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Exam 25: Standard Costs and Balanced Scorecard

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Question 101

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Which of the following statements is true?

A) Variances are the differences between total actual costs and total standard costs.
B) When actual costs exceed standard costs the variance is favorable.
C) An unfavorable variance results when actual costs are decreasing but standards are not changed.
D) All of the above are true.

E) None of the above
F) A) and D)

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Question 102

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Actual costs that vary from standard costs always indicate inefficiencies.

A) True
B) False

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Question 103

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If production exceeds normal capacity the overhead volume variance will be favorable.

Alex Co. prepared its income statement for management using a standard cost accounting system. Which of the following appears at the "standard" amount?

Jackson Manufacturing planned to produce 20000 units of product and work at the 60000 direct labor hours level of activity for 2016. Manufacturing overhead at this level of activity and the predetermined overhead rate are as follows: $\begin{array}{llc}&&\text {Predetermined }\\&&\text {Overhead Rate per}\\&&\text { Direct Labor Hour}\\\text { Variable manufacturing overhead } & \$ 300,000 & \$ 5 \\\text { Fixed manufacturing overhead } & 120,000 &2\\\text { Total manufacturing overhead }&\$420,000&\$7\end{array}$ At the end of 2016 21000 units were actually produced and 61500 direct labor hours were actually worked. Total actual manufacturing overhead costs were $430000. Instructions Using a two-variance analysis of manufacturing overhead calculate the following variances and indicate whether they are favorable or unfavorable: (a) Overhead controllable variance. (b) Overhead volume variance.

Dart Company developed the following standard costs for its product for 2016: The company expected to work at the 120000 direct labor hours level of activity and produce 60000 units of product. Actual results for 2016 were as follows: $\bullet$ 56800 units of product were actually produced. $\bullet$ Direct labor costs were $1092000 for 112000 direct labor hours actually worked. $\bullet$ Actual direct materials purchased and used during the year cost $1108800 for 231000 pounds. $\bullet$ Total actual manufacturing overhead costs were $680000. Instructions Compute the following variances for Dart Company for 2016 and indicate whether the variance is favorable or unfavorable. 1. Direct materials price variance. 2. Direct materials quantity variance. 3. Direct labor price variance. 4. Direct labor quantity variance. 5. Overhead controllable variance. 6. Overhead volume variance.

Edgar Inc. has a materials price standard of $2.00 per pound. Six thousand pounds of materials were purchased at $2.20 a pound. The actual quantity of materials used was 6000 pounds although the standard quantity allowed for the output was 5400 pounds. Edgar Inc.'s materials quantity variance is

Platt Company produces one product a putter called PAR-putter. Platt uses a standard cost system and determines that it should take one hour of direct labor to produce one PAR-putter. The normal production capacity for this putter is 100000 units per year. The total budgeted overhead at normal capacity is $500000 comprised of $200000 of variable costs and $300000 of fixed costs. Platt applies overhead on the basis of direct labor hours. During the current year Platt produced 85000 putters worked 89000 direct labor hours and incurred variable overhead costs of $160000 and fixed overhead costs of $300000. Instructions (a) Compute the predetermined variable overhead rate and the predetermined fixed overhead rate. (b) Compute the applied overhead for Platt for the year. (c) Compute the total overhead variance.

Variance reports are

Budget data are not journalized in cost accounting systems with the exception of

Standards which represent optimum performance under perfect operating conditions are called _______________ standards but most companies use _________________ standards which are rigorous but attainable.

Oxnard Industries produces a product that requires 2.6 pounds of materials per unit. The allowance for waste and spoilage per unit is .3 pounds and .1 pounds respectively. The purchase price is $2 per pound but a 2% discount is usually taken. Freight costs are $.10 per pound and receiving and handling costs are $.07 per pound. The hourly wage rate is $12.00 per hour but a raise which will average $.30 will go into effect soon. Payroll taxes are $1.20 per hour and fringe benefits average $2.40 per hour. Standard production time is 1 hour per unit and the allowance for rest periods and setup is .2 hours and .1 hours respectively. - The standard direct labor hours per unit is

Standard cost is the industry average cost for a particular item.

A company uses 20000 pounds of materials for which it paid $6.00 a pound. The materials price variance was $15000 unfavorable. What is the standard price per pound?

If actual costs are less than standard costs the variance is favorable.

The direct materials quantity standard should

All of the following are advantages of standard costs except they

In concept standards and budgets are essentially the same.

The standard direct labor cost for producing one unit of product is 5 direct labor hours at a standard rate of pay of $20. Last month 15000 units were produced and 73500 direct labor hours were actually worked at a total cost of $1350000. The direct labor quantity variance was

Parnell Company prepared its income statement for internal use. How would amounts for cost of goods sold and variances appear?