Chapter 7 quiz

1.

1 point

A favorable fixed overhead volume variance occurs if

there is a favorable labor rate variance.

production is greater than planned.

there is a favorable labor efficiency variance.

production is less than planned.

2.

1 point

At the end of a period, a significant material quantity variance should be

closed to Cost of Goods Sold.

allocated among Work in Process, Finished Goods, and Cost of Goods Sold.

allocated among Raw Material, Work in Process, Finished Goods, and Cost of Goods Sold.

carried forward as a balance sheet account to the next period.

3.

1 point

A variable overhead spending variance is caused by

using more or fewer actual hours than the standard hours allowed for the production achieved.

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.

larger/smaller waste and shrinkage associated with the resources involved than expected.

both b and c are causes.

4.

1 point

A company using very tight (high) standards in a standard cost system should expect that

most variances will be unfavorable.

costs will be controlled better than if lower standards were used.

no incentive bonus will be paid.

employees will be strongly motivated to attain the standards.

5.

1 point

The standard cost card contains quantities and costs for

direct material only.

direct material and direct labor only.

direct labor only.

direct material, direct labor, and overhead.

6.

1 point

The term standard hours allowed measures

actual output at actual hours.

standard labor hours for actual production.

budgeted output at actual hours.

budgeted output at standard hours.

7.

1 point

A company wishing to isolate variances at the point closest to the point of responsibility will determine its material price variance when

material is used in production.

material is issued to production.

production is completed.

material is purchased.

8.

1 point

When computing variances from standard costs, the difference between actual and standard price multiplied by actual quantity used yields a

price variance.

quantity variance.

mix variance.

combined price-quantity variance.

9.

1 point

Standard costs

require that significant unfavorable variances be investigated, but do not require that significant favorable variances be investigated.

can, if properly used, help motivate employees.

are difficult to use with a process costing system.

are estimates of costs attainable only under the most ideal conditions.

10.

1 point

In a standard cost system, Work in Process Inventory is ordinarily debited with

actual costs of material and labor and a predetermined overhead cost for overhead.

standard costs based on production output.

actual costs of material, labor, and overhead.

standard costs based on the level of input activity (such as direct labor hours worked).

11.

1 point

Gallagher Corporation. incurred 2,300 direct labor hours to produce 600 units of product. Each unit should take 4 direct labor hours. Gallagher Corporation applies variable overhead to production on a direct labor hour basis. The variable overhead efficiency variance

will be unfavorable.

will depend upon the capacity measure selected to assign overhead to production.

will be favorable.

is impossible to determine without additional information.

12.

1 point

A total variance is best defined as the difference between total

actual cost and total cost applied for the standard output of the period.

actual cost and total standard cost of the actual input of the period.

standard cost and total cost applied to production.

actual cost and total cost applied for the actual output of the period.

13.

1 point

The sum of the material price variance (calculated at point of purchase) and material quantity variance equals

the material yield variance.

the total cost variance.

the material mix variance.

no meaningful number.

14.

1 point

If actual direct labor hours (DLHs) are less than standard direct labor hours allowed and overhead is applied on a DLH basis, a(n)

favorable variable overhead spending variance exists.

unfavorable volume variance exists.

favorable volume variance exists.

favorable variable overhead efficiency variance exists.

15.

1 point

Which of the following statements regarding standard cost systems is true?

Favorable variances are not necessarily good variances.

The production supervisor is generally responsible for material price variances.

Standard costs cannot be used for planning purposes since costs normally change in the future.

None of the above statements is true.