Select the answer which best completes the statement:
(a) A purpose of standard costing is to: (1) determine the break even production level; (2) control costs; (3) eliminate the need for subjective decisions by management ; (4) allocate cost more accurately.
(b) A company employing very tight (theoretical) standards in a standard costing system should expect that : (1) a large incentive bonus will be paid; (2) most variances will be unfavorable; (3) employees will be strongly motivated to attain the standards; (4) costs will be controlled better than if lower standards were used.
(c) Of the different types of standards listed below, the one which best describes labor costs that should be incurred under forthcoming efficient operating conditions is : (1) ideal; (2) basic; (3) maximum efficiency; (4) normal.
(d) In standard costing, standard hours allowed is a means of measuring: (1) standard output at standard hours; (2) actual output at standard hours; (3) standard output at actual hours; (4) actual output at actual hours.
(e) In preparing cost report at standard for process costing: (1) equivalent units are not used; (2) equivalent units are computed using an approach that ignores inventories; (3) the actual equivalent units are multiplied by the standard cost per unit; (4) the standard equivalent units are multiplied by the actual cost per unit.
(f) In a standard cost system, the materials purchase price variance is obtained by multiplying the: (1) actual price by the difference between actual quantity purchased and standard quantity allowed; (2) actual quantity purchased by the difference between actual price and standard price; (3) standard price by the difference between standard quantity purchased and standard quantity allowed; (4) standard quantity purchased by the difference between actual price and standard price.
(g) A favorable labor efficiency variance indicates: (1) the average wage rate paid was less than the standard rate; (2) the standard labor hours allowed were greater than the actual labor hours used; (3) the actual total labor cost incurred was less than the standard labor cost allowed for the units produced; (4) the number of units produced was less than the number of units budgeted for the period.
(h) Given below are notations and their respective meanings:
AH = Actual hours
SHA = Standard hours allowed for actual production
AR = Actual rate
SR = Standard rate
The formula that represents the labor efficiency variance is: (1) SR × (AH – SHA); (2) AR × (AH – SHA); (3) AH × (AR – SR); (4) SHA × (AR – SR).
(i) The standard cost variance representing the difference between actual factory overhead incurred and budgeted factory overhead based on actual hours worked is the (1) volume variance; (2) spending variance; (3) efficiency variance; (4) quantity variance.
(j) The fixed portion of the standard factory overhead application rate is a function of a predetermined “normal” activity level. If standard hours allowed for good output equal this normal activity level for a given period, the volume variance will be: (1) zero; (2) favorable; (3) unfavorable; (4) either favorable or unfavorable, depending on the budgeted overhead.