MAS Problem 3

Standard Costs and Variance Analysis

STANDARD COSTS AND VARIANCE ANALYSIS

D. 3ractic 3ractical al capacit capacity y

THEORIES: Standard cost system 1. A primary purpose purpose of using using a standard cost cost system system is A. To make things easier easier for managers managers in the production facility. facility. B. To provde provde a dstnct meas!re meas!re o" cost contro#. contro#. C. To minimize minimize the cost cost per unit unit of production. production. D. b and c are are correc correctt

4. A company employing employing &ery &ery tight 5high6 standards standards in a standard standard cost system should e-pect that A. o incenti&e incenti&e bonus bonus will will be paid. B. &ost varances varances *## (e !n"avora( !n"avora(#e. #e. C. *mployees *mployees will be strongly strongly moti&ated moti&ated to attain the standard. standard. D. Costs will will be controlled better than if lower standards standards were used. 7. To measur measure e control controllab lable le product production ion inefficie inefficienci ncies" es" which of the following is the best basis for a company to use in establishing the standard hours allowed for the output of one unit of product A. A&erage A&erage historical historical performance performance for the last se&eral se&eral years #. *ngineering *ngineering estimates estimates based on ideal performanc performance e C. En'neern' En'neern' estmates (ased on attana(#e attana(#e per"ormance per"ormance D. The The hours hours per unit unit that that would would be re8ui re8uired red for the the pres present ent workforce to satisfy e-pected demand o&er the long run

2. Which one of the following following statements statements is true concerning concerning standard standard costs A. !tandard !tandard costs are estimates estimates of costs costs attainable attainable only under the most ideal conditions" but rarely practicable. #. !tandard !tandard costs are difficult to use with a process$costin process$costing g system. C. I" proper#y !sed$ !sed$ standards can %e#p motvate motvate emp#oyees. emp#oyees. D. %nfa %nfa&o &ora rabl ble e &ari &arian ance ces" s" mate materi rial al in amou amount nt"" shou should ld be in&e in&est stig igat ated" ed" but larg large e fa&or fa&orab able le &ari &arian ances ces need need not not be in&estigated.

9. Which of the following following statements statements about about the selection selection of standards is true A. :deal standards standards tend to e-tract e-tract higher performance performance le&els le&els since they gi&e employees something to li&e up to. #. Curre Currentl ntly y attai attaina nabl ble e stan standa dards rds may may encour encourag age e opera operati ting ng inefficiencies. C. Curren Currently tly attaina attainable ble standar standards ds discou discourage rage employe employees es from achie&ing their full performance potential. D. Idea# standards standards demand ma)m!m ma)m!m e""cency *%c% *%c% may #eave #eave *or+e *or+ers rs "r!str "r!strate ated$ d$ t%!s t%!s ca!sn ca!sn' ' a dec# dec#ne ne n per"ormance.

'. Which of the followi following ng is a purpose purpose of standard costing costing A. Determine Determine (breake&en) (breake&en) producti production on le&el B. Contro Contro## costs costs C. *liminate *liminate the need for sub+ecti&e sub+ecti&e decisions decisions by management management D. Allocate Allocate cost with with more accuracy accuracy ,. When When e&al e&alua uati ting ng the the oper operati ating ng perfo perform rman ance ce manag managem ement ent someti sometimes mes uses uses the differen difference ce between between e-pecte e-pected d and actual actual performance. This refers to A. /ana /anage geme ment nt by De&i De&iat atio ion n C. /ana /anage geme ment nt by 0b+e 0b+ect cti& i&e e D. &ana'ement &ana'ement (y E)cepton #. /anage /anagement ment by Contr Control ol

!tandard costs &s. budgeted costs ;. A difference difference between standard standard costs used used for cost control and the budgeted costs representing representing the same manufacturing manufacturing effort can e-ist because A. stand standar ard d cost costs s must must be deter determi mine ned d after after the the budg budget et is completed B. standard standard costs represen representt *%at *%at costs costs s%o!#d s%o!#d (e *%#e *%#e (!d'eted costs represent e)pected act!a# costs

!tandard setting . The best basis basis upon which which cost standards standards should should be set to measure controllable production inefficiencies is A. *ngineering *ngineering standards standards based on ideal performanc performance e #. ormal ormal capaci capacity ty C. En'neern' En'neern' standards (ased (ased on attana(#e per"ormance per"ormance 2a- !tandards D. *mployee !tandards

19.:n 19.:n analyzi analyzing ng manufa manufactur cturing ing o&erhea o&erhead d &arian &ariances ces"" the &olume &olume &ariance is the difference between the A. Amount shown shown in the fle-ible fle-ible budget and the amount amount shown in the debit side of the o&erhead control account #. 3redetermined 3redetermined o&erhead o&erhead application application rate and the fle-ible fle-ible budget 2abor rate D. La(or e""cency #. /aterials price

22.The budgeted o&erhead costs for standard hours allowed and the o&erhead costs applied to product are the same amount A. for both &ariable and fi-ed o&erhead costs. #. only when standard hours allowed is less than normal capacity. C. "or vara(#e over%ead costs. D. for fi-ed o&erhead costs.

27.Which of the following is the most probable reason with a company would e-perience an unfa&orable labor rate &ariance and a 2