Standard Costing Quiz

Management scrutinizes variances because

• Management desires to detect such variances to be able to plan for promotions.

• Management needs to determine the benefits forgone by such variances.

• It is desirable under conventional knowledge on good management.

• Management recognizes the need to know why variances happen to be able to make corrective actions and fairly reward good performers.

You used predetermined overhead rates and the resulting variances when compared with the results using the actual rates were substantial. Production data indicated that volumes were lower than the plan by a large difference. This situation can be due to:

• Products being simultaneously manufactured in single rums

• Overhead cost being recorded as planned

• overhead being substantially composed of fixed cost

• overhead cost being substantially composed of variable cost

Which one of the following variances is of least significance from a behavioral control perspective?

• Unfavorable materials quantity variance amounting to 20% of the quantity allowed for the output attained

• Unfavorable labor efficiency variance amounting to 10% more than the budgeted hours for the output attained.

• Favorable materials price variance obtained by purchasing raw material from a new vendor.

• Fixed factory overhead volume variance resulting from management decision midway through the fiscal year to reduce its budgeted output by 20%.

Which of the following standard costing variances would be least controllable by a production supervisor?

• Overhead volume.

• Overhead efficiency.

• Labor Efficiency

• Materials Usage

What is the normal year-end treatment of immaterial variances recognized in a cost accounting system using standard costs?

• Reclassified as deferred charges until all related production is sold.

• Allocated among cost of goods manufactured and ending work-in-process

• Closed to the cost of goods sold in the period in which they arose.

• Capitalized as a cost of ending finished goods inventory.

Which of the following is not an acceptable treatment of factory overhead variances at an interim reporting date?

• Apportion the total only among work-in-process and finished goods inventories on hand at the end of the interim reporting period.

• Apportion the total only between that part of the current period's production remaining in inventories at the end of the period and that part sold during the period.

• Carry forward the total to be offset by opposite balances in later periods

• Charge or credit the total to the cost of goods sold during the period.

The conventional break-even chart adopted by businessmen and accountants does not take for granted that

• Some costs are semi-variable.

• production is not equal to sales.

• there is a significant amount of change in inventories.

• the sales mix ratio of the products being sold changes within the relevant range.

Which of the following is not correct?

At break-even

• profit equals zero

• gross profit equals zero

• sales equals total cost

• fixed cost equals contribution margin

Cost-volume-profit analysis assumes that over the relevant range total

• Revenues are linear

• Cost are unchanged

• Variable Cost are nonlinear

• Fixed costs are nonlinear

Which one describes the labor costs that should be incurred under efficient operating conditions?

• Ideal

• Basic

• Maximum-efficiency

• Currently attainable