Q: A company produced 1,000 units. The standard quantity of direct materials per unit is 2 pounds. If the actual quantity used was 2,200 pounds, what is the Standard Quantity Allowed (SQA)?

SQA = 2 \times 1,000 = 2,000 \text{ pounds}

Q: A company’s actual direct labor hours (AH) were 1,500, and the standard hours allowed (SHA) for actual output were 1,400. The standard rate (SR) is $20 per hour. What is the Direct Labor Efficiency Variance?

$$ DL\ Efficiency\ Variance = SR \times (AH - SHA) = 20 \times (1,500 - 1,400) = 20 \times 100 = 2,000\ $$ Unfavorable

Q: Which formula is used to calculate the Direct Materials Price Variance?

$$ DM\ Price\ Variance = AQ \times (AP - SP) $$

Q: A company’s actual variable overhead rate (AR) was $$3 per hour, standard rate (SR) was 2.50 $$per hour, and actual hours (AH) worked were 2,000. What is the Variable Overhead Rate Variance?

$$ VOH\ Rate\ Variance = AH \times (AR - SR) = 2,000 \times (3 - 2.5) = 2,000 \times 0.5 = 1,000 $$ Unfavorable

Q: A company produced 500 units. The standard labor hours per unit are 3 hours. Actual labor hours worked were 1,700. What is the Standard Hours Allowed (SHA)?

SHA = 3 \times 500 = 1,500\text{ hours}

Question 1

Which of the following best describes a 'practical standard' in managerial accounting?

Accepted Answer

A standard that reflects attainable performance with normal waste and inefficiencies.

Question 2

A company produced 1,000 units. The standard quantity of direct materials per unit is 2 pounds. If the actual quantity used was 2,200 pounds, what is the Standard Quantity Allowed (SQA)?

Accepted Answer

SQA = 2 	imes 1,000 = 2,000 	ext{ pounds}

Question 3

Which manager is typically responsible for the Direct Materials Price Variance?

Accepted Answer

Purchasing manager

Question 4

A company’s actual direct labor hours (AH) were 1,500, and the standard hours allowed (SHA) for actual output were 1,400. The standard rate (SR) is $20 per hour. What is the Direct Labor Efficiency Variance?

Accepted Answer

$$ DL\ Efficiency\ Variance = SR 	imes (AH - SHA) = 20 	imes (1,500 - 1,400) = 20 	imes 100 = 2,000\ $$ Unfavorable

Question 5

Which formula is used to calculate the Direct Materials Price Variance?

Accepted Answer

$$ DM\ Price\ Variance = AQ 	imes (AP - SP) $$

Question 6

A company’s actual variable overhead rate (AR) was $$3 per hour, standard rate (SR) was 2.50 $$per hour, and actual hours (AH) worked were 2,000. What is the Variable Overhead Rate Variance?

Accepted Answer

$$ VOH\ Rate\ Variance = AH 	imes (AR - SR) = 2,000 	imes (3 - 2.5) = 2,000 	imes 0.5 = 1,000 $$ Unfavorable

Question 7

Which of the following is NOT an advantage of using standard costs?

Accepted Answer

Encourages short-term focus

Question 8

A company’s budgeted fixed overhead is $$50,000. Actual fixed overhead incurred is 52$$,000. What is the Fixed Overhead Budget Variance?

Accepted Answer

$$ FOH\ Budget\ Variance = Actual\ FOH - Budgeted\ FOH = 52,000 - 50,000 = 2,000 $$ Unfavorable

Question 9

If a company’s actual results increase operating income relative to the standard, what type of variance is this?

Accepted Answer

Favorable variance

Question 10

A company produced 500 units. The standard labor hours per unit are 3 hours. Actual labor hours worked were 1,700. What is the Standard Hours Allowed (SHA)?

Accepted Answer

SHA = 3 	imes 500 = 1,500	ext{ hours}

Question 11

Which formula is used to calculate the Fixed Overhead Volume Variance?

Accepted Answer

$$ FOH\ Volume\ Variance = Budgeted\ FOH - Applied\ FOH $$

Question 12

A company’s actual cost was $$120,000, and the flexible budget cost was 115$$,000. What is the Total Flexible Budget Variance?

Accepted Answer

$$ Total\ Flexible\ Budget\ Variance = Actual\ Cost - Flexible\ Budget\ Cost = 120,000 - 115,000 = 5,000 $$ Unfavorable

Question 13

Which of the following best describes 'management by exception'?

Accepted Answer

Managers focus on significant variances rather than minor differences.

Question 14

A company’s actual direct materials price (AP) was $$4 per pound, standard price (SP) was 3.50 $$per pound, and actual quantity (AQ) purchased was 1,000 pounds. What is the Direct Materials Price Variance?

Accepted Answer

$$ DM\ Price\ Variance = AQ 	imes (AP - SP) = 1,000 	imes (4 - 3.5) = 1,000 	imes 0.5 = 500 $$ Unfavorable

Question 15

Which variance is most likely to be affected by the efficiency of the cost driver, such as direct labor hours?

Accepted Answer

Variable Overhead Efficiency Variance

Question 16

A company produced 800 units. The standard cost per unit is $10. What is the total standard cost for the actual output?

Accepted Answer

$$ Total\ Standard\ Cost = 800 	imes 10 = 8,000 $$

Question 17

Which of the following is a potential disadvantage of using standard costs?

Accepted Answer

May become outdated and encourage negative behavioral effects

Question 18

A company’s actual direct labor rate (AR) was $$18 per hour, standard rate (SR) was 20 $$per hour, and actual hours (AH) worked were 1,200. What is the Direct Labor Rate Variance?

Accepted Answer

$$ DL\ Rate\ Variance = AH 	imes (AR - SR) = 1,200 	imes (18 - 20) = 1,200 	imes (-2) = -2,400 $$ Favorable

Standard Costs and Variances: Managerial Accounting Study Notes

Study Guide - Practice Questions

Study Guide - Flashcards