STANDARD COSTING Flashcards
A system that determines product cost by using standards or norms for quantities and/or prices of component elements. It also allows costs to be compared against norms for cost control purposes.
STANDARD COSTING
a planned unit cost of the product, component or service produced in a period.
Standard Cost
is a unit amount.
standard
is a total amount.
budget
represent optimum levels of performance under perfect operating conditions.
Ideal standards
represent efficient levels of performance that are attainable under expected operating conditions.
Normal standards
should be based on the delivered cost of raw materials plus an allowance for receiving and handling.
direct materials price standard
should establish the required quantity plus an allowance for unavoidable waste and normal spoilage.
direct materials quantity standard
should be based on current wage rates and anticipated adjustments.
direct labor price standard
be based on required production time plus an allowance for rest periods, cleanup, machine setup, and machine downtime.
direct labor quantity standard should
a standard predetermined overhead rate is used. It is based on an expected standard activity index such as standard direct labor hours or standard machine hours.
manufacturing overhead
is the sum of the standard costs of direct materials, direct labor, and manufacturing overhead.
total standard cost per unit
A company controls its production costs by comparing its actual monthly production costs with the expected levels. Any significant deviations from expected levels are investigated and evaluated as a basis for corrective actions. The quantitative technique that is most probably being used is
a. Time-series or trend regression analysis
b. Correlation analysis
c. Differential calculus
d. Standard cost variance analysis
A primary purpose of using a standard cost system is
a. To make things easier for managers in the production facility
b. To provide a distinct measure of cost control
c. To minimize the cost per unit of production
d. b and c are correct
A purpose of standard costing is to
a.
Replace budgets and budgeting
b.
Simplify costing procedures
c.
Eliminate the need for actual costing for external reporting purposes
d.
Eliminate the need to account for year-end underapplied or overapplied manufacturing overhead
Standard costs may be used for
a. Product costing
b. Planning
c. Controlling
d. All of the above
The standard cost card contains quantities and costs for
a. Direct material only
b. Direct labor only
c. Direct material and direct labor only
d. Direct material, direct labor, and overhead
A company using very tight (high) standards in a standard cost system should expect that
a.
No incentive bonus will be paid
b.
Most variances will be unfavorable
c.
Employees will be strongly motivated to attain the standards
d.
Costs will be controlled better than if lower standards were used
The type of standard that is intended to represent challenging, yet attainable results is
a. Theoretical standard
b. Flexible budget standard
c. Normal standard
d. Expected actual standard
Of the following variances, the one that is most useful in assessing the performance of the Purchasing Department is the
a. Idle capacity variance
b. Materials purchase price variance
c. Labor rate variance
d. Materials price usage variance
Materials usage variances are normally chargeable to the
a. Production Department
b. Purchasing Department
c. Finished Goods Department
d. Materials Storage Department
When a change in the manufacturing process reduces the number of direct labor hours and standards are unchanged, the resulting variance will be:
a. An unfavorable labor usage variance
b. An unfavorable labor rate variance
c. A favorable labor rate variance
d. A favorable labor usage variance
The most probable reason a company would experience a favorable labor rate variance and an unfavorable labor efficiency variance is that
a. The mix of workers assigned to the particular job was heavily weighted toward the use of higher paid, experienced individuals
b. The mix of workers assigned to the particular job was heavily weighted toward the use of new, relatively low-paid, unskilled workers
c. Because of the production schedule, workers from other production areas were assigned to assist in this particular process
d. Defective materials caused more labor to be used in order to produce a standard unit
Which of the following would least likely cause an unfavorable materials quantity (usage) variance?
a. Labor that possesses skills equal to those required by the standards
b. Scheduling of substantial overtime
c. A mix of direct materials that does not conform to plan
d. Materials that do not meet specifications
The sum of the material price variance (calculated at point of purchase) and material quantity variance equals
a. The total cost variance
b. The material mix variance
c. The material yield variance
d. No meaningful number
The sum of the material mix and material yield variances equals
a. The material purchase price variance
b. The material quantity variance
c. The total material variance
d. None of the above
The sum of the labor mix and labor yield variances equals
a. The labor efficiency variance
b. The total labor variance
c. The labor rate variance
d. Nothing because these two variances cannot
be added since they use different costs
A variable overhead spending variance is caused by
a.
Using more or fewer actual hours than the standard hours allowed for the production achieved
b.
Paying a higher/lower average actual overhead price per unit of the activity base than the standard price allowed per unit of the activity base
c.
Larger/smaller waste and shrinkage associated with the resources involved than expected
d.
Both b and c are causes
A favorable fixed overhead spending variance indicates that
a.
Budgeted fixed overhead is less than actual fixed overhead
b.
Budgeted fixed overhead is greater than applied fixed overhead
c.
Applied fixed overhead is greater than budgeted fixed overhead
d.
Actual fixed overhead is less than budgeted fixed overhead
The variance least significant for purposes of controlling costs is the
a. Material quantity variance
b. Variable overhead efficiency variance
c. Fixed overhead spending variance
d. Fixed overhead volume variance
The variance most useful in evaluating plant utilization is the
a. Variable overhead spending variance
b. Fixed overhead spending variance
c. Variable overhead efficiency variance
d. Fixed overhead volume variance
An unfavorable fixed overhead volume variance is most often caused by
a. Actual fixed overhead incurred exceeding budgeted fixed overhead
b. An over-application of fixed overhead to production
c. An increase in the level of the finished inventory
d. Normal capacity exceeding actual production levels
