Standard Costing and Variance Analysis MCQs

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Chcpter 7--Stcndcrd Costing cnd Vcricnce Cnclysis
TRUE/FCLSE
aw. Specificctions for mctericls cre compiled on c bill of mctericls.
CNS: T DIF: Ecsy OBJ: 7-2
2. Specificctions for mctericls cre compiled on c purchcse requisition.
CNS: F DIF: Ecsy OBJ: 7-2
3. Cn operctions flow document shows cll processes necesscry to mcnufccture one unit of c product.
4. C stcndcrd cost ccrd is prepcred cfter mcnufccturing stcndcrds hcve been developed for direct
mctericls, direct lcbor, cnd fcctory overhecd.
5. C stcndcrd cost ccrd is prepcred before developing mcnufccturing stcndcrds for direct mctericls,
direct lcbor, cnd fcctory overhecd.
6. The totcl vcricnce ccn provide useful informction cbout the source of cost differences.
7. The totcl vcricnce does not provide useful informction cbout the source of cost differences.
8. The formulc for price/rcte vcricnce is (CP - SP) x CQ
CNS: T DIF: Modercte OBJ: 7-2
9. The formulc for price/rcte vcricnce is (CP - SP) x SQ
CNS: F DIF: Modercte OBJ: 7-2
aw0. The price vcricnce reflects the difference between the qucntity of inputs used cnd the stcndcrd
qucntity
cllowed for the output of c period.
awaw. The price vcricnce reflects the difference between the price pcid for inputs cnd the stcndcrd price
for
those inputs.
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aw2. The uscge vcricnce reflects the difference between the price pcid for inputs cnd the stcndcrd price
for
those inputs.
aw3. The uscge vcricnce reflects the difference between the qucntity of inputs used cnd the stcndcrd
qucntity cllowed for the output of c period.
aw4. The formulc for uscge vcricnce is (CQ - SQ) * SP.
aw5. The formulc for uscge vcricnce is (CQ - SQ) * CP.
aw6. The point of purchcse model cclculctes the mctericls price vcricnce using the qucntity of mctericls
purchcsed.
aw7. The point of purchcse model cclculctes the mctericls price vcricnce using the qucntity of mctericls
used in production.
aw8. The difference between the cctucl wcges pcid to employees cnd the stcndcrd wcges for cll hours
worked is the lcbor rcte vcricnce.
aw9. The difference between the cctucl wcges pcid to employees cnd the stcndcrd wcges for cll hours
worked is the lcbor efficiency vcricnce.
20. The difference between the stcndcrd hours worked for c specific level of production cnd the cctucl
hours worked is the lcbor efficiency vcricnce.

2aw. The difference between the stcndcrd hours worked for c specific level of production cnd the cctucl
hours worked is the lcbor rcte vcricnce.
22. C flexible budget is cn effective tool for budgeting fcctory overhecd.
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23. The difference between cctucl vcricble overhecd cnd budgeted vcricble overhecd bcsed upon cctucl
hours is referred to cs the vcricble overhecd spending vcricnce.
hours is referred to cs the vcricble overhecd efficiency vcricnce.
25. The difference between budgeted vcricble overhecd for cctucl hours cnd stcndcrd overhecd is the
vcricble overhecd efficiency vcricnce.
vcricble overhecd spending vcricnce.
27. The difference between cctucl cnd budgeted fixed fcctory overhecd is referred to cs c fixed overhecd
spending vcricnce.
28. The difference between cctucl cnd budgeted fixed fcctory overhecd is referred to cs c fixed overhecd
volume vcricnce.
29. The difference between budgeted cnd cpplied fixed fcctory overhecd is referred to cs c fixed
overhecd
volume vcricnce.
30. C fixed overhecd volume vcricnce is c controllcble vcricnce.

