Chapter 12 true and fales

Question 1

1. Inventories cannot be valued at standard cost in financial statements.

Answer 1

f

Question 2

2. Standard cost is the industry average cost for a particular item

Answer 2

f

Question 3

3. A standard is a unit amount, whereas a budget is a total amount.

Answer 3

t

Question 4

4. Standard costs may be incorporated into the accounts in the general ledger.

Answer 4

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Question 5

5. An advantage of standard costs is that they simplify costing of inventories and reduce clerical costs

Answer 5

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Question 6

6. Setting standard costs is relatively simple because it is done entirely by accountants.

Answer 6

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Question 7

7. Normal standards should be rigorous but attainable.

Answer 7

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Question 8

8. Actual costs that vary from standard costs always indicate inefficiencies.

Answer 8

f

Question 9

9. Ideal standards will generally result in favourable variances for the company.

Answer 9

f

Question 10

10. Normal standards incorporate normal contingencies of production into the standards

Answer 10

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Question 11

11. Once set, normal standards should not be changed during the year.

Answer 11

f

Question 12

12. In developing a standard cost for direct materials, a price factor and a quantity factor must be considered.

Answer 12

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Question 13

13. A direct labour price standard is frequently called the direct labour efficiency standard.

Answer 13

f

Question 14

14. The standard predetermined overhead rate must be based on direct labour hours as the standard activity index.

Answer 14

f

Question 15

15. Standard cost cards are the subsidiary ledger for the Work in Process account in a standard cost system.

Answer 15

f

Question 16

16. A variance is the difference between actual costs and standard costs.

Answer 16

t

Question 17

17. If actual costs are less than standard costs, the variance is favourable.

Answer 17

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Question 18

18. A materials quantity variance is calculated as the difference between the standard direct materials price and the actual direct materials price multiplied by the actual quantity of direct materials used.

Answer 18

f

Question 19

19. An unfavourable labour quantity variance indicates that the actual number of direct labour hours worked was greater than the number of direct labour hours that should have been worked for the output attained.

Answer 19

T

Question 20

20. Standard cost + price variance + quantity variance = Budgeted cost.

Answer 20

F

Question 21

21. The total overhead budget variance relates primarily to fixed overhead costs.

Answer 21

F

Question 22

22. The fixed overhead volume variance relates only to fixed overhead costs

Answer 22

T

Question 23

23. If production exceeds normal capacity, the overhead volume variance will be favourable.

Answer 23

T

Question 24

24. There could be instances where the production department is responsible for a direct materials price variance.

Answer 24

T

Question 25

25. The starting point for determining the causes of an unfavourable materials price variance is the purchasing department.

Answer 25

T

Question 26

26. A two-variance analysis of overhead consists of a spending variance and a volume variance

Answer 26

T

Question 27

27. Variance analysis facilitates the principle of “management by exception.”

Answer 27

T

Question 28

*28. A credit to a Materials Quantity Variance account indicates that the actual quantity of direct materials used was greater than the standard quantity of direct materials allowed.

Answer 28

F

Question 29

*29. A standard cost system may be used with a job order cost system but not a process cost system.

Answer 29

F

Question 30

*30. A debit to the Overhead Volume Variance account indicates that the standard hours allowed for the output produced was greater than the standard hours at normal capacity

Answer 30

F