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Chapter 12&13 Variance Analysis

The document discusses standard costing and variance analysis. It provides examples of standard cost variances such as direct materials quantity variance, labor efficiency variance, variable overhead efficiency variance, and overhead volume variance. It also identifies which managers or departments would typically be responsible for different types of variances, such as the purchasing department for a materials price variance or the production supervisor for a labor efficiency variance.

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Ch King
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298 views3 pages

Chapter 12&13 Variance Analysis

The document discusses standard costing and variance analysis. It provides examples of standard cost variances such as direct materials quantity variance, labor efficiency variance, variable overhead efficiency variance, and overhead volume variance. It also identifies which managers or departments would typically be responsible for different types of variances, such as the purchasing department for a materials price variance or the production supervisor for a labor efficiency variance.

Uploaded by

Ch King
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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MANAGEMENT ACCOUNTING 1|Page

Chapter 12&13 Variance Analysis


1. The best characteristics of a standard cost system is
A. all variances from standard should be reviewed
B. standard can pinpoint responsibility and help motivation
C. all significant unfavorable variances should be reviewed
D. standard cost involves cost control which is cost reduction

2. Standard costs are used for all of the following except:


A. controlling costs C. income determination
B. forming a basis for price setting D. measuring efficiencies

3. Standard costs are least useful for


A. Determining minimum inventory levels C. Measuring production efficiency
B. Job order production systems D. Simplifying costing procedures

4. To which of the following is a standard cost nearly like?


A. Budgeted cost. C. Period cost.
B. Estimated cost. D. Product cost.

5. Standard costing will produce the same results as actual or conventional costing when
standard cost variances are distributed to
A. A balance sheet account C. Cost of goods sold
B. An income or expense account D. Cost of goods sold and inventories

6. Which of the following term is best identified with a system of standard cost?
A. Contribution approach. C. Marginal costing.
B. Management by exception. D. Standard accounting system.

7. The type of standard that is intended to represent challenging yet attainable results is:
A. controllable cost standard D. normal standard
B. expected actual standard E. theoretical standard
C. flexible budget standard

8. A company using very tight standards in a standard cost system should expect that
A. No incentive bonus will be paid
B. Most variances will be unfavorable
C. Employees will be strongly motivated to attain the standard
D. Costs will be controlled better than if lower standards were used

9. The variable factory overhead rate under the normal volume, practical capacity, and expected
activity levels would be the
A. Same except for expected capacity C. Same except for practical capacity
B. Same except for normal volume D. Same for all three activity levels

10. The journal entry to record the direct materials quantity variance may be recorded
A. Only when direct materials are purchased
B. When inventory is taken at the end of the year.
C. Only when direct materials are issued to production
D. Either (A) or (C)

11. A credit balance in the labor efficiency variance indicates that:


MANAGEMENT ACCOUNTING 2|Page
A. actual hours exceed standard hours
B. standard hours exceed actual hours
C. actual rate and actual hours exceed standard rate and standard hours
D. standard rate and standard hours exceed actual rate and actual hours

12. A debit balance in the labor efficiency variance indicates that


A. Actual hours exceed standard hours. C. Standard hours exceed actual hours.
B. Actual rate exceeds standard rate. D. Standard rate exceeds actual rate.

13. The variance resulting from obtaining an output different from the one expected on the basis of
input is the:
A. efficiency variance C. usage variance
B. mix variance D. yield variance

14. In the analysis of standard cost variances, the item which receives the most diverse treatment in
accounting is
A. Direct labor cost C. Factory overhead cost
B. Direct material cost D. Variable cost.

15. The total overhead variance is


A. Based on actual hours worked for the units produced.
B. The difference between budgeted overhead and applied overhead.
C. The difference between actual overhead costs and applied overhead.
D. The difference between actual overhead costs and budgeted overhead.

16. When expenses estimated for the capacity attained differ from the actual expenses incurred, the
resulting balance is termed the
A. Activity variance. C. Unfavorable variance.
B. Budget variance. D. Volume variance.

17. If a company uses a predetermined rate for absorption of manufacturing overhead, the volume
variance is
A. The under- or over-applied fixed cost element of overhead.
B. The under- or over-applied variable cost element of overhead.
C. The difference between budgeted cost and actual cost of fixed overhead items.
D. The difference between budgeted cost and actual cost of variable overhead items.

18. Which department is typically responsible for a materials price variance?


A. Engineering. C. Purchasing.
B. Production. D. Sales.

19. Under a standard cost system, the materials efficiency variance are the responsibility of
A. Production and industrial engineering. C. Purchasing and sales.
B. Purchasing and industrial engineering. D. Sales and industrial engineering.

20. Which of the following people is most likely responsible for an unfavorable variable overhead
efficiency variance?
A. accountant C. purchasing agent
B. production supervisor D. supplier

21. Which of the following standard costing variances would be least controllable by a production
supervisor?
A. Labor efficiency. C. Overhead efficiency.
B. Materials usage. D. Overhead volume.
MANAGEMENT ACCOUNTING 3|Page

22. Which variance is LEAST likely to be affected by hiring workers with less skill than those
already working?
A. Labor rate variance. C. Material use variance.
B. Material price variance. D. Variable overhead efficiency variance.

23. Which of the following unfavorable variances is directly affected by the relative position of a
production process on a learning curve?
A. Materials mix. C. Labor efficiency.
B. Materials price. D. Labor rate.

24. Which one of the following would not explain an adverse direct labor efficiency variance?
A. A reduction in direct labor training
B. Poor scheduling of direct labor hours
C. Unusually lengthy machine breakdowns
D. Setting standard efficiency at a level that is too low

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