Content check — Managerial Accounting, Chapter 8: Standard Costs and Variances

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Chapter 8: Standard Costs and Variances

27 problems · 0 figures

Multiple Choice 8.1 §8.1 source ↗

Why does a company use a standard costing system?

a.
to identify variances from actual cost that assist them in maintaining profits
b.
to identify nonperformers in the workplace
c.
to identify what vendors are unreliable
d.
to identify defective materials

Answer

A. to identify variances from actual cost that assist them in maintaining profits

Multiple Choice 8.3 §8.1 source ↗

This standard is set at a level that could be achieved if everything ran perfectly.

a.
ideal standard
b.
attainable standard
c.
unattainable standard
d.
variance from standard

Answer

A. ideal standard

Multiple Choice 8.5 §8.1 source ↗

This variance is the difference involving spending less, or using less than the standard amount.

a.
favorable variance
b.
unfavorable variance
c.
no variance
d.
variance

Answer

A. favorable variance

Multiple Choice 8.7 §8.2 source ↗

When is the material price variance unfavorable?

a.
when the actual quantity used is greater than the standard quantity
b.
when the actual quantity used is less than the standard quantity
c.
when the actual price paid is greater than the standard price
d.
when the actual price is less than the standard price

Answer

C. when the actual price paid is greater than the standard price

Multiple Choice 8.9 §8.2 source ↗

What are some reasons for a material quantity variance?

a.
building rental charges increase
b.
labor rate decreases
c.
more qualified workers
d.
change in the actual cost of materials

Answer

C. more qualified workers

Multiple Choice 8.11 §8.2 source ↗

When is the material quantity unfavorable?

a.
when the actual quantity used is greater than the standard quantity
b.
when the actual quantity used is less than the standard quantity
c.
when the actual price paid is greater than the standard price
d.
when the actual price is less than the standard price

Answer

A. when the actual quantity used is greater than the standard quantity

Multiple Choice 8.13 §8.3 source ↗

When is the labor rate variance unfavorable?

a.
when the actual quantity used is greater than the standard quantity
b.
when the actual quantity used is less than the standard quantity
c.
when the actual price paid is greater than the standard price
d.
when the actual price is less than the standard price

Answer

C. when the actual price paid is greater than the standard price

Multiple Choice 8.15 §8.3 source ↗

What are some possible reasons for a direct labor time variance?

a.
utility usage decrease
b.
less qualified workers
c.
office supplies spending
d.
sales decline

Answer

B. less qualified workers

Multiple Choice 8.17 §8.3 source ↗

When is the direct labor time variance unfavorable?

a.
when the actual quantity used is greater than the standard quantity
b.
when the actual quantity used is less than the standard quantity
c.
when the actual price paid is greater than the standard price
d.
when the actual price is less than the standard price

Answer

A. when the actual quantity used is greater than the standard quantity

Multiple Choice 8.19 §8.4 source ↗

The variable overhead rate variance is caused by the difference between which of the following?

a.
actual and standard allocation base
b.
actual and standard overhead rates
c.
actual and budgeted units
d.
actual units and actual overhead rates

Answer

B. actual and standard overhead rates

Multiple Choice 8.21 §8.4 source ↗

The fixed factory overhead variance is caused by the difference between which of the following?

a.
actual and standard allocation base
b.
actual and budgeted units
c.
actual fixed overhead and applied fixed overhead
d.
actual and standard overhead rates

Answer

C. actual fixed overhead and applied fixed overhead

Multiple Choice 8.23 §8.5 source ↗

Which of the following is a possible cause of an unfavorable material quantity variance?

a.
purchasing substandard material
b.
hiring higher-quality workers
c.
paying more than should have for workers
d.
purchasing too much material

Answer

A. purchasing substandard material

Multiple Choice 8.25 §8.5 source ↗

Which of the following is a possible cause of an unfavorable labor rate variance?

a.
hiring too many workers
b.
hiring higher-quality workers at a higher wage
c.
making too many units
d.
purchasing too much material

Answer

B. hiring higher-quality workers at a higher wage

Question 8.1 §8.1 source ↗

What two components are needed to determine a standard for materials?

Answer

The expected price of materials per unit and the expected quantity usage are needed to help determine a standard.

Question 8.3 §8.1 source ↗

What elements require consideration before establishing an overhead standard?

Answer

Fixed overhead and variable overhead should be considered.

Question 8.5 §8.2 source ↗

What causes the material price variance?

Answer

Paying more or less than the standard price

Question 8.7 §8.2 source ↗

What are some possible causes of a material price variance?

Answer

Buying a different quality level of material; good or bad purchasing/negotiation

Question 8.9 §8.3 source ↗

What is the direct labor rate variance?

Answer

A direct labor rate variance is the actual rate paid being different from the standard rate.

Question 8.11 §8.3 source ↗

What are some possible causes of a direct labor rate variance?

Answer

Employees have a different level of experience than standards; the labor market is tighter or looser than expected; contract renegotiation.

Question 8.13 §8.3 source ↗

How is the total direct labor variance calculated?

Answer

Total direct labor variance = (Actual hours × Actual rate) – (Standard hours × Standard rate) or the total direct labor variance is also found by combining the direct labor rate variance and the direct labor time variance.

Question 8.15 §8.4 source ↗

What causes the variable overhead efficiency variance?

Answer

The difference between the actual and standard amounts of the allocation base cause variable overhead efficiency variance.

Question 8.17 §8.5 source ↗

What causes a favorable variance?

Answer

It is caused by paying or using less than the standard amount.

Question 8.19 §8.5 source ↗

When might a favorable variance not be a good outcome?

Answer

It may not be a good outcome when buying substandard material or hiring substandard employees.

Question 8.21 §8.5 source ↗

Identify several causes of a favorable material price variance.

Answer

Causes may include substandard material, quantity discount, negotiated better price, quantity discount, or price drop.

Question 8.23 §8.5 source ↗

Identify several causes of a favorable material quantity variance.

Answer

Causes may include higher-quality material, better-qualified employees, or a change in manufacturing process.

Question 8.25 §8.5 source ↗

Identify several causes of a favorable labor rate variance.

Answer

Causes may include less-qualified employees or a change in quality level of employees due to a change in process.

Question 8.27 §8.5 source ↗

Identify several causes of a favorable labor efficiency variance.

Answer

Causes may include better material, higher-quality employees, or a change in process.

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Problems and answers are adapted from Principles of Accounting, Volume 2: Managerial Accounting by Mitchell Franklin, Patty Graybeal and Dixon Cooper, OpenStax, and are used under the CC BY-NC-SA 4.0 licence. Access for free at https://openstax.org/books/principles-managerial-accounting/pages/1-why-it-matters. Illustrations: Copyright Rice University, OpenStax, under CC BY-NC-SA 4.0 license. This adaptation is released under the same licence, is non-commercial, and is neither affiliated with nor endorsed by OpenStax or Rice University.