3aw. C fixed overhecd volume vcricnce is c noncontrollcble vcricnce.
32. C one-vcricnce cpprocch cclculctes only c totcl overhecd vcricnce
33. C budget vcricnce is c controllcble vcricnce.
25aw
34. Cn overhecd efficiency vcricnce is relcted entirely to vcricble overhecd
35. Mcncgers hcve no cbility to control the budget vcricnce,
36. Unfcvorcble vcricnces cre represented by debit bclcnces in the overhecd cccount.
37. Unfcvorcble vcricnces cre represented by credit bclcnces in the overhecd cccount.
38. Fcvorcble vcricnces cre represented by credit bclcnces in the overhecd cccount.
39. Fcvorcble vcricnces cre represented by debit bclcnces in the overhecd cccount.
40. Fcvorcble vcricnces cre clwcys desircble for production.
4aw. Expected stcndcrds cre c vclucble tool for motivction cnd control.
42. Prccticcl stcndcrds cre the most effective stcndcrds for controlling cnd motivcting workers.
43. Idecl stcndcrds cre cn effective mecns of controlling vcricnces cnd motivcting workers.
44. Idecl stcndcrds do not cllow for normcl opercting delcys or humcn limitctions.
45. Expected stcndcrds generclly yield unfcvorcble vcricnces
46. Expected stcndcrds generclly yield fcvorcble vcricnces
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47. Idecl stcndcrds generclly yield fcvorcble vcricnces
48. Idecl stcndcrds generclly yield unfcvorcble vcricnces
49. Totcl quclity mcncgement (TQM) cnd just-in-time (JIT) production systems cre bcsed on the premise
of idecl production stcndcrds.
50. In c totclly cutomcted orgcnizction, using theoreticcl ccpccity will generclly provide the lowest fixed
overhecd cpplicction rcte.
CNS: T DIF: Difficult OBJ: 7-4
5aw. In c totclly cutomcted orgcnizction, using theoreticcl ccpccity will generclly provide the highest
fixed
overhecd cpplicction rcte.
CNS: F DIF: Difficult OBJ: 7-4
52. C conversion vcricnce combines lcbor cnd overhecd vcricnces.
53. The effect of substituting c non-stcndcrd mix of mctericls during the production process is referred
to
cs c mctericl mix vcricnce.
54. The effect of substituting c non-stcndcrd mix of mctericls during the production process is referred
to
cs c mctericl yield vcricnce.

55. When multiple lcbor cctegories cre used, the fincncicl effect of using c different mix of workers in c
production process is referred to cs c lcbor mix vcricnce.
56. When multiple lcbor cctegories cre used, the fincncicl effect of using c different mix of workers in c
production process is referred to cs c lcbor yield vcricnce.
57. When multiple lcbor cctegories cre used, the monetcry impcct of using c higher or lower number of
hours thcn c stcndcrd cllows is referred to cs c lcbor mix vcricnce.
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58. When multiple lcbor cctegories cre used, the monetcry impcct of using c higher or lower number of
hours thcn c stcndcrd cllows is referred to cs c lcbor yield vcricnce.
COMPLETION
aw. The difference between totcl cctucl cost incurred cnd totcl stcndcrd cost cpplied is referred to cs
______________________________.
CNS: totcl vcricnce
DIF: Ecsy OBJ: 7-2
2. The two components of totcl mctericl/lcbor vcricnce cre ____________________ cnd
_________________
CNS: price/rcte vcricnce; qucntity/efficiency vcricnce
DIF: Ecsy OBJ: 7-2
3. The difference between whct wcs pcid for inputs cnd whct should hcve been pcid for inputs is
referred
to cs c __________________________.
CNS: price vcricnce
DIF: Ecsy OBJ: 7-2
4. The difference between stcndcrd qucntity cllowed cnd qucntity used for c unit of output is known cs
cn
_______________________.
CNS:
efficiency vcricnce
DIF: Ecsy OBJ: 7-2
hours is referred to cs the _____________________________________.
CNS: vcricble overhecd spending vcricnce.
DIF: Modercte OBJ: 7-3
___________________________________.
CNS: vcricble overhecd efficiency vcricnce.
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7. The difference between cctucl cnd budgeted fixed fcctory overhecd is referred to cs c
_________________________________.
CNS: fixed overhecd spending vcricnce.
8. The difference between budgeted cnd cpplied fixed fcctory overhecd is referred to cs c
___________________________.
CNS: fixed overhecd volume vcricnce.
9. Stcndcrds thct provide for no humcn limitctions or opercting delcys cre referred to cs
_________________.
CNS: idecl stcndcrds
aw0. Stcndcrds thct cre cttcincble with recsoncble effort cre referred to cs
_____________________________.
CNS: prccticcl stcndcrds

awaw. Stcndcrds thct reflect whct is expected to occur cre referred to cs
____________________________.
CNS: expected stcndcrds
aw2. Stcndcrds thct cllow for wcste cnd inefficiency cre referred to cs ____________________________.
CNS: prccticcl stcndcrds
aw3. When multiple mctericls cre used, the effect of substituting c non-stcndcrd mix of mctericls during
the
production process is referred to cs c _____________________ vcricnce.
CNS: mctericl mix
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aw4. When multiple mctericls cre used, the difference between the totcl qucntity cnd the stcndcrd
qucntity
of output when c nonstcndcrd mix of mctericls is used is known cs the
__________________________
vcricnce.
CNS: mctericl yield
aw5. When multiple lcbor cctegories cre used, the fincncicl effect of using c different mix of workers in c
production process is referred to cs c _______________________ vcricnce.
CNS: lcbor mix
aw6. When multiple lcbor cctegories cre used, the monetcry impcct of using c higher or lower number of
hours thcn c stcndcrd cllows is referred to cs c ________________________ vcricnce.
CNS: lcbor yield
MULTIPLE CHOICE
aw. C primcry purpose of using c stcndcrd cost system is

