Standard Costing

STUDY
PLAY
1. Variances indicate
c. that actual performance is not going according to plan
2. The unit standard cost is
a. the product of the standard price times the standard quantity for each unit
3. In setting price standards, the purchasing manager must consider
a. freight.
b. quality.
c. quantity discounts.

d. all of the above. **
_______________ demand maximum efficiency and can be achieved only if everything operates perfectly
b. Ideal standards
5. All of the following are true of currently attainable standards EXCEPT
b. Currently attainable standards are based on ideal conditions. X
6. Price standards are the responsibility of
accounting.
purchasing.
personnel.
D. all of the above. **
7. Which of the following is NOT true about Kaizen Standards?
d. Kaizen standards are the standards used in traditional costing systems.
8. Quantity price standards:
c. specify how much should be paid for the quantity of input to be used
9. The standard cost sheet includes all of the following EXCEPT
d. the standard labor hours allowed for actual production.
10. Standard costing
a. establishes price and quantity standards for inputs
11. The standard cost sheet includes all of the following EXCEPT
b. the standard quantity allowed for actual production.
Mover Company has developed the following standards for one of its products:
Direct materials: 7.5 pounds $8 per pound
Direct labor: 2 hours $12 per hour
Variable manufacturing overhead: 2 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. $98.
13. Roberts 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

Roberts Company reports its material price variances at the time of purchase.

What is the standard quantity of direct materials per unit for Roberts Company?
d. 3.00 lbs. 3,000/1,000 = 3.00 lbs.
14. Which of the following equations measures the total budget variance?
d. (AQ AP) - (SQ SP)
15. The usage variances focus on the difference between
a. actual quantity used and standard quantity allowed for actual production.
16. During June, 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
c. $7.50.
(12,000 *$8) - $6,000 = $90,000/ 6,000 = $7.50
17. Which of the following equations measures a price variance?
a. AQ * (AP - SP)
18. Price/rate variances focus on the differences between
b. actual and standard unit prices of an input multiplied by the actual quantity of inputs
Roberts 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

Roberts Company reports its material price variances at the time of purchase.

What is the material usage variance for Roberts Company?
a. $900 (F) (2,950 - 3,000) X$18 = $900 (F)
During August, 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 August, the actual quantity of materials used must be
a. 106,250 pounds.
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
b. 190,000 pounds.
22. Which of the following equations measures the direct labor rate variance?
c. (AR AH) - (SR AH)
23. Direct labor variances:
a. are largely determined by external forces such as labor markets and union contracts
b. occur because an highly paid laborers are used for less skilled tasks
c. that result from usage of labor are decisions usually controllable by the production managers

d. all of the above are correct *** X
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: 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


24. What is the material usage variance for Bender Corporation
a. $60 (U)
(220 - 200) * $3 = $60 (U)
25. What is the material price variance for Bender Corporation?
c. $33 (F)
220* ($3.00 - $2.85) = $33 (F)
26. Max 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
c. $10,000 unfavorable. $170,000 - (10,000 * $16) = $10,000 unfavorable
27. 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 the above ****
Roberts 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
Roberts Company reports its material price variances at the time of purchase.
What is the journal entry to record material purchases?
c. Materials
55,800
Materials Price Variance 4,650 Accounts Payable 51,150
Claire 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


29. What is the total labor budget variance for Claire Company?
d. $12,000 (U) X
30. How many actual labor hours were worked during February for Claire Company?
d. 12,000 hours $18,000/($15.00 - $13.50) = 12,000 hours
31. Direct labor variances:
a. are largely determined by external forces such as labor markets and union contracts
b. occur because an highly paid laborers are used for less skilled tasks
c. that result from usage of labor are decisions usually controllable by the production managers

d. all of the above are correct ****
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