Final Accounting 24

Question 1

What are standard costs?

Answer 1

Predetermined unit costs which companies use as measures of performance?

Question 2

What are advantages of standard costs?

Answer 2

Facilitate management planning promote greater economy by making employees more cost conscious Useful in settling , selling prices contribute to management control by providing basis for evaluation of cost control useful and highlighting variances in management by exception , simplify costing of internUseful in settling, selling prices contribute to management control by providing basis for evaluation of cost control useful and highlighting variances in management by exception, simplify costing of inventories And reduce clerical costs.

Question 3

What is the difference between a standard and a budget

Answer 3

Both are predetermined costs.Both contribute to management planning and control

He standard is a unit amount
Ex standard cost cost per unit

.A budget is a total amount

Question 4

What is?
An ideal standard

Answer 4

Represents an optimal levels of performance under perfect operating conditions.

Question 5

What are normal standards

Answer 5

Represent efficient levels of performance that are attainable under expected operating conditions

Question 6

What is the direct materials price standard

Answer 6

Cost per finished unit of product of direct material that should be incurred.

Based on the purchasing department’s best estimate of the cost of raw materialsthe cost is frequently based on current purchase prices. The price standard also includes an amount for related costs such as receiving storing and handling.

Question 7

What is direct materials quantity standard

Answer 7

The quantity of direct materials that management determines should be used per unit of finished goods

Express as a physical measure such as pounds barrels or board feet

Considers both quality and quantity of materials required to manufacture. The product standard includes allowances for unavoidable waste and normal spoilage.

Question 8

What is?
The direct labor’s price standard

Answer 8

The rate per hour that should be encured for direct labor

Based on current wages adjusted for anticipatedchanges such as cost of living adjustments
Generally includes employer, payroll taxes and French benefits such as paid holidays and vacations.

Question 9

What is direct labor quantity standard

Answer 9

The time that management determines should be required to make one unit of the product.

Critical and labor-intensive companies. Allowances should be made in the standard for rest periods. Clean up machine set up and machine downtime.

Question 10

What is standard predetermined overhead rate

Answer 10

Used for manufacturing overhead.It is determined by dividing Budgeted overhead costs by an expected standard activity indexmaybe direct labor hours or standard machine hours.

Question 11

What is normal capacity

Answer 11

The average activity output that a company should experience Over the long run

Question 12

What is the standard cost per unit

Answer 12

The sum of the standard cost of direct materials Direct labor And manufacturing overhead

Question 13

What are variances

Answer 13

The difference is between total actual costs and total standard costs.
Also, used to indicate differences between total budgeted and total actual cost.

Question 14

What makes a variance unfavorable

Answer 14

When actual cost exceeds standard cost

It reduces profit.It’s suggests the company pay too much 41 or more of the manufacturing cost components or that it used the components ineffectively

Question 15

What makes a variance favorable

Answer 15

If actual costs are less than standard costs.
Increases profit and suggests Efficiencies and incurring manufacturing costs and in using direct materials direct labor in manufacturing overhead.

Question 16

What is total materials variance

Answer 16

Computed as the difference between the amount paid actual quantity times actual price and the amount That should have been paid Based on standards standard quantity times standard price of materials

Question 17

What is material’s price variance

Answer 17

Computed as the difference between the actual amount paid actual Quantity of material times actual price and the standard amount that should have been paid for the materials used actual quantity of material times standard price.

Question 18

What is materials quantity variance

Answer 18

Computed as the difference between the standard cost of the Actual quantity actual quantity times standard price and the standard cost of the amount that should have been used standard quantity times standard price for materials

Question 19

What is a matrix and analyzing a variance

Answer 19

The matrix provides a convenient structure for determining each variance

A company computes the amounts using the equations for each cost component first then Computer the variances

Question 20

What is total labor variance

Answer 20

The difference between the amount actually paid for labor actual hours times actual rate And the amount that should have been paid standard hours times standard rate for labor

Question 21

What is labor price variance

Answer 21

Computed as the difference between the actual amount paid actual hours times actual rate and the amount That should have been paid for the number of hours worked actual hours times standard rate for labor.

Question 22

What is labor quantity variance

Answer 22

Computed as the difference between the amount that should have been paid for the hours worked actual hours times standard rate And the amount that should have been paid for the amount of hours that should have been worked standard hours times standard rate for labor

Question 23

What is total overhead variance

Answer 23

The difference between the actual overhead cost and overhead costs applied based on standard hours allowed for the amount of goods produced

Question 24

What are standard hours allowed

Answer 24

The hours that should have been worked for the units produced.

Question 25

What is a balanced scorecard

Answer 25

Incorporates financial and non financial measures and an integrated system that links performance measurements with a company's goals The balance scorecard evaluates Company performance from a series of perspectives Financial customer internal process learning And growth prespectives

Question 26

what are financial prespectives

Answer 26

the most traditional iew of the company, it employs financial measures of performance used by most firms

Question 27

what are customer prespectives

Answer 27

evaluates the company from the viewpoints of those people who buy its products or services. this view compares the company to competitors in terms of price, quality, product innovation, customer service, and other dimensions

Question 28

what are internal process perspectives

Answer 28

evaluate the internal operating processes critical to success. all critical aspects of the value chain including product development, production, delivery, and after- sale service are evaluated to ensure that the company is operating effectively and efficiently

Question 29

what are learning and growth perspectives

Answer 29

evaluates how well the company developes and retauns its employees. this would include evaluation of such things as employee skills, employee satisfaction, training, programs, and information dissememination

Question 30

what does a balance score card do

Answer 30

employs both financial and nonfinancial measures creates linkages so that- high-level corporate goals can be communicated all the way down to the shop provides measurable objectives for nonfinancial measures such as product quality rather than vague statements such as "we would like to improve quality" integrates all of the companies goals into a single performance measurement system so that a inappropriate amount of weight will not be placed on any single goal

Question 31

What is a standard cost accounting system

Answer 31

A double entry system of accounting Companies use standard costs in making Entries and They formally recognize variances in the accounts Variances are recognized at the earliest opportunity Work in progress account is maintained exclusively on the basis of standard costs

Question 32

What is the overhead controllable variance

Answer 32

Shows weather overhead costs are effectively controlled Company. Compares actual overhead costs Incured with budgeted costs for the standard hours allowed Budgeted costs are determined from a flexible manufacturing overhead budget. Most controllable variances are associated with variable costs which are controllable costs Fixed costs are often known at the time the budget is prepared and Are therefore not as likely to deviate from the budgeted amount Management can compare actual and budgeted overhead for each manufacturing overhead cost that contributes to controllable variance Management can develop costs and quantity variances for each overhead costs such as indirect Materials and indirect labor

Question 33

What is overhead volume variance

Answer 33

The difference. Between normal capacity hours and standard hours allowed times the fixed overhead rate The overhead volume variance relates to weather Fixed costs were over or under applied during the year

Question 34

What do you need to remember in computing the overhead variances

Answer 34

Standard hours allowed are used in each of the variances budgetted costs for the controllable Controllable variance are derived from the flexible budget The controllable variance generally portrays The controllable variance generally pertains to variable costs.to variable costs The volume variance pertains solely to fixed costs often these volume Variances arise because productivity capacity exceeds what it is needed to satisfy sales. This is usually beyond the control of the product manager.