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Multiple Choice

This document summarizes key concepts around control and evaluation of cost centers: 1) Standard costs provide information for control purposes by identifying variances from budgets, such as price and quantity variances. 2) Setting standards has important behavioral implications and should not aim to make standards unachievably tight. 3) An unfavorable labor efficiency variance could result from a manager's actions rather than worker inefficiency, and control charts are used to determine if variances require investigation.

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Carlo Paras
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644 views2 pages

Multiple Choice

This document summarizes key concepts around control and evaluation of cost centers: 1) Standard costs provide information for control purposes by identifying variances from budgets, such as price and quantity variances. 2) Setting standards has important behavioral implications and should not aim to make standards unachievably tight. 3) An unfavorable labor efficiency variance could result from a manager's actions rather than worker inefficiency, and control charts are used to determine if variances require investigation.

Uploaded by

Carlo Paras
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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CHAPTER 11: CONTROL AND EVALUATION OF COST CENTERS

Multiple Choice

c 1. The two general types of variable cost variances are the


a. rate variance and spending variance.
b. price variance and budget variance.
c. price variance and quantity variance.
d. quantity variance and efficiency variance.

d 2. A major advantage of using standard costs is that


a. they are easier to compute than actual costs.
b. they are lower than actual costs.
c. products with standard costs can be sold at lower prices.
d. they provide information for control purposes.

a 3. Setting standards
a. has important behavioral implications.
b. is largely a matter of calculating rates and quantities.
c. should be done to make them as tight as possible.
d. is done only for manufacturing activities.

d 4. Which of the following is NOT a quantity variance?


a. Material use variance.
b. Labor efficiency variance.
c. Variable overhead efficiency variance.
d. Fixed overhead budget variance.

a 5. A major drawback to setting standards based on historical results is that such standards
a. can perpetuate inefficiencies.
b. are harder to compute than are engineered standards.
c. are usually too hard to meet because of inflation.
d. are usually not well received by workers.

b 6. Cascade Company, which has a $3 standard cost per unit and budgeted production at 1,000 units, actually produced 1,200 units. Total
standard cost for the period is
a. $3,000.
b. $3,600.
c. an amount that cannot be determined without knowing the variances for the period.
d. none of the above.

c 7. Which variance is LEAST likely to be affected by hiring workers with less skill than those already working?
a. Material use variance.
b. Labor rate variance.
c. Material price variance.
d. Variable overhead efficiency variance.

c 8. Which variance is MOST likely to be affected by buying a more expensive material that produces less waste and is easier to handle?
a. Labor rate variance.
b. Variable overhead spending variance.
c. Direct labor efficiency variance.
d. Fixed overhead budget variance.

b 9. Filter Company's budget for overhead costs is:

total overhead cost = $50,000 + ($4 x direct labor hours)

Standard direct labor time is 1.5 hours per unit of product. The standard wage rate is $6 per hour. Standard variable overhead cost for
a unit of product is
a. $4.00.
b. $6.00.
c. $9.00.
d. $10.00.

b 10. The major variance used in controlling fixed costs is the


a. efficiency variance.
b. budget variance.
c. use variance.
d. none of the above.

d 11. If the variable overhead standard is based on direct labor hours and actual hours worked exceed standard hours allowed, the result is
a. a favorable labor efficiency variance.
b. an unfavorable variable overhead spending variance.
c. a favorable variable overhead spending variance.
d. an unfavorable variable overhead efficiency variance.

a 12. Control charts are used


a. to decide whether to investigate variances.
b. to develop standard costs.
c. to calculate variances.
d. for all of the above purposes.

c 13. An unfavorable labor efficiency variance


a. means that workers were inefficient and their supervisor did a poor job.
b. causes a favorable variable overhead efficiency variance.
c. can result from an action taken by a manager other than the supervisor of the workers.
d. should always be investigated and corrected.

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