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Management Advisory Services Standard Costing & Variance Analysis

Standard costing involves establishing standards for costs, outputs, and efficiencies. Variances from these standards can then be analyzed to measure performance and control costs. Key aspects include: 1) Standards should represent attainable yet challenging levels of performance. 2) Variances show where costs differ from standards and help pinpoint responsibility, allowing for cost control. 3) Standard costs are used to measure efficiencies, control costs, and set prices, but are least useful for determining inventory levels. 4) Differences may exist between standard costs and budgeted costs because standards are determined after budgets and represent what costs should be.

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126 views

Management Advisory Services Standard Costing & Variance Analysis

Standard costing involves establishing standards for costs, outputs, and efficiencies. Variances from these standards can then be analyzed to measure performance and control costs. Key aspects include: 1) Standards should represent attainable yet challenging levels of performance. 2) Variances show where costs differ from standards and help pinpoint responsibility, allowing for cost control. 3) Standard costs are used to measure efficiencies, control costs, and set prices, but are least useful for determining inventory levels. 4) Differences may exist between standard costs and budgeted costs because standards are determined after budgets and represent what costs should be.

Uploaded by

Yuki Cross
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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MANAGEMENT ADVISORY SERVICES

STANDARD COSTING & VARIANCE ANALYSIS

THEORY
1. Which one of the following terms best describes the rate of output which qualified workers
can achieve as an average over the working day or shift, without over-exertion, provided they
adhere to the specified method of working and are well motivated in their work?
A. Standard time B. Standard hours C. Standard unit D. Standard performance

2. The best characteristics of a standard cost system is


A. standard can pinpoint responsibility and help motivation
B. all variances from standard should be reviewed
C. all significant unfavorable variances should be reviewed
D. standard cost involves cost control which is cost reduction

3. Standard costs are used for all of the following except:


A. income determination C. measuring efficiencies
B. controlling costs D. forming a basis for price setting

4. Standard costs are least useful for


A. Measuring production efficiency C. Job order production systems
B. Simplifying costing procedures D. Determining minimum inventory levels

5. To which of the following is a standard cost nearly like?


A. Estimated cost. B. Budgeted cost. C. Product cost. D. Period cost.

6. A difference between standard costs used for cost control and budgeted costs
A. Can exist because standard costs must be determined after the budget is completed.
B. Can exist because standard costs represent what costs should be while budgeted costs
represent expected actual costs.
C. Can exist because budgeted costs are historical costs while standard costs are based on
engineering studies.
D. Can exist because establishing budgeted costs involves employee participation and
standard costs do not.

7. Normal costing and standard costing differ in that


A. the two systems can show different overhead budget variances.
B. only normal costing can be used with absorption costing.
C. the two systems show different volume variances if standard hours do not equal actual
hours.
D. normal costing is less appropriate for multiproduct firms

8. When standard costs are used in a process-costing system, how, if at all, are equivalent units
of production (EUP) involved or used in the cost report at standard?
A. Equivalent units are not used.
B. Equivalent units are computed using a special approach.
C. The actual equivalent units are multiplied by the standard cost per unit.
D. The standard equivalent units are multiplied by the actual cost per unit.

9. The type of standard that is intended to represent challenging yet attainable results is:
A. theoretical standard D. normal standard
B. flexible budget standard E. expected actual standard
C. controllable cost standard
10. A company using very tight standards in a standard cost system should expect that

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A. Most variances will be unfavorable
B. No incentive bonus will be paid
C. Costs will be controlled better than if lower standards were used
D. Employees will be strongly motivated to attain the standard

11. A predetermined overhead rate for fixed costs is unlike a standard fixed cost per unit in that a
predetermined overhead rate is
A. based on an input factor like direct labor hours and a standard cost per unit is based on a
unit of output.
B. based on practical capacity and a standard fixed cost can be based on any level of
activity.
C. used with variable costing while a standard fixed cost is used with absorption costing.
D. likely to be higher than a standard fixed cost per unit.

12. If a company wishes to establish factory overhead budget system in which estimated costs
can be derived directly from estimates of activity levels, it should prepare a
A. Flexible budget. B. Fixed budget. C. Capital budget. D. Discretionary budget.

13. Lanta Restaurant compares monthly operating results with a static budget. When actual sales
are less than budget, would Lanta usually report favorable variances on variable food costs
and fixed supervisory salaries.
A. B. C. D.
Variable food costs Yes Yes No No
Fixed supervisory salaries Yes No Yes No

14. The primary difference between a fixed (static) budget and a variable (flexible) budget is that
a fixed budget:
A. cannot be changed after the period begins; while a variable budget can be changed after
the period begins
B. is a plan for a single level of sales (or other measure of activity); while a variable budget
consists of several plans, one for each of several levels of sales (or other measure of
activity)
C. includes only fixed costs; while variable budget includes only variable costs
D. is concerned only with future acquisitions of fixed assets; while a variable budget is
concerned with expenses that vary with sales

15. Which of the following term is best identified with a system of standard cost?
A. Contribution approach. C. Marginal costing.
B. Management by exception. D. Standard accounting system.

16. Which department is typically responsible for a materials price variance?


A. Engineering. B. Production. C. Purchasing. D. Sales.

17. Under a standard cost system, the materials efficiency variance are the responsibility of
A. Production and industrial engineering. C. Purchasing and sales.
B. Purchasing and industrial engineering. D. Sales and industrial engineering.

18. Which of the following people is most likely responsible for an unfavorable variable
overhead efficiency variance?

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