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Introduction to Managerial Accounting

Jeannie M. Folk
Ray H. Garrison
Eric Noreen

Standard Costs

Multiple Choice Quiz

Standards that do not allow for machine breakdowns or other work interruptions and that require peak efficiency at all times are known as:

budgeted standards.

ideal standards.

normal standards.

practical standards.

If a company isolates variances at the earliest point in time, the appropriate time to recognize a direct material price variance would be when:

the material is issued.

the material is purchased.

the material is used in production.

production is completed.

A favorable materials price variance indicates that

actual quantity exceed standard quantity.

standard quantity exceed actual quantity.

actual price exceeded the standard price.

standard price exceeded the actual price.

Montpellier Company reported a favorable materials price variance of $380 and an unfavorable materials quantity variance of $120. Based on these variances, you can conclude that:

the actual cost per pound for materials was less than the standard cost per pound.

the actual usage of materials was less than the standard allowed.

more materials were purchased than were used.

more materials were used than were purchased.

The "standard quantity allowed" or "standard hours allowed" is computed by multiplying the:

actual input in units by the standard output allowed.

actual output in units by the standard input allowed.

actual output in units by the standard output allowed.

standard output in units by the standard input allowed.

Marseille Company, a clothing manufacturer, uses a standard costing system. Each unit of a finished product contains 2 yards of cloth. However, there is unavoidable waste of 25%, calculated on input quantities, when the cloth is cut for assembly. The cost of the cloth is $6 per yard. The standard direct material cost for cloth per unit of finished product is:

$9.60.

$12.00.

$14.00.

$15.00.

Venezia Company employs a standard cost system in which direct materials inventory is carried at standard cost. Venezia has established the following standards for the prime costs of one unit of product:

	Standard	Standard	Standard
	Quantity	Price	Cost
Direct materials	6.0 pounds	$ 7.00/pound	$42.00
Direct labor	1.3 hours	$22.00/hour	28.60
			$70.60

During June, Venezia purchased 165,000 pounds of direct material at a total cost of $1,171,500. The total factory wages for June were $800,000, 90 percent of which were for direct labor. Venezia manufactured 25,000 units of product during June using 151,000 pounds of direct material and 32,000 direct labor hours. The price variance for the direct material acquired by the company during June is:

$15,100 favorable.

$15,100 unfavorable.

$16,500 favorable.

$16,500 unfavorable.

	Standard	Standard	Standard
	Quantity	Price	Cost
Direct materials	6.0 pounds	$ 7.00/pound	$42.00
Direct labor	1.3 hours	$22.00/hour	28.60
			$70.60

During June, Venezia purchased 165,000 pounds of direct material at a total cost of $1,171,500. The total factory wages for June were $800,000, 90 percent of which were for direct labor. Venezia manufactured 25,000 units of product during June using 151,000 pounds of direct material and 32,000 direct labor hours. (Note that this is the same data that was provided for the previous question.) The direct material quantity variance for June is:

$7,000 favorable.

$7,000 unfavorable.

$7,100 favorable.

$7,100 unfavorable.

9 Venezia Company employs a standard cost system in which direct materials inventory is carried at standard cost. Venezia has established the following standards for the prime costs of one unit of product:

	Standard	Standard	Standard
	Quantity	Price	Cost
Direct materials	6.0 pounds	$ 7.00/pound	$42.00
Direct labor	1.3 hours	$22.00/hour	28.60
			$70.60

During June, Venezia purchased 165,000 pounds of direct material at a total cost of $1,171,500. The total factory wages for June were $800,000, 90 percent of which were for direct labor. Venezia manufactured 25,000 units of product during June using 151,000 pounds of direct material and 32,000 direct labor hours. (Note that this is the same data that was provided for the previous question.) The direct labor rate variance for June is:

$16,000 favorable.

$16,000 unfavorable.

$96,000 favorable.

$96,000 unfavorable.

	Standard	Standard	Standard
	Quantity	Price	Cost
Direct materials	6.0 pounds	$ 7.00/pound	$42.00
Direct labor	1.3 hours	$22.00/hour	28.60
			$70.60

During June, Venezia purchased 165,000 pounds of direct material at a total cost of $1,171,500. The total factory wages for June were $800,000, 90 percent of which were for direct labor. Venezia manufactured 25,000 units of product during June using 151,000 pounds of direct material and 32,000 direct labor hours. (Note that this is the same data that was provided for the previous question.) The direct labor efficiency variance for June is:

$11,000 favorable.

$11,000 unfavorable.

$11,250 favorable.

$11,250 unfavorable.

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