Standard costing and variance analysis

Multiple choice questions (MCQs) quiz

1. The term standard cost refers to the:

2. The term budgeted cost refers to the:

3. A document that records the standard cost of a single unit of product is known as:

4. The standards that require peak efficiency and do not allow any work interruptions are known as:

5. Three Star Company produces a product known as product X. The company uses a standard costing system and provides you the following information:

• Direct materials required to produce one unit of product X: 6 pounds
• Standard cost of direct materials: $10 per pound
• Normal wastage while producing one unit of product X: 0.5 pounds

Based on the above information, what is the standard direct materials cost per unit of product X?

6. The following information belongs to John Manufacturing Company that uses a standard costing system:

• Basic wage rate: $12 per hour
• Fringe benefits: $2 per hour
• Basic time: 2 hours per unit
• Allowance for down time: 0.3 hours per unit
• Allowance for brakes: 0.2 hours per unit

Based on the above information, what is the standard direct labor cost per unit?

7. Which of the following is a correct formula for computing direct materials price variance?

8. A favorable direct materials price variance occurs when the actual rate of direct materials is:

9. Ali BaBa Company uses a standard costing system. The company established the following direct materials cost standards for one unit of product K:

During the month of January, Ali BaBa purchased 25,000 ponds of materials at a cost of $128,750 and used 10,250 ponds of materials to produce 2,500 units of product K. The direct materials price variance for January was:

10. The Crescent Manufacturing company established the following direct materials cost standards for one unit of product X:

During the month of June, the company purchased 40,000 pounds of direct materials at a cost of $199,200 and produced 5,000 units of product X using 19,750 pounds of direct materials. The direct materials quantity variance for June was:

11. Carl Care Company established the following direct labor cost standards for one unit of product Z:

• Standard hours: 1.5 hours
• Standard rate: $20 per hour
• Standard cost: $30 (1.5 hours @ $20 per hour)

During the month of July, 20,000 direct labor hours were worked and 12,500 units of product Z were manufactured. The total wages related to direct labor in July were $405,000. The direct labor rate variance for July was:

12. The “standard hours allowed” or “standard quantity allowed” is equal to:

13. Carl Care Company established the following direct labor cost standards for one unit of product Z:

• Standard hours: 1.5 hours
• Standard rate: $20 per hour
• Standard cost: $30 (1.5 hours @ $20 per hour)

During the month of July, 20,000 direct labor hours were worked and 12,500 units of product Z were manufactured. The total wages related to direct labor in July were $405,000. The direct labor efficiency variance for July was:

14. Which of the following cannot be a reason of unfavorable direct materials price variance?

15. Which of the following cannot be a reason of unfavorable direct materials quantity variance?

16. Which of the following is not likely to be a reason of unfavorable direct labor rate variance?

17. Which of the following is not likely to be a reason of unfavorable direct labor efficiency variance?

18. During the month of December actual direct labor cost amounted to $39,550, the standard direct labor rate was $10 per hour and the direct labor rate variance amounted to $450 favorable. The actual direct labor hours worked were:

19. During the month of January, the standard cost of actual hours worked amounted to $25,000, the standard direct labor rate was $10 per hour and the direct labor efficiency variance amounted to $1,000 favorable. The standard hours allowed for actual production were:

20. During the month of January, the standard cost of actual hours worked amounted to $42,000, the standard hours allowed for actual production were 2,000 and the direct labor efficiency variance amounted to $2,000 unfavorable. The standard direct labor rate per hour was:

21. You are provided the following information for December 2017:

• Actual direct labor hours used: 3,000
• Standard direct labor hours allowed: 2,950
• Actual variable manufacturing overhead rate: $12.20/direct labor hour
• Standard variable manufacturing overhead rate: $12.30/direct labor hour

Based on the above information, the variable manufacturing overhead rate variance is:

22. Variable manufacturing overhead rate variance is also known as:

23. Mexico Company’s standard variable manufacturing overhead rate was $20 per hour calculated on the basis of machine hours. According to standards, the company took 1 hour to complete three units (i.e., 20 minutes per unit). During the month of June, the company operated for 4,100 hours and manufactured 12,000 units of product. The actual variable manufacturing overhead for June was $85,000.

On the basis of above data, the variable manufacturing overhead efficiency variance for June was: