Standard Costing: Control Costs and Improve Efficiency

Standard Costing1.A standard cost system may be used in a.Job-order costing but not process costing. b.Either job-order costing or process costing. c.Process costing but not job-order costing. d.Neither process costing nor job-order costing. 2.A difference between standard costs used for cost control and the budgeted costs of the same manufacturing effort a.Can exist because standard costs represent what costs should be; whereas budgeted costs are expected actual costs. b.Can exist because budgeted costs are historical costs, whereas standard costs are based on engineering studies. c.Can exist because budgeted costs include some slack, whereas standard costs do not. d.Cannot exist because the amounts should be the same. 3.When a manager is concerned with monitoring total cost, total revenue, and the net profit conditioned upon the level of productivity, an accountant should normally recommend Flexible BudgetingStandard Costing a.YesYes b.YesNo c.NoYes d.NoNo 4.Which of the following is a purpose of standard costing a.Determine breakeven production level. b.Control costs. c.Eliminate the need for subjective decisions by management. d.Allocate cost with more accuracy. 5.Which one of the following is true concerning standard costs? a.Standard costs are estimates of costs attainable only under the most ideal conditions, but rarely practicable. b.Standard costs are difficult to use with a process costing system. c.If properly used, standards can help motivate employees. d.Unfavorable variances, material in amount, should be investigated, but large favorable variances need not be investigated. 6.When standard costs are used in a process costing system, how, if at all, are equivalent units of production (EUP) involved or used in the cost report at standard? a.Equivalent units are not used. b.Equivalent units are computed using a special approach. c.The actual equivalent units are multiplied by the standard cost per unit. d.The standard equivalent units are multiplied by the actual cost per unit. 7.The difference between the actual amounts and the flexible budget amounts for the actual output achieved is the a.Production volume variance. b.Flexible budget variance. c.Sales volume variance. d.Standard cost variance. 8.In analyzing company operations, the controller of the Jason Corporation found a P250,000 favorable flexible budget revenue variance. The variance was calculated by comparing the actual results with the flexible budget. This variance can be wholly explained by a.The total flexible budget variance. b.The total static budget variance. c.Changes in the unit selling prices. d.Changes in the number of units sold. 9.The best basis upon which cost standards should be set to measure controllable production inefficiencies is a.Engineering standards based on ideal performance. b.Normal capacity. c.Engineering standards based on attainable performance. d.Practical capacity. 10.Which one of the following statements about ideal standards is incorrect? a.Ideal standards are also called theoretical or maximum efficiency standards. b.Ideal standards do not make provisions for workers with different degrees of experience and skill levels. c.Ideal standards make no allowance for waste, spoilage, and machine breakdowns. d.Ideal standards can be used for cash budgeting or product costing. 11.Which of the following statements pertaining to practical standards is incorrect? a.Practical standards can be used for product costing and cash budgeting. b.A firm using practical standards has no reason to make any midyear adjustments to the production standards if an old machine is replaced by a newer, faster machine. c.Under practical standards, exceptions from standards are less likely; consequently, managers will be better able to practice management by exception. d.Practical standards are more likely to be attained by workers making diligent efforts. 12.Standard costing will produce the same income before extraordinary items as actual costing when standard cost variances are assigned to a.Work-in-process and finished goods inventories. b.An income or expense account. c.Cost of goods sold and inventories. d.Cost of goods sold. 13.If the total materials variance (actual cost of materials used compared with the standard cost of the standard amount of materials required) for a given operation is favorable, why must this variance be further evaluated as to price and usage? a.There is no need to further evaluate the total materials variance if it is favorable. b.Generally accepted accounting principles require that all variances be analyzed in three stages. c.All variances must appear in the annual report to equity owners for proper disclosures. d.Determining price and usage variances allows management to evaluate the efficiency of the purchasing and production functions. 14.Which department is customarily held responsible for an unfavorable materials usage variance? a.Quality control. b.Purchasing. c.Engineering. d.Production. 15.At the end of its fiscal year, Graham Company had several substantial variances from standard variable manufacturing costs. The one that should be allocated between inventories and cost of sales is the one attributable to a.Additional cost of raw material acquired under a speculative purchase contact. b.A breakdown of equipment. c.Overestimates of production volume for the period resulting from failure to predict an unusual decline in the market for the company's product. d.Increased labor rates won by the union as a result of a strike.