Chapter 23 Practice Materials.doc

Chapter 23/Performance Evaluation Using Variances From Standard Costs F 243Chapter 23Performance Evaluation Using Variances From Standard CostsMULTIPLE CHOICE1.Which of the following conditions normally would not indicate that standard costs should be revised?a.The engineering department has revised product specifications in responding to customer suggestions.b.The company has signed a new union contract which increases the factory wages on average by $2.00 an hour.c.Actual costs differed from standard costs for the preceding week.d.The world price of raw materials increased.ANS: CDIF: DifficultOBJ: 23-01NAT: AACSB Analytic | IMA-Performance Measurement2.Standards that represent levels of operation that can be attained with reasonable effort are called:a.theoretical standardsb.ideal standardsc.variable standardsd.normal standardsANS: DDIF: DifficultOBJ: 23-01NAT: AACSB Analytic | IMA-Performance Measurement3.Manufacturing companies use standard costs for the following except:a.Variable costsb.Direct Materialsc.Direct Labord.Factory OverheadANS: ADIF: EasyOBJ: 23-01NAT: AACSB Analytic | IMA-Performance Measurement4.Standard costs are used in companies for a variety of reasons. Which of the following is not one of the benefits for using standard costs?a.Used to indicate where changes in technology and machinery need to be made.b.Used to value inventoryc.Used to plan direct materials, direct labor, and factory manufacturing cost.d.Used to control costs.ANS: ADIF: EasyOBJ: 23-01NAT: AACSB Analytic | IMA-Performance Measurement5.The principle of exceptions allows managers toa.focus on correcting variances between standard costs and actual costs.b.focus on correcting variances between variable costs and actual costs.c.focus on correcting variances between competitors costs and actual costs.d.focus on correcting variances between competitors costs and standard costs.ANS: ADIF: EasyOBJ: 23-01NAT: AACSB Analytic | IMA-Performance Measurement6.Several people play an essential part in setting standards. Which of the following is incorrect as to setting standards?a.Accountants expresses judgement in dollars and cents.b.Engineers identify material, labor, and machine requirements.c.Human resource managers provide personnel information.d.Quality managers provide quality measures that will be used to evaluate rejects.ANS: DDIF: ModerateOBJ: 23-01NAT: AACSB Analytic | IMA-Performance Measurement7.Periodic comparisons between planned objectives and actual performance are reported in:a.zero-base reportsb.budget performance reportsc.master budgetsd.budgetsANS: BDIF: EasyOBJ: 23-02NAT: AACSB Analytic | IMA-Performance Measurement8.The standard price and quantity of direct materials are separated because:a.GAAP reporting requires this separationb.direct materials prices are controlled by the purchasing department, and quantity used is controlled by the production departmentc.standard quantities are more difficult to estimate than standard pricesd.standard prices change more frequently than standard quantitiesANS: BDIF: EasyOBJ: 23-02NAT: AACSB Analytic | IMA-Performance Measurement9.Standard costs are divided into which of the following components?a.Price Standard and Quantity Standardb.Materials Standard and Labor Standardc.Quality Standard and Quantity Standardd.Price Standard and Quantity StandardANS: DDIF: EasyOBJ: 23-02NAT: AACSB Analytic | IMA-Performance Measurement10.A favorable cost variance occurs whena.Actual costs are more than standard costs.b.Standard costs are more than actual costs.c.Standard costs are less than actual costs.d.None of the above.ANS: BDIF: EasyOBJ: 23-02NAT: AACSB Analytic | IMA-Performance Measurement11.Total manufacturing cost variance includes:a.Direct materials price variance, direct labor cost variance, and fixed factory overhead volume varianceb.Direct materials cost variance, direct labor rate variance, and factory overhead cost variancec.Direct materials cost variance, direct labor cost variance, variable factory overhead controllable varianced.Direct