
$18.30 per hour. The labor quantity variance was

a. $3,660
F.

b. $3,600
U.

c. $2,460
U.

d. $3,660
U.

124. Clark
Company manufactures a product with a standard direct labor cost of two hours
at $18.00 per hour. During July, 2,000 units were produced using 4,200 hours at
$18.30 per hour. The labor price variance was

a. $1,260
U.

b. $4,860
U.

c. $4,860
F.

d. $3,600
U.

125. A
company developed the following per unit materials standards for its
product: 3 pounds of direct materials at
$5 per pound. If 12,000 units of product were produced last month and 37,500
pounds of direct materials were used, the direct materials quantity variance
was

a. $4,500
favorable.

b. $7,500
unfavorable.

c. $4,500
unfavorable.

d. $7,500
favorable.

126. The standard direct labor cost for
producing one unit of product is 5 direct labor hours at a standard rate of pay
of $20. Last month, 15,000 units were produced and 73,500 direct labor hours
were actually worked at a total cost of $1,350,000. The direct labor quantity
variance was

a. $30,000
unfavorable.

b. $45,000
unfavorable.

c. $45,000
favorable.

d. $30,000
favorable.

127. Atkins,
Inc. produces a product requiring 8 pounds of material at $1.50 per pound. Atkins
produced 10,000 units of this product during 2013 resulting in a $30,000
unfavorable materials quantity variance. How many pounds of direct material did
Atkins use during 2013?

a. 100,000
pounds

b. 80,000
pounds

c. 160,000
pounds

d. 125,000
pounds

128. Dillon has a standard of 1.5 pounds of
materials per unit, at $6 per pound. In producing 2,000 units, Dillon used
3,100 pounds of materials at a total cost of $18,135. Dillon’s total variance
is

a. $450
F.

b. $135
U.

c. $465
U.

d. $600
U.

129. Dillon has a standard of 1.5 pounds of
materials per unit, at $6 per pound. In producing 2,000 units, Dillon used
3,100 pounds of materials at a total cost of $18,135. Dillon’s materials price
variance is

a. $135
U.

b. $465
F.

c. $600
F.

d. $1,050
F.

130. Dillon has a standard of 1.5 pounds of
materials per unit, at $6 per pound. In producing 2,000 units, Dillon used
3,100 pounds of materials at a total cost of $18,135. Dillon’s materials
quantity variance is

a. $135
F.

b. $465
U.

c. $600
U.

d. $1,050
U.

131. Dillon has a standard of 2 hours of labor
per unit, at $12 per hour. In producing 2,000 units, Dillon used 3,850 hours of
labor at a total cost of $46,970. Dillon’s total labor variance is

a. $1,030
U.

b. $800
U.

c. $-1,030
F.

d. $1,930
F.

132. Dillon has a standard of 2 hours of labor
per unit, at $12 per hour. In producing 2,000 units, Dillon used 3,850 hours of
labor at a total cost of $46,970. Dillon’s labor price variance is

a. $770
U.

b. $800
U.

c. $1,030
F.

d. $1,930
F.

133. Dillon has a standard of 2 hours of labor
per unit, at $12 per hour. In producing 2,000 units, Dillon used 3,850 hours of
labor at a total cost of $46,970. Dillon’s labor quantity variance is

a. $770
U.

b. $770
F.

c. $1,800
F.

d. $1,930
F.

134. Which one of the following describes the total overhead variance?

a. The
difference between what was actually incurred and the flexible budget amount

b. The
difference between what was actually incurred and overhead applied

c. The
difference between the overhead applied and the flexible budget amount

d. The
difference between what was actually incurred and the total
production budget

135. Manufacturing
overhead costs are applied to work in process on the basis of

a. actual
hours worked.

b. standard
hours allowed.

c. ratio
of actual variable to fixed costs.

d. actual
overhead costs incurred.

136. The
total overhead
varianceis the difference between the

a. actual
overhead costs and overhead costs applied based on standard hours allowed.

b. actual
overhead costs and overhead costs applied based on actual hours.

c. overhead
costs applied based on actual hoursand
overhead costs applied based on standard hours
allowed.

d. the
actual overhead costs and the standard
direct labor costs.

137. The predetermined overhead rate for Zane
Company is $5, comprised of a variable overhead rate of $3 and a fixed rate of
$2. The amount of budgeted overhead costs at normal capacity of $150,000 was
divided by normal capacity of 30,000 direct labor hours, to arrive at the
predetermined overhead rate of $5. Actual overhead for June was $9,500 variable
and $6,050 fixed, and standard hours allowed for the product produced in June
was 3,000 hours. The total overhead
variance is

a. $3,050
F.

b. $550
F.

c. $550
U.

d. $3,050
U.

138. The predetermined
overhead rate for Zane Company is $5, comprised of a variable overhead rate of
$3 and a fixed rate of $2. The amount of budgeted overhead costs at normal
capacity of $150,000 was divided by normal capacity of 30,000 direct labor
hours, to arrive at the predetermined overhead rate of $5. Actual overhead for
June was $8,900 variable and $5,400 fixed, and 1,500 units were produced. The
direct labor standard is 2 hours per unit produced. The total overhead variance is

a. $1,800
F.

b. $700
F.

c. $700
U.

d. $1,800
U.

139. Which of the following
is true?

a. The form, content, and frequency of variance
reports vary considerably among companies.

b. The form, content,
and frequency of variance reports do not vary among companies.

c. The
form and content of variance reports vary considerably among companies, but the
frequency is always weekly.

d. The
form and content of variance reports are consistent among companies, but the
frequency varies.

140. Denmark Corporation’s variance report for
the purchasing department reports 1,000 units of material A purchased and 2,400
units of material B purchased. It also reports standard prices of $2 for
Material A and $3 for Material B. Actual prices reported are $2.10 for Material
A and $2.80 for Material B. Denmark should report a total price variance of

a. $380
F.

b. $340
F.

c. $340
U.

d. $380
U.

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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.

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.

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.

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.

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.

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 laborquantity 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.

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.

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.

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.

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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.

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

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.”

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.

`*

60. The most rigorous of all standards is the

a. normal
standard.

b. realistic
standard.

c. ideal
standard.

d. conceivable
standard.

`

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