ELECTIVE PRELIMS

Question 1

Standard costs are predetermined or _____ set by management for various purposes like product
costing, pricing, budgeting, cost control, motivation, and performance measurement.

Answer 1

targeted costs

Question 2

Standards are similar to budgeted amounts stated on a ___ basis, but standards differ from budgets in that they actually appear in general ledger accounts, while budgeted amounts do not.

Answer 2

per unit

Question 3

Because of the impact of the fixed costs in most businesses, a standard costing system is usually not effective unless the company uses a _____ system.

Answer 3

flexible budgeting

Question 4

presume perfect efficiency and 100% capacity and hence not useful for control purposes as they are not practically attainable.

Answer 4

IDEAL/THEORETICAL Standards

Question 5

based on higher-than-average levels of efficiency, but are clearly achievable and hence typically used for employee motivation, product costing and budgeting.

Answer 5

CURRENTLY ATTAINABLE/PRACTICAL Standards

Question 6

Standards based on historical information are ___ as this practice may perpetuate past inefficiencies.

Answer 6

not used

Question 7

Standards can be used in both

Answer 7

process costing and job-order costing systems

Question 8

usually indicates the quantity of raw materials or labor time required to produce a unit of product. This is normally expressed per unit of
output

Answer 8

Quantity Standard

Question 9

usually indicates what the peso amount of the quantity standard should be. This is normally expressed per unit of input

Answer 9

Cost Standard

Question 10

Standard costs are systematically ___ costs established by management to be used as a basis for comparison with actual cost.

Answer 10

pre-determined

Question 11

When standard costs are used for inventory valuation, variances are:

written-off to cost of goods sold

Answer 11

If immaterial/insignificant

Question 12

When standard costs are used for inventory valuation, variances are:

allocated to ending working-process, finished goods, and cost of goods sold

Answer 12

If material/significant

Question 13

Under _____, managers focus attention on results that materially deviate from expectations. Results that are close to expectations (e.g.bimmaterial variances) do not require investigation.

Answer 13

management by exception

Question 14

Materials Quantity Variance (MQV) =

Answer 14

(AQ – SQ) SO

Question 15

Materials Price Variance (MPV) =

Answer 15

AQ (AP – SP)

Question 16

Labor Efficiency Variance (LEV) =

Answer 16

(AH – SH) SR

Question 17

Labor Rate Variance (LRV) =

Answer 17

AH (AR – SR

Question 18

Materials Mix Variance (MMV) =

Answer 18

(AQ x SP) – TAQASP

Question 19

Materials Yield Variance (MYV) =

Answer 19

TAQASP – Standard Costs

Question 20

Mix and yield variances may also apply to ____ specifically in situations where various labor skills are required to produce units of products.

Answer 20

direct labor

Question 21

Materials PRICE variance (MPV) is also known as:

Answer 21

Materials spending variance, materials rate variance, materials money variance

Question 22

Materials QUANTITY variance (MQV) is also known as:

Answer 22

Materials usage variance, materials efficiency variance

Question 23

Materials usage variance is a ___ variance while materials price usage variance is a ___ variance.

Answer 23

quantity
price

Question 24

Labor RATE variance (LRV) is also known as:

Answer 24

Labor price variance, labor spending variance, labor money variance

Question 25

Labor EFFICIENCY variance (LEV) is also known as:

Answer 25

Labor hours variance, labor usage variance, labor quantity variance, labor time variance

Question 26

Labor efficiency variance excludes ___ spent in the production. If any, ___ is separately explained through the ____ Variance, which is regarded as unfavorable.

Answer 26

idle time

Question 27

IDLE TIME variance =

Answer 27

Idle Time x Standard Labor Rate

Question 28

The term capacity variance is also used to mean the

Answer 28

volume variance.

Question 29

➢ AFOH > SFOH (applied FOH):

Answer 29

FOH is under-applied, indicating an unfavorable variance

Question 30

SFOH (applied FOH) > AFOH:

Answer 30

FOH is over-applied, indicating a favorable variance.

Question 31

Volume variance is actually the ____ variance; there is no such thing as a variable volume or variable capacity variance.

Answer 31

fixed volume

Question 32

FOH Efficiency Variance is actually the

Answer 32

Variable FOH Efficiency Variance

Question 33

Other than ‘BAAH – BASH,’
variable overhead efficiency variance may also be computed based on:

Answer 33

Change in hours x variable FOH rate = (AH – SH) VR

Question 34

Variable FOH Variances =

Answer 34

Variable Spending Variance + (variable) Efficiency Variance

Question 35

Fixed FOH Variances =

Answer 35

Fixed Spending Variance + (fixed) Volume Variance

Question 36

IDLE capacity variance:

Answer 36

BAAH – (AH x SR)

Question 37

TOTAL efficiency variance:

Answer 37

∆H x SR

Question 38

The Manufacturing Efficiency Variance incorporates the effect of both FOH Efficiency Variance and Labor Efficiency Variance. In some cases, the ____ variance may also be included.

Answer 38

material quantity

Question 39

Production or Manufacturing Cost Variance =

Answer 39

DM Variance + DL Variance + FOH Variance

Question 40

PRICE Factor = Sales price variance =

Answer 40

AQ x Δ SP = AQ (Actual SP – Budgeted SP)

Question 41

COST Factor = Cost price variance =

Answer 41

AQ x Δ CP = AQ (Actual CP – Budgeted CP)

Question 42

VOLUME Factor =

Answer 42

ΔQ x Budgeted Unit GP = (AQ – BQ) x Budgeted Unit GP

Question 43

Sales volume variance =

Answer 43

ΔQ x Budgeted SP

Question 44

Cost volume variance =

Answer 44

ΔQ x Budgeted CP