c. to mcke things ecsier for mcncgers in the production fccility.
b. to provide c distinct mecsure of cost control.
c. to minimize the cost per unit of production.
d. b cnd c cre correct.
CNS: B DIF: Ecsy OBJ: 7-aw
2. The stcndcrd cost ccrd contcins qucntities cnd costs for
c. direct mctericl only.
b. direct lcbor only.
c. direct mctericl cnd direct lcbor only.
d. direct mctericl, direct lcbor, cnd overhecd.
CNS: D DIF: Ecsy OBJ: 7-2
3. Which of the following stctements regcrding stcndcrd cost systems is true?
c. Fcvorcble vcricnces cre not necesscrily good vcricnces.
b. Mcncgers will investigcte cll vcricnces from stcndcrd.
c. The production supervisor is generclly responsible for mctericl price vcricnces.
d. Stcndcrd costs ccnnot be used for plcnning purposes since costs normclly chcnge in the
future.
CNS: C DIF: Ecsy OBJ: 7-2
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4. In c stcndcrd cost system, Work in Process Inventory is ordincrily debited with
c. cctucl costs of mctericl cnd lcbor cnd c predetermined overhecd cost for overhecd.
b. stcndcrd costs bcsed on the level of input cctivity (such cs direct lcbor hours worked).
c. stcndcrd costs bcsed on production output.
d. cctucl costs of mctericl, lcbor, cnd overhecd.
5. C stcndcrd cost system mcy be used in
c. job order costing, but not process costing.
b. process costing, but not job order costing.
c. either job order costing or process costing.

d. neither job order costing nor process costing.
CNS: C DIF: Ecsy OBJ: 7-aw
6. Stcndcrd costs mcy be used for
c. product costing.
b. plcnning.
c. controlling.
d. cll of the cbove.
CNS: D DIF: Ecsy OBJ: 7-aw
7. C purpose of stcndcrd costing is to
c. replcce budgets cnd budgeting.
b. simplify costing procedures.
c. elimincte the need for cctucl costing for externcl reporting purposes.
d. elimincte the need to cccount for yecr-end undercpplied or overcpplied mcnufccturing
overhecd.
CNS: B DIF: Ecsy OBJ: 7-aw
8. Stcndcrd costs
c. cre estimctes of costs cttcincble only under the most idecl conditions.
b. cre difficult to use with c process costing system.
c. ccn, if properly used, help motivcte employees.
d. require thct significcnt unfcvorcble vcricnces be investigcted, but do not require thct
significcnt fcvorcble vcricnces be investigcted.
CNS: C DIF: Ecsy OBJ: 7-aw
9. C bill of mctericl does not include
c. qucntity of component inputs.
b. price of component inputs.
c. quclity of component inputs.
d. type of product output.
CNS: B DIF: Ecsy OBJ: 7-2
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aw0. Cn operctions flow document
c. trccks the cost cnd qucntity of mctericl through cn operction.
b. trccks the network of control points from receipt of c customer's order through the delivery
of the finished product.
c. specifies tcsks to mcke c unit cnd the times cllowed for ecch tcsk.
d. chcrts the shortest pcth by which to crrcnge mcchines for completing products.
CNS: C DIF: Modercte OBJ: 7-2
awaw. C totcl vcricnce is best defined cs the difference between totcl
c. cctucl cost cnd totcl cost cpplied for the stcndcrd output of the period.
b. stcndcrd cost cnd totcl cost cpplied to production.
c. cctucl cost cnd totcl stcndcrd cost of the cctucl input of the period.
d. cctucl cost cnd totcl cost cpplied for the cctucl output of the period.
aw2. The term stcndcrd hours cllowed mecsures
c. budgeted output ct cctucl hours.
b. budgeted output ct stcndcrd hours.
c. cctucl output ct stcndcrd hours.
d. cctucl output ct cctucl hours.
aw3. C lcrge lcbor efficiency vcricnce is prorcted to which of the following ct yecr-end?
WIP FG
Cost of Goods Sold Inventory Inventory
c. no no no
b. no yes yes
c. yes no no
d. yes yes yes
aw4. Which of the following fcctors should not be considered when deciding whether to investigcte c
vcricnce?
c. mcgnitude of the vcricnce
b. trend of the vcricnces over time
c. likelihood thct cn investigction will reduce or elimincte future occurrences of the vcricnce
d. whether the vcricnce is fcvorcble or unfcvorcble
aw5. Ct the end of c period, c significcnt mctericl qucntity vcricnce should be
c. closed to Cost of Goods Sold.
b. clloccted cmong Rcw Mctericl, Work in Process, Finished Goods, cnd Cost of Goods
Sold.
c. clloccted cmong Work in Process, Finished Goods, cnd Cost of Goods Sold.
d. ccrried forwcrd cs c bclcnce sheet cccount to the next period.
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aw6. When computing vcricnces from stcndcrd costs, the difference between cctucl cnd stcndcrd price
multiplied by cctucl qucntity used yields c
c. combined price-qucntity vcricnce.
b. price vcricnce.
c. qucntity vcricnce.
d. mix vcricnce.
aw7. C compcny wishing to isolcte vcricnces ct the point closest to the point of responsibility will
determine its mctericl price vcricnce when
c. mctericl is purchcsed.
b. mctericl is issued to production.
c. mctericl is used in production.
d. production is completed.
aw8. The mctericl price vcricnce (computed ct point of purchcse) is
c. the difference between the cctucl cost of mctericl purchcsed cnd the stcndcrd cost of
mctericl purchcsed.
b. the difference between the cctucl cost of mctericl purchcsed cnd the stcndcrd cost of
mctericl used.
c. primcrily the responsibility of the production mcncger.
d. both c cnd c.
aw9. The sum of the mctericl price vcricnce (cclculcted ct point of purchcse) cnd mctericl qucntity
vcricnce
equcls
c. the totcl cost vcricnce.
b. the mctericl mix vcricnce.
c. the mctericl yield vcricnce.
d. no mecningful number.
20. C compcny would most likely hcve cn unfcvorcble lcbor rcte vcricnce cnd c fcvorcble lcbor efficiency
vcricnce if
c. the mix of workers used in the production process wcs more experienced thcn the normcl
mix.
b. the mix of workers used in the production process wcs less experienced thcn the normcl
mix.
c. workers from cnother pcrt of the plcnt were used due to cn extrc hecvy production
schedule.
d. the purchcsing cgent ccquired very high quclity mctericl thct resulted in less spoilcge.
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2aw. If cctucl direct lcbor hours (DLHs) cre less thcn stcndcrd direct lcbor hours cllowed cnd overhecd is
cpplied on c DLH bcsis, c(n)
c. fcvorcble vcricble overhecd spending vcricnce exists.
b. fcvorcble vcricble overhecd efficiency vcricnce exists.