materials cost variance, direct labor cost variance, factory overhead cost varianceANS: DDIF: ModerateOBJ: 23-02NAT: AACSB Analytic | IMA-Performance Measurement12.Which of the following is not a reason standard costs are separated in two components?a.the price and quantity variances need to be identified separately to correct the actual major differences.b.identifying variances determines which manager must find a solution to major discrepancies.c.if a negative variance is over-shadowed by a favorable variance, managers may overlook potential corrections.d.variances brings attention to discrepancies in the budget and requires managers to revise budgets closer to actual.ANS: DDIF: DifficultOBJ: 23-02NAT: AACSB Analytic | IMA-Performance Measurement13.The standard costs and actual costs for direct materials for the manufacture of 2,500 actual units of product are as follows:Standard CostsDirect materials (per completed unit)1.04 kilograms $8.75Actual CostsDirect materials2,500 kilograms $8The amount of direct materials price variance is:a.$1,875 unfavorableb.$1,950 favorablec.$1,875 favorabled.$1,950 unfavorableANS: CDIF: ModerateOBJ: 23-03NAT: AACSB Analytic | IMA-Performance Measurement14.The standard costs and actual costs for direct materials for the manufacture of 2,500 actual units of product are as follows:Standard CostsDirect materials2,500 kilograms $8Actual CostsDirect materials2,600 kilograms $8.75The amount of the direct materials quantity variance is:a.$875 favorableb.$800 unfavorablec.$800 favorabled.$875 unfavorableANS: BDIF: ModerateOBJ: 23-03NAT: AACSB Analytic | IMA-Performance MeasurementThe following data relate to direct materials costs for November:Actual costs4,600 pounds at $5.50Standard costs4,500 pounds at $6.0015.What is the direct materials price variance?a.$2,250 favorableb.$2,250 unfavorablec.$2,300 favorabled.$1,700 unfavorableANS: CDIF: ModerateOBJ: 23-03NAT: AACSB Analytic | IMA-Performance Measurement16.What is the direct materials quantity variance?a.$550 unfavorableb.$600 favorablec.$550 favorabled.$600 unfavorableANS: DDIF: ModerateOBJ: 23-03NAT: AACSB Analytic | IMA-Performance Measurement17.If the actual quantity of direct materials used in producing a commodity differs from the standard quantity, the variance is termed:a.controllable varianceb.price variancec.quantity varianced.rate varianceANS: CDIF: EasyOBJ: 23-03NAT: AACSB Analytic | IMA-Performance Measurement18.If the price paid per unit differs from the standard price per unit for direct materials, the variance is termed:a.variable varianceb.controllable variancec.price varianced.volume varianceANS: CDIF: EasyOBJ: 23-03NAT: AACSB Analytic | IMA-Performance MeasurementThe following data is given for the Walker Company:Budgeted production1,000 unitsActual production980 unitsMaterials:Standard price per lb$2.00Standard pounds per completed unit12Actual pounds purchased and used in production11,800Actual price paid for materials$23,000Labor:Standard hourly labor rate$14 per hourStandard hours allowed per completed unit4.5Actual labor hours worked4,560Actual total labor costs$62,928Overhead:Actual and budgeted fixed overhead$27,000Standard variable overhead rate$3.50 per standard labor hourActual variable overhead costs$15,500Overhead is applied on standard labor hours.19.The direct material price variance is:a.600Fb.600Uc.80Fd.80UANS: ADIF: ModerateOBJ: 23-03NAT: AACSB Analytic | IMA-Performance Measurement20.The direct material quantity variance is:a.600Fb.600Uc.80Fd.80UANS: DDIF: ModerateOBJ: 23-03NAT: AACSB Analytic | IMA-Performance MeasurementThe following data is given for the Walker Company:Budgeted production26,000 unitsActual production27,500 unitsMaterials:Standard price per ounce$6.50Standard ounces per completed unit8Actual ounces purchased and used in production228,000Actual price paid for materials$1,504,800Labor:Standard hourly labor rate$22 per hourStandard hours allowed per completed unit6.6Actual labor hours worked183,000Actual total labor costs$4,020,000Overhead:Actual and budgeted