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Standard Costing

Standard Costing

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Published by: ztr1k3r on Nov 20, 2009
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03/16/2014

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PERFORMANCE EVALUATION THROUGHSTANDARD COSTS
TRUE-FALSE STATEMENTS
1.Inventories cannot be valued at standard cost in financial statements.2.Standard cost is the industry average cost for a particular item.3.A standard is a unit amount, whereas a budget is a total amount.4.Standard costs may be incorporated into the accounts in the general ledger.5.An advantage of standard costs is that they simplify costing of inventories and reduceclerical costs.6.Setting standard costs is relatively simple because it is done entirely by accountants.7.Normal standards should be rigorous but attainable.8.Actual costs that vary from standard costs always indicate inefficiencies.9.Ideal standards will generally result in favorable variances for the company.10.Normal standards incorporate normal contingencies of production into the standards.11.Once set, normal standards should not be changed during the year.12.In developing a standard cost for direct materials, a price factor and a quantity factor mustbe considered.13.A direct labor price standard is frequently called the direct labor efficiency standard.14.The standard predetermined overhead rate must be based on direct labor hours as thestandard activity index.15.Standard cost cards are the subsidiary ledger for the Work in Process account in astandard cost system.16.A variance is the difference between actual costs and standard costs.17.If actual costs are less than standard costs, the variance is favorable.18.A materials quantity variance is calculated as the difference between the standard directmaterials price and the actual direct materials price multiplied by the actual quantity of direct materials used.19.An unfavorable labor quantity variance indicates that the actual number of direct labor hours worked was greater than the number of direct labor hours that should have beenworked for the output attained.
 
Test Bank for Managerial Accounting, Second Edition
20.Standard cost + price variance + quantity variance = Budgeted cost.21.The overhead controllable variance relates primarily to fixed overhead costs.22.The overhead volume variance relates only to fixed overhead costs.23.If production exceeds normal capacity, the overhead volume variance will be favorable.24.There could be instances where the production department is responsible for a directmaterials price variance.25.The starting point for determining the causes of an unfavorable materials price variance isthe purchasing department.26.A two-variance analysis of overhead consists of a controllable variance and a volumevariance.27.Variance analysis facilitates the principle of "management by exception."*28.A credit to a Materials Quantity Variance account indicates that the actual quantity of direct materials used was greater than the standard quantity of direct materials allowed.*29.A standard cost system may be used with a job order cost system but not a process costsystem.*30.A debit to the Overhead Volume Variance account indicates that the standard hoursallowed for the output produced was greater than the standard hours at normal capacity.
Answers to True-False Statements
ItemAns.ItemAns.ItemAns.ItemAns.ItemAns.ItemAns.
1.F6.F11.F16.T21.F26.T2.F7.T12.T17.T22.T27.T3.T8.F13.F18.F23.T*28.F4.T9.F14.F19.T24.T*29.F5.T10.T15.F20.F25.T*30.F
8-2
 
Performance Evaluation Through Standard Costs
8-3
MULTIPLE CHOICE QUESTIONS
31.A standard cost isa.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.32.The difference between a budget and a standard is thata.a budget expresses what costs were, while a standard expresses what costs shouldbe.b.a budget expresses management's plans, while a standard reflects what actuallyhappened.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 aregenerally incorporated into the cost accounting system.33.Standard costs may be used bya.universities.b.governmental agencies.c.charitable organizations.d.all of these.34.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.35.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.36.It is possible that a company's financial statements may report inventories ata.budgeted costs.b.standard costs.c.both budgeted and standard costs.d.none of these.37.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 thehistorical cost accounting system.d.approval of the stockholders is required.38.Standard costsa.may show past cost experience.b.help establish expected future costs.c.are the budgeted costs per unit in the present.d.all of these.

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