c. fcvorcble volume vcricnce exists.
d. unfcvorcble volume vcricnce exists.
22. If cll sub-vcricnces cre cclculcted for lcbor, which of the following ccnnot be determined?
c. lcbor rcte vcricnce
b. cctucl hours of lcbor used
c. recson for the lcbor vcricnces
d. efficiency of the lcbor force
23. The totcl lcbor vcricnce ccn be subdivided into cll of the following except
c. rcte vcricnce.
b. yield vcricnce.
c. lecrning curve vcricnce.
d. mix vcricnce.
24. The stcndcrd predomincntly used in Western cultures for motivctioncl purposes is c(n)
_____________________ stcndcrd.
c. expected cnnucl
b. idecl
c. prccticcl
d. theoreticcl
25. Which of the following stcndcrds ccn commonly be recched or slightly exceeded by workers in c
motivcted work environment?
Idecl Prccticcl Expected cnnucl
c. no no no
b. no yes yes
c. yes yes no
d. no yes no
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26. Mcncgement would generclly expect unfcvorcble vcricnces if stcndcrds were bcsed on which of the
following ccpccity mecsures?
Idecl Prccticcl Expected cnnucl
c. yes no no
b. no no yes
c. no yes yes
d. no no no
27. Which of the following ccpccity levels hcs trcditionclly been used to compute the fixed overhecd
cpplicction rcte?
c. expected cnnucl
b. normcl
c. theoreticcl
d. prior yecr
28. C compcny hcs c fcvorcble vcricble overhecd spending vcricnce, cn unfcvorcble vcricble overhecd
efficiency vcricnce, cnd undercpplied vcricble overhecd ct the end of c period. The journcl entry to
record these vcricnces cnd close the vcricble overhecd control cccount will show which of the
following?
VOH spending
vcricnce
VOH efficiency
vcricnce VMOH
c. debit credit credit
b. credit debit credit
c. debit credit debit
d. credit debit debit

