What is a standard cost?
The amount management thinks that should be incurred to produce a good or service.
Which one of the following is not an advantage of a standard costing system?
It can be used as the price at which to sell a product.
Labor quantity variances usually result from misallocation of workers.
False. The labor quantity variance relates to the efficiency of workers, not the misallocation of workers.
A variance is favorable if actual costs are
less than standard costs.
The standard rate of pay is $10 per direct labor hour. If the actual direct labor payroll was $39,200 for 4,000 direct labor hours worked, the direct labor price variance is
The formula for computing the total overhead variance is
actual overhead less overhead applied.
Which statement is correct concerning the costing of inventories at standard cost for external financial statements?
GAAP allows companies to report cost of goods sold and inventories at standard cost and to disclose the variances separately if the differences between actual and standard costing are immaterial.
In a standard costing system,
the Work in Process account is maintained exclusively on the basis of standard costs
Standards differ from budgets in that:
budgets are a total amount and standards are a unit amount.
are predetermined unit costs which companies use as measures of performance.
The advantages of standard costs include all of the following except:
management must use a static budget.
allow for rest periods, machine breakdowns, and setup time.
The setting of standards is:
a management decision.
In producing product AA, 6,300 pounds of direct materials were used at a cost of $1.10 per pound. The standard was 6,000 pounds at $1.00 per pound. The direct materials quantity variance is:
In producing product ZZ, 14,800 direct labor hours were used at a rate of $8.20 per hour. The standard was 15,000 hours at $8.00 per hour. Based on these data, the direct labor:
price variance is $2,960 unfavorable.
Which of the following is correct about the total overhead variance?
Standard hours allowed for the work done is the measure used in computing the variance.
Which of the following is incorrect about variance reports?
They should only be sent to the top level of management.
In using variance reports to evaluate cost control, management normally looks into:
(d) both favorable and unfavorable variances that exceed a predetermined quantitative measure such as a percentage or dollar amount.
Generally accepted accounting principles allow a company to:
report inventory and cost of goods sold at standard cost as long as there are no significant differences between actual and standard cost.
Which of the following is incorrect about a standard cost accounting system?
It reports only favorable variances.
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