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Standard costing and variance analysis Multiple choice questions (MCQs)
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ABOUT THIS QUIZ:
 Chapter: Standard costing and variance analysis
 Quiz Type: Multiple choice questions (MCQs)
 Number of MCQs: 23
 Total Points: 23
 Approximate Time Required: 20 – 25 minutes
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Question 1 of 23
1. Question
The term standard cost refers to the:

Question 2 of 23
2. Question
The term budgeted cost refers to the:

Question 3 of 23
3. Question
A document that records the standard cost of a single unit of product is known as:

Question 4 of 23
4. Question
The standards that require peak efficiency and do not allow any work interruptions are known as:

Question 5 of 23
5. Question
The 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?

Question 6 of 23
6. Question
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?
Correct
Awesome! Your answer is correct.
($12 + $2)* × (2 hours + 0.3 hours + 0.2 hours)**
= $14 × 2.5 hours
= $35*Standard cost includes basic wage rate and other costs associated with direct labor such as fringe benefits and employment taxes etc.
**Standard time includes basic time required to produce a unit of product and allowances for brakes, down time and rejected materials etc.
Incorrect
Your answer is incorrect. The correct answer is “$35” (option 1).
Computations:
($12 + $2)* × (2 hours + 0.3 hours + 0.2 hours)**
= $14 × 2.5 hours
= $35*Standard cost includes basic wage rate and other costs associated with direct labor such as fringe benefits and employment taxes etc.
**Standard time includes basic time required to produce a unit of product and allowances for brakes, down time and rejected materials etc.

Question 7 of 23
7. Question
Which of the following is a correct formula for computing direct materials price variance?

Question 8 of 23
8. Question
A favorable direct materials price variance occurs when:

Question 9 of 23
9. Question
The 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:
Correct
Awesome! Your answer is correct.
Computations:
Direct materials price variance = (Actual quantity purchased × Actual rate) – (Actual quantity purchased × Standard rate)
= $128,750 – (25,000 pounds × $5)
= $128,750 – $125,000
= $3,750 UnfavorableOr direct materials price variance can be computed as follows:
Direct materials price variance = Actual quantity × (Actual rate – Standard rate)
= 25,000 ponds × ($5.15* – $5.00)
= 25,000 ponds × $0.15
= $3,750 Unfavorable*Actual rate of direct materials: $128,750/25,000 ponds = $5.15
Incorrect
Your answer is incorrect. The correct answer is “$3,750 unfavorable” (option 2).
Computations:
Direct materials price variance = (Actual quantity purchased × Actual rate) – (Actual quantity purchased × Standard rate)
= $128,750 – (25,000 pounds × $5)
= $128,750 – $125,000
= $3,750 UnfavorableOr direct materials price variance can be computed as follows:
Direct materials price variance = Actual quantity × (Actual rate – Standard rate)
= 25,000 ponds × ($5.15* – $5.00)
= 25,000 ponds × $0.15
= $3,750 Unfavorable*Actual rate of direct materials: $128,750/25,000 ponds = $5.15

Question 10 of 23
10. Question
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:
Correct
Awesome! Your answer is correct.
Computations:
Direct materials quantity variance = (Actual quantity used × Standard rate) – (Standard quantity allowed × Standard rate)
= (19,750 pounds × $5) – (*20,000 pounds × $5)
= $98,750 – $100,000
= $1,250 favorableOr direct materials quantity variance can be computed as follows:
Direct materials quantity variance = Standard rate × (Actual quantity used – Standard quantity allowed)
= $5 × (19,750 pounds – 20,000 pounds)
= $5 × 250 pounds
= $1,250 favorable*5,000 units × 4 pounds per unit = 20,000 pounds
Incorrect
Your answer is incorrect. The correct answer is “$1,250 favorable” (option 4).
Computations:
Direct materials quantity variance = (Actual quantity used × Standard rate) – (Standard quantity allowed × Standard rate)
= (19,750 pounds × $5) – (*20,000 pounds × $5)
= $98,750 – $100,000
= $1,250 favorableOr direct materials quantity variance can be computed as follows:
Direct materials quantity variance = Standard rate × (Actual quantity used – Standard quantity allowed)
= $5 × (19,750 pounds – 20,000 pounds)
= $5 × 250 pounds
= $1,250 favorable*5,000 units × 4 pounds per unit = 20,000 pounds