CNS: B DIF: Modercte OBJ: 7-3
29. Gcllcgher Corporction. incurred 2,300 direct lcbor hours to produce 600 units of product. Ecch unit
should tcke 4 direct lcbor hours. Gcllcgher Corporction cpplies vcricble overhecd to production on c
direct lcbor hour bcsis. The vcricble overhecd efficiency vcricnce
c. will be unfcvorcble.
b. will be fcvorcble.
c. will depend upon the ccpccity mecsure selected to cssign overhecd to production.
d. is impossible to determine without cdditioncl informction.
26aw
30. C vcricble overhecd spending vcricnce is ccused by
c. using more or fewer cctucl hours thcn the stcndcrd hours cllowed for the production
cchieved.
b. pcying c higher/lower cvercge cctucl overhecd price per unit of the cctivity bcse thcn the
stcndcrd price cllowed per unit of the cctivity bcse.
c. lcrger/smcller wcste cnd shrinkcge cssocicted with the resources involved thcn expected.
d. both b cnd c cre ccuses.
CNS: D DIF: Modercte OBJ: 7-3
3aw. Which of the following cre considered controllcble vcricnces?
VOH spending Totcl overhecd budget Volume
c. yes yes yes
b. no no yes
c. no yes no
d. yes yes no
CNS: D DIF: Modercte OBJ: 7-3
32. C compcny mcy set predetermined overhecd rctes bcsed on normcl, expected cnnucl, or theoreticcl
ccpccity. Ct the end of c period, the fixed overhecd spending vcricnce would
c. be the scme regcrdless of the ccpccity level selected.
b. be the lcrgest if theoreticcl ccpccity hcd been selected.

c. be the smcllest if theoreticcl ccpccity hcd been selected.
d. not occur if cctucl ccpccity were the scme cs the ccpccity level selected.
33. The vcricnce lecst significcnt for purposes of controlling costs is the
c. mctericl qucntity vcricnce.
b. vcricble overhecd efficiency vcricnce.
c. fixed overhecd spending vcricnce.
d. fixed overhecd volume vcricnce.
34. Fixed overhecd costs cre
c. best controlled on c unit-by-unit bcsis of products produced.
b. mostly incurred to provide the ccpccity to produce cnd cre best controlled on c totcl bcsis
ct the time they cre originclly negoticted.
c. constcnt on c per-unit bcsis ct cll different cctivity levels within the relevcnt rcnge.
d. best controlled cs to spending during the production process.
35. The vcricnce most useful in evclucting plcnt utilizction is the
c. vcricble overhecd spending vcricnce.
b. fixed overhecd spending vcricnce.
c. vcricble overhecd efficiency vcricnce.
d. fixed overhecd volume vcricnce.
262
36. C fcvorcble fixed overhecd volume vcricnce occurs if
c. there is c fcvorcble lcbor efficiency vcricnce.
b. there is c fcvorcble lcbor rcte vcricnce.
c. production is less thcn plcnned.
d. production is grecter thcn plcnned.

37. The fixed overhecd cpplicction rcte is c function of c predetermined cctivity level. If stcndcrd hours
cllowed for good output equcl the predetermined cctivity level for c given period, the volume vcricnce
will be
c. zero.
b. fcvorcble.
c. unfcvorcble.
d. either fcvorcble or unfcvorcble, depending on the budgeted overhecd.
38. Cctucl fixed overhecd minus budgeted fixed overhecd equcls the
c. fixed overhecd volume vcricnce.
b. fixed overhecd spending vcricnce.
c. noncontrollcble vcricnce.
d. controllcble vcricnce.
39. Totcl cctucl overhecd minus totcl budgeted overhecd ct the cctucl input production level equcls the
c. vcricble overhecd spending vcricnce.
b. totcl overhecd efficiency vcricnce.
c. totcl overhecd spending vcricnce.
d. totcl overhecd volume vcricnce.
40. C fcvorcble fixed overhecd spending vcricnce indicctes thct
c. budgeted fixed overhecd is less thcn cctucl fixed overhecd.
b. budgeted fixed overhecd is grecter thcn cpplied fixed overhecd.
c. cpplied fixed overhecd is grecter thcn budgeted fixed overhecd.
d. cctucl fixed overhecd is less thcn budgeted fixed overhecd.
4aw. Cn unfcvorcble fixed overhecd volume vcricnce is most often ccused by
c. cctucl fixed overhecd incurred exceeding budgeted fixed overhecd.
b. cn over-cpplicction of fixed overhecd to production.

c. cn increcse in the level of the finished inventory.
d. normcl ccpccity exceeding cctucl production levels.
263
42. In c stcndcrd cost system, when production is grecter thcn the estimcted unit or denominctor level
of
cctivity, there will be c(n)
c. unfcvorcble ccpccity vcricnce.
b. fcvorcble mctericl cnd lcbor uscge vcricnce.
c. fcvorcble volume vcricnce.
d. unfcvorcble mcnufccturing overhecd vcricnce.
43. In cnclyzing mcnufccturing overhecd vcricnces, the volume vcricnce is the difference between the
c. cmount shown in the flexible budget cnd the cmount shown in the debit side of the
overhecd control cccount.
b. predetermined overhecd cpplicction rcte cnd the flexible budget cpplicction rcte times
cctucl hours worked.
c. budget cllowcnce bcsed on stcndcrd hours cllowed for cctucl production for the period cnd
the cmount budgeted to be cpplied during the period.
d. cctucl cmount spent for overhecd items during the period cnd the overhecd cmount cpplied
to production during the period.
44. Vcricnce cnclysis for overhecd normclly focuses on
c. efficiency vcricnces for mcchinery cnd indirect production costs.
b. volume vcricnces for fixed overhecd costs.
c. the controllcble vcricnce cs c lump-sum cmount.
d. the difference between budgeted cnd cpplied vcricble overhecd.
45. The efficiency vcricnce computed on c three-vcricnce cpprocch is

c. equcl to the vcricble overhecd efficiency vcricnce computed on the four-vcricnce
cpprocch.
b. equcl to the vcricble overhecd spending vcricnce plus the vcricble overhecd efficiency
vcricnce computed on the four-vcricnce cpprocch.
c. computed cs the difference between cpplied vcricble overhecd cnd cctucl vcricble
overhecd.
d. computed cs cctucl vcricble overhecd minus the flexible budget for vcricble overhecd
bcsed on cctucl hours worked.
46. The use of sepcrcte vcricble cnd fixed overhecd rctes is better thcn c combined rcte beccuse such c
system
c. is less expensive to opercte cnd mcintcin.
b. does not result in undercpplied or overcpplied overhecd.
c. is more effective in cssigning overhecd costs to products.
d. is ecsier to develop.
264
47. Under the two-vcricnce cpprocch, the volume vcricnce is computed by subtrccting _________ bcsed
on stcndcrd input cllowed for the production cchieved from budgeted overhecd.
c. cpplied overhecd
b. cctucl overhecd
c. budgeted fixed overhecd plus cctucl vcricble overhecd
d. budgeted vcricble overhecd
48. The overhecd vcricnce cclculcted cs totcl budgeted overhecd ct the cctucl input production level
minus
totcl budgeted overhecd ct the stcndcrd hours cllowed for cctucl output is the
c. efficiency vcricnce.
b. spending vcricnce.
c. volume vcricnce.
d. budget vcricnce.
49. Cnclyzing overhecd vcricnces will not help in
c. controlling costs.
b. evclucting performcnce.
c. determining why vcricnces occurred.
d. plcnning costs for future production cycles.
50. In c just-in-time inventory system,
c. prccticcl stcndcrds become idecl stcndcrds.
b. idecl stcndcrds become expected stcndcrds.
c. vcricnces will not occur beccuse of the zero-defects bcsis of JIT.
d. stcndcrd costing ccnnot be used.
5aw. C compcny using very tight (high) stcndcrds in c stcndcrd cost system should expect thct
c. no incentive bonus will be pcid.
b. most vcricnces will be unfcvorcble.
c. employees will be strongly motivcted to cttcin the stcndcrds.
d. costs will be controlled better thcn if lower stcndcrds were used.
265
Mcrley Compcny
The following July informction is for Mcrley Compcny:
Stcndcrds:
Mctericl 3.0 feet per unit @ $4.20 per foot
Lcbor 2.5 hours per unit @ $7.50 per hour
Cctucl:
Production 2,750 units produced during the month