fixed overhead$1,029,600Standard variable overhead rate$24.50 per standard labor hourActual variable overhead costs$4,520,000Overhead is applied on standard labor hours.21.The direct material price variance is:a.22,800Ub.22,800Fc.52,000Ud.52,000FANS: ADIF: ModerateOBJ: 23-03NAT: AACSB Analytic | IMA-Performance Measurement22.The direct material quantity variance is:a.22,800Fb.22,800Uc.52,000Fd.52,000UANS: DDIF: ModerateOBJ: 23-03NAT: AACSB Analytic | IMA-Performance MeasurementThe Joyner Corporation purchased and used 126,000 board feet of lumber in production, at a total cost of $1,449,000. Original production had been budgeted for 22,000 units with a standard material quantity of 5.5 board feet per unit and a standard price of $12 per board foot. Actual production was 23,000 units.23.Compute the material price variance.a.63,000Fb.63,000Uc.6,000Fd.6,000UANS: ADIF: ModerateOBJ: 23-03NAT: AACSB Analytic | IMA-Performance Measurement24.Compute the material quantity variance.a.63,000Fb.63,000Uc.6,000Fd.6,000UANS: CDIF: ModerateOBJ: 23-03NAT: AACSB Analytic | IMA-Performance Measurement25.If the wage rate paid per hour differs from the standard wage rate per hour for direct labor, the variance is termed:a.variable varianceb.rate variancec.quantity varianced.volume varianceANS: BDIF: EasyOBJ: 23-03NAT: AACSB Analytic | IMA-Performance Measurement26.If the actual direct labor hours spent producing a commodity differ from the standard hours, the variance is termed:a.time varianceb.price variancec.quantity varianced.rate varianceANS: ADIF: EasyOBJ: 23-03NAT: AACSB Analytic | IMA-Performance Measurement27.The following data relate to direct labor costs for the current period:Standard costs7,500 hours at $11.60Actual costs6,000 hours at $12.00What is the direct labor time variance?a.$3,000 favorableb.$15,000 unfavorablec.$2,400 favorabled.$17,400 favorableANS: DDIF: ModerateOBJ: 23-03NAT: AACSB Analytic | IMA-Performance Measurement28.The following data relate to direct labor costs for the current period:Standard costs6,000 hours at $12.00Actual costs7,500 hours at $11.60What is the direct labor rate variance?a.$15,000 unfavorableb.$3,000 favorablec.$17,400 unfavorabled.$2,400 favorableANS: BDIF: ModerateOBJ: 23-03NAT: AACSB Analytic | IMA-Performance Measurement29.The following data relate to direct labor costs for the current period:Standard costs9,000 hours at $5.50Actual costs8,750 hours at $5.75What is the direct labor rate variance?a.$2,250.00 unfavorableb.$2,187.50 unfavorablec.$1,438.00 favorabled.$1,375.00 favorableANS: BDIF: ModerateOBJ: 23-03NAT: AACSB Analytic | IMA-Performance Measurement30.The following data relate to direct labor costs for the current period:Standard costs36,000 hours at $22.50Actual costs35,000 hours at $23.00What is the direct labor time variance?a.$17,500 unfavorableb.$18,000 unfavorablec.$5,000 favorabled.$22,500 favorableANS: DDIF: ModerateOBJ: 23-03NAT: AACSB Analytic | IMA-Performance Measurement31.The standard costs and actual costs for direct labor for the manufacture of 2,500 actual units of product are as follows:Standard CostsDirect labor7,500 hours $12Actual CostsDirect labor7,400 hours $11.40The amount of the direct labor rate variance is:a.$4,440 unfavorableb.$4,500 favorablec.$4,440 favorabled.$4,500 unfavorableANS: CDIF: ModerateOBJ: 23-03NAT: AACSB Analytic | IMA-Performance Measurement32.The standard costs and actual costs for direct materials, direct labor, and factory overhead for the manufacture of 2,500 units of product are as follows:Standard CostsDirect labor7,500 hours $12Actual CostsDirect labor7,400 hours $11.40The amount of the direct labor time variance is:a.$1,200 favorableb.$1,140 unfavorablec.$1,200 unfavorabled.$1,140 favorableANS: ADIF: ModerateOBJ: 23-03NAT: AACSB Analytic | IMA-Performance MeasurementThe following data relate to direct labor costs for February:Actual costs7,700 hours at $13Standard costs7,000 hours at $933.What is the direct labor time variance?a.$9,100 favorableb.$9,100 unfavorablec.$6,300 unfavorabled.$6,300 favorableANS: CDIF: ModerateOBJ: 23-03NAT: AACSB Analytic | IMA-Performance Measurement34.What is the direct labor rate variance?a.$28,000 favorableb.$28,000 unfavorablec.$30,800 favorabled.$30,800 unfavorableANS: DDIF: ModerateOBJ: 23-03NAT: AACSB Analytic | IMA-Performance MeasurementThe following data is given for the Walker Company:Budgeted production1,000 unitsActual production980 unitsMaterials:Standard price per lb$2.00Standard pounds per completed unit12Actual pounds purchased and used in production11,800Actual price paid for materials$23,000Labor:Standard hourly labor rate$14 per hourStandard hours allowed per completed unit4.5Actual labor hours worked4,560Actual total labor costs$62,928Overhead:Actual and budgeted fixed overhead$27,000Standard variable overhead rate$3.50 per standard labor hourActual variable overhead costs$15,500Overhead is applied on standard labor hours.35.The direct labor rate variance is:a.912Ub.912Fc.2,100Ud.2,100FANS: BDIF: ModerateOBJ: 23-03NAT: AACSB Analytic | IMA-Performance Measurement36.The direct labor time variance is:a.912Fb.912Uc.2,100Ud.2,100FANS: CDIF: ModerateOBJ: 23-03NAT: AACSB Analytic | IMA-Performance MeasurementThe following data is given for the Walker Company:Budgeted production26,000 unitsActual production27,500 unitsMaterials:Standard price per ounce$6.50Standard ounces per completed unit8Actual ounces purchased and used in production228,000Actual price paid for materials$1,504,800Labor:Standard hourly labor rate$22 per hourStandard hours allowed per completed unit6.6Actual labor hours worked183,000Actual total labor costs$4,020,000Overhead:Actual and budgeted fixed overhead$1,029,600Standard variable overhead rate$24.50 per standard labor hourActual variable overhead costs$4,520,000Overhead is applied on standard labor hours.37.The direct labor rate variance is:a.6,000Ub.6,000Fc.33,000Fd.33,000UANS: BDIF: DifficultOBJ: 23-03NAT: AACSB Analytic | IMA-Performance Measurement38.The direct labor time variance is:a.6,000Fb.6,000Uc.33,000Ud.33,000FANS: CDIF: DifficultOBJ: 23-03NAT: AACSB Analytic | IMA-Performance MeasurementThe Joyner Corporation had 8,000 actual direct labor hours at an actual rate of $12.20 per hour. Original production had been budgeted for 1,100 units, but only 1,000 units were actually produced. Labor standards were 7.5 hours per completed unit at a standard rate of $13 per hour.39.Compute the labor rate variance.a.6,400Ub.6,400Fc.6,500Ud.6,500UANS: BDIF: ModerateOBJ: 23-03NAT: AACSB Analytic | IMA-Performance Measurement40.Compute the labor time variance.a.6,400Fb.6,400Uc.6,500Ud.6,500FANS: CDIF: ModerateOBJ: 23-03NAT: AACSB Analytic | IMA-Performance MeasurementStandardActualMaterial Cost Per Yard$2.00$2.04Standard Yards per Unit5 yards4.75 yardsUnits of Production9,45041.Calculate the Total Direct Materials cost variance using the above information:a.$2,929.50 Unfavorableb.$2,929.50 Favorablec.$3,780.00 Unfavorabled.$3,562.50 FavorableANS: BDIF: EasyOBJ: 23-03NAT: AACSB Analytic | IMA-Performance Measurement42.Calculate the Total Direct Materials Price variance using the above information:a.$1,795.50 Favorableb.$378 Favorablec.$1,795.50 Unfavorabled.$378 UnfavorableANS: CDIF: EasyOBJ: 23-03NAT: AACSB Analytic | IMA-Performance Measurement43.Calculate the Total Direct Materials Quantity variance using the above information:a.$2,929.50 Unfavorableb.$2,929.50 Favorablec.$4,725 Unfavorabled.$4,725 FavorableANS: DDIF: EasyOBJ: 23-03NAT: AACSB Analytic | IMA-Performance MeasurementStandardActualRate$12.00$12.25Hours18,90017,955Units of Production9,45044.Calculate the Direct Labor Variance using the above informationa.$6,851.25 Favorableb.$6,851.25 Unfavorablec.$2,362.50 Unfavorabled.$2,362.50 FavorableANS: ADIF: EasyOBJ: 23-03NAT: AACSB Analytic | IMA-Performance Measurement45.Calculate the Direct Labor Time Variance using the above informationa.$2,362.50 Favorableb.$2,362,50 Unfavorablec.$11,340.00 Favorabled.$11,340.00 UnfavorableANS: CDIF: EasyOBJ: 23-03NAT: AACSB Analytic | IMA-Performance Measurement46.Calculate the Direct Labor Rate