Question 11 of 23
11. Question
The 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:
Correct
Awesome! Your answer is correct.
Computations:
Direct labor rate variance = Actual hours worked × (Actual rate – Standard rate)
= 20,000 hours × ($20.25* – $20)
= 20,000 hours × $0.25
= $5,000 unfavorable*$405,000/20,000 hours = $20.25 per hour
Incorrect
Your answer is incorrect. The correct answer is “$5,000 unfavorable” (option 1).
Computations:
Direct labor rate variance = Actual hours worked × (Actual rate – Standard rate)
= 20,000 hours × ($20.25* – $20)
= 20,000 hours × $0.25
= $5,000 unfavorable*$405,000/20,000 hours = $20.25 per hour

Question 12 of 23
12. Question
The “standard hours allowed” or “standard quantity allowed” is equal to:

Question 13 of 23
13. Question
The 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:
Correct
Awesome! Your answer is correct.
Computations:
Direct labor efficiency variance = Standard rate × (Actual hours worked – Standard hours allowed)
= $20 × (20,000 hours – *18,750 hours)
= $20 × 1,250 hours
= $25,000 unfavorable*Standard hours allowed are computed by multiplying the actual units produced by the standard hours per unit: 12,500 units × 1.5 hours
Incorrect
Your answer is incorrect. The correct answer is “$25,000 unfavorable” (option 2).
Computations:
Direct labor efficiency variance = Standard rate × (Actual hours worked – Standard hours allowed)
= $20 × (20,000 hours – *18,750 hours)
= $20 × 1,250 hours
= $25,000 unfavorable*Standard hours allowed are computed by multiplying the actual units produced by the standard hours per unit: 12,500 units × 1.5 hours

Question 14 of 23
14. Question
Which of the following cannot be a reason of unfavorable direct materials price variance?

Question 15 of 23
15. Question
Which of the following cannot be a reason of unfavorable direct materials quantity variance?

Question 16 of 23
16. Question
Which of the following is not likely to be a reason of unfavorable direct labor rate variance?

Question 17 of 23
17. Question
Which of the following is not likely to be a reason of unfavorable direct labor efficiency variance?

Question 18 of 23
18. Question
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:
Correct
Awesome! Your answer is correct.
Computations:
Direct labor rate variance = (AH × AR) – (AH × SR)
$450* = $39,550 – (AH × $10)
$450 – $39,550 = $10AH
$40,000 = $10AH
AH = $40,000/$10
AH = 4,000 hoursAH = Actual hours
AR = Actual rate
SR = Standard rate*The negative sign () indicates a favorable variance because a favorable variance means less production cost than expected.
Incorrect
Your answer is incorrect. The correct answer is “4,000 hours” (option 2).
Computations:
Direct labor rate variance = (AH × AR) – (AH × SR)
$450* = $39,550 – (AH × $10)
$450 – $39,550 = $10AH
$40,000 = $10AH
AH = $40,000/$10
AH = 4,000 hoursAH = Actual hours
AR = Actual rate
SR = Standard rate*The negative sign () indicates a favorable variance because a favorable variance means less production cost than expected.

Question 19 of 23
19. Question
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:
Correct
Awesome! Your answer is correct.
Computations:
Direct labor efficiency variance = (AH × SR) – (SH × SR)
$1,000* = $25,000 – (SH × $10)
$1,000 – $25,000 = $10SH
$26,000 = $10SH
SH = $26,000/$10
SH = 2,600 hoursAH = Actual hours
SR = Standard rate
SH = Standard hours*The negative sign () indicates a favorable variance because a favorable variance means less production cost than expected.
Incorrect
Your answer is incorrect. The correct answer is “2,600 hours” (option 4).
Computations:
Direct labor efficiency variance = (AH × SR) – (SH × SR)
$1,000* = $25,000 – (SH × $10)
$1,000 – $25,000 = $10SH
$26,000 = $10SH
SH = $26,000/$10
SH = 2,600 hoursAH = Actual hours
SR = Standard rate
SH = Standard hours*The negative sign () indicates a favorable variance because a favorable variance means less production cost than expected.

Question 20 of 23
20. Question
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:
Correct
Awesome! Your answer is correct.
Computations:
Direct labor efficiency variance = (AH × SR) – (SH × SR)
$2,000 = $42,000 – (2,000 × SR)
$2,000 – $42,000 = 2,000SR
$40,000 = 2,000SR
SR = $40,000/2,000
SR = $20 per hourAH = Actual hours
SR = Standard rate
SH = Standard hoursIncorrect
Your answer is incorrect. The correct answer is “$20 per hour” (option 2).
Computations:
Direct labor efficiency variance = (AH × SR) – (SH × SR)
$2,000 = $42,000 – (2,000 × SR)
$2,000 – $42,000 = 2,000SR
$40,000 = 2,000SR
SR = $40,000/2,000
SR = $20 per hourAH = Actual hours
SR = Standard rate
SH = Standard hours 
Question 21 of 23
21. Question
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:
Correct
Awesome! Your answer is correct.
Computations:
Variable manufacturing overhead rate variance = (Actual hours × Actual rate) – (Actual hours × Standard rate)
= (3,000 hours × $12.2) – (3,000 hours × $12.3)
= $36,600 – $36,900
= $300 favorableOr we can compute the above variance by using factored formula as follows:
Variable manufacturing overhead rate variance = Actual hours × (Actual rate – Standard rate)
= 3,000 hours × ($12.2 – $12.3)
= 3,000 hours × $0.1
= $300 favorableIncorrect
Your answer is incorrect. The correct answer is “$300 favorable” (option 4).
Computations:
Variable manufacturing overhead rate variance = (Actual hours × Actual rate) – (Actual hours × Standard rate)
= (3,000 hours × $12.2) – (3,000 hours × $12.3)
= $36,600 – $36,900
= $300 favorableOr we can compute the above variance by using factored formula as follows:
Variable manufacturing overhead rate variance = Actual hours × (Actual rate – Standard rate)
= 3,000 hours × ($12.2 – $12.3)
= 3,000 hours × $0.1
= $300 favorable 
Question 22 of 23
22. Question
Variable manufacturing overhead rate variance is also known as:

Question 23 of 23
23. Question
The 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:
Correct
Awesome! Your answer is correct.
Computations:
Variable manufacturing overhead efficiency variance = (Actual hours × Standard overhead rate) – (Standard hours × Standard overhead rate)
= (4,100 hours × $20) – (*4,000 hours × $20)
= $82,000 – $80,000
= 2,000 unfavorableOr we can compute above variance using factored formula as follows:
Variable manufacturing overhead efficiency variance = Standard overhead rate × (Actual hours – Standard hours)
= $20 × (4,100 hours – *4,000 hours)
= $20 × 100 hours
= $2,000 hours*Standard hours allowed for actual production:
The standard time to complete one unit is 20 minutes. Therefore, the standard time to complete 12,000 units would be 240,000 minutes or 4,000 hours as computed below:
12,000 units × 20 minutes = 240,000 minutes
240,000 minutes/60 = 4,000 hoursIncorrect
Your answer is incorrect. The correct answer is “$2,000 unfavorable” (option 3).
Computations:
Variable manufacturing overhead efficiency variance = (Actual hours × Standard overhead rate) – (Standard hours × Standard overhead rate)
= (4,100 hours × $20) – (*4,000 hours × $20)
= $82,000 – $80,000
= 2,000 unfavorableOr we can compute above variance using factored formula as follows:
Variable manufacturing overhead efficiency variance = Standard overhead rate × (Actual hours – Standard hours)
= $20 × (4,100 hours – *4,000 hours)
= $20 × 100 hours
= $2,000 hours*Standard hours allowed for actual production:
The standard time to complete one unit is 20 minutes. Therefore, the standard time to complete 12,000 units would be 240,000 minutes or 4,000 hours as computed below:
12,000 units × 20 minutes = 240,000 minutes
240,000 minutes/60 = 4,000 hours
good