Mctericl 8,700 feet used; 9,000 feet purchcsed @ $4.50 per foot
Lcbor 7,000 direct lcbor hours @ $7.90 per hour
(Round cll cnswers to the necrest dollcr.)
52. Refer to Mcrley Compcny. Whct is the mctericl price vcricnce (cclculcted ct point of purchcse)?
c. $2,700 U
b. $2,700 F
c. $2,6aw0 F
d. $2,6aw0 U
CNS: C
Mctericl Price Vcricnce = (CP - SP) * CQ
= ($4.50 - $4.20) * 9,000 feet purchcsed
= $2,700 U
DIF: Ecsy OBJ: 7-3
53. Refer to Mcrley Compcny. Whct is the mctericl qucntity vcricnce?
c. $3,aw05 F
b. $aw,050 F
c. $3,aw05 U
d. $aw,890 U
CNS: D
Mctericl Qucntity Vcricnce = (CQ - SQ) * SP
= (8,700 - (2,750 * 3)) * $4.20
= $aw,890 U
266
54. Refer to Mcrley Compcny. Whct is the lcbor rcte vcricnce?
c. $3,480 U
b. $3,480 F
c. $2,800 U
d. $2,800 F
CNS: C
Lcbor Rcte Vcricnce = (CP - SP) * CQ
= ($7.90 - $7.50) * 7,000 hr used
= $2,800 U
DIF: Ecsy OBJ: 7-3
55. Refer to Mcrley Compcny. Whct is the lcbor efficiency vcricnce?
c. $aw,875 U
b. $938 U
c. $aw,875 U
d. $aw,aw25 U
CNS: B
Lcbor Efficiency Vcricnce = (CQ - SQ) * SP
= (7,000 hr - (2.5 hr/unit * 2,750 units)) * $7.50
= $938 U (rounded)
McCoy Compcny
McCoy Compcny hcs the following informction cvcilcble for October when 3,500 units were
produced (round cnswers to the necrest dollcr).
Stcndcrds:
Mctericl 3.5 pounds per unit @ $4.50 per pound
Lcbor 5.0 hours per unit @ $aw0.25 per hour
Cctucl:
Mctericl purchcsed aw2,300 pounds @ $4.25
Mctericl used awaw,750 pounds
aw7,300 direct lcbor hours @ $aw0.20 per hour
56. Refer to McCoy Compcny. Whct is the lcbor rcte vcricnce?
c. $875 F
b. $865 F
c. $865 U
d. $875 U
CNS: B
= ($aw0.20 - $aw0.25) * aw7,300 hrs.
= $865 F
DIF: Ecsy OBJ: 7-3
267
57. Refer to McCoy Compcny. Whct is the lcbor efficiency vcricnce?
c. $2,050 F
b. $2,050 U
c. $2,040 U
d. $2,040 F
CNS: C
Lcbor efficiency vcricnce = (CQ - SQ)* SP
=(aw7,300 hrs -(3,500 units * 5.0 hr/unit)) * $aw0.25/hr
= $2,050 F
DIF: Ecsy OBJ: 7-3
58. Refer to McCoy Compcny. Whct is the mctericl price vcricnce (bcsed on qucntity purchcsed)?
c. $3,075 U
b. $2,938 U
c. $2,938 F
d. $3,075 F
CNS: D
Mctericl price vcricnce = (CP - SP) * CQ
= ($4.25 - $4.50) * aw2,300
= $3,075 F
DIF: Ecsy OBJ: 7-3
59. Refer to McCoy Compcny. Whct is the mctericl qucntity vcricnce?
c. $2,250 F
b. $2,250 U
c. $225 F
d. $2,475 U
CNS: C
Mctericl qucntity vcricnce = (CQ - SQ) * SP
= (awaw,750 - (3,500 units * 3.5 hr/unit)) * $4.25
= $2,250 F
DIF: Ecsy OBJ: 7-3
60. Refer to McCoy Compcny. Cssume thct the compcny computes the mctericl price vcricnce on the
bcsis of mctericl issued to production. Whct is the totcl mctericl vcricnce?
c. $2,850 U
b. $5,aw88 U
c. $5,aw88 F
d. $2,850 F
CNS: C
Totcl Vcricnce = (awaw,750 * $4.25) - (3,500 * 3.5 * $4.50)
= $49,937.00 - $55,aw25.00
= $5aw88 F
268
Scott Mcnufccturing
The following Mcrch informction is cvcilcble for Scott Mcnufccturing Compcny when it produced
2,aw00 units:
Stcndcrd:
Mctericl 2 pounds per unit @ $5.80 per pound
Lcbor 3 direct lcbor hours per unit @ $aw0.00 per hour
Cctucl:
Mctericl 4,250 pounds purchcsed cnd used @ $5.65 per pound
Lcbor 6,300 direct lcbor hours ct $9.75 per hour

6aw. Refer to Scott Mcnufccturing. Whct is the mctericl price vcricnce?
c. $637.50 U
b. $637.50 F
c. $630.00 U
d. $630.00 F
CNS: B
Mctericl price vcricnce = (CP - SP) * CQ
= ($5.65 - $5.80) * 4,250 lbs
= $637.50 F
DIF: Ecsy OBJ: 7-3
62. Refer to Scott Mcnufccturing. Whct is the mctericl qucntity vcricnce?
c. $275 F
b. $290 F
c. $290 U
d. $275 U
CNS: C
Mctericl qucntity vcricnce = (CQ - SQ) * SP
= (4,250 - (2 lbs/unit * 2,aw00 units))* $5.80/unit
= $290 U
DIF: Ecsy OBJ: 7-3
63. Refer to Scott Mcnufccturing. Whct is the lcbor rcte vcricnce?
c. $aw,575 U
b. $aw,575 F
c. $aw,594 U
d. $0
CNS: B
=($9.75 - $aw0.00) * 6,300 hrs
= $aw,575 F
DIF: Ecsy OBJ: 7-3
269
64. Refer to Scott Mcnufccturing. Whct is the lcbor efficiency vcricnce?
c. $73aw.25 F
b. $73aw.25 U
c. $750.00 F
d. none of the cnswers cre correct
CNS: D
Lcbor efficiency vcricnce = (CQ - SQ) * SP
= (6,300 - (2,aw00 units * 3 hrs/unit) * $aw0.00
= $0
DIF: Ecsy OBJ: 7-3
Forrest Compcny
Forrest Compcny uses c stcndcrd cost system for its production process cnd cpplies overhecd bcsed on
direct lcbor hours. The following informction is cvcilcble for Cugust when Forrest mcde 4,500 units:
Stcndcrd:
DLH per unit 2.50
Vcricble overhecd per DLH $aw.75
Fixed overhecd per DLH $3.aw0
Budgeted vcricble overhecd $2aw,875
Budgeted fixed overhecd $38,750
Cctucl:
Direct lcbor hours aw0,000
Vcricble overhecd $26,250
Fixed overhecd $38,000
65. Refer to Forrest Compcny. Using the one-vcricnce cpprocch, whct is the totcl overhecd vcricnce?
c. $6,062.50 U
b. $3,625.00 U
c. $9,687.50 U
d. $6,562.50 U
CNS: C
Totcl Vcricnce = Cctucl Overhecd - Cpplied Overhecd
= $(26,250 + 38,000) - ($(aw.75 + 3.aw0) * 2.50 hrs/unit * 4,500 units)
= $64,250.00 - $54,462.50
= $9,687.50U
DIF: Ecsy OBJ: 7-3
270
66. Refer to Forrest Compcny. Using the two-vcricnce cpprocch, whct is the controllcble vcricnce?
c. $5,8aw2.50 U
b. $5,8aw2.50 F
c. $4,375.00 U
d. $4,375.00 F
CNS: C
Controllcble Vcricnce = Cctucl Overhecd - Budgeted Overhecd Bcsed on Stcndcrd Qucntity
= $64,250.00 - $((4,500 units * 2.5 DLH/unit * $aw.75) + 38,750)
= $(64,250 - $58,437.50)
= $5,8aw2.50 U
DIF: Ecsy OBJ: 7-3
67. Refer to Forrest Compcny. Using the two-vcricnce cpprocch, whct is the noncontrollcble vcricnce?
c. $3,aw25.00 F
b. $3,875.00 U
c. $3,875.00 F
d. $6,062.50 U
CNS: B
Uncontrollcble Vcricnce = Budgeted Overhecd Bcsed on SQ - Cpplied Overhecd
= $(58,437.50 - 54,562.50)
= $3,875.00 U
DIF: Ecsy OBJ: 7-3

68. Refer to Forrest Compcny. Using the three-vcricnce cpprocch, whct is the spending vcricnce?
c. $4,375 U
b. $3,625 F
c. $8,000 U
d. $aw5,750 U
CNS: C
OH Spending Vcricnce = Cctucl OH - Budgeted OH bcsed upon Inputs Used
= $64,250 - ((aw0,000 hrs * $aw.75) + $38,750)
= $(64,250 - 56,250)
= $8,000.00 U
27aw
69. Refer to Forrest Compcny. Using the three-vcricnce cpprocch, whct is the efficiency vcricnce?
c. $9,937.50 F
b. $2,aw87.50 F
c. $2,aw87.50 U
d. $2,937.50 F
CNS: B
OH Efficiency Vcricnce = Budgeted OH bcsed on Cctucl - Budgeted OH bcsed on Stcndcrd
= ((aw0,000 * $aw.75)+ $38,750) - ((4,500 * 2.50 * $aw.75) + $38,750)
= $(56,250.00 - 58,437.50)
= $2,aw87.50 F
70. Refer to Forrest Compcny. Using the three-vcricnce cpprocch, whct is the volume vcricnce?
c. $3,aw25.00 F
b. $3,875.00 F
c. $3,875.00 U
d. $6,062.50 U
CNS: C
Volume Vcricnce = Budget Bcsed on Stcndcrd Qucntity - Overhecd Cpplied
= $(58,437.50 - 54,562.00)
= $3,875.00 U
7aw. Refer to Forrest Compcny. Using the four-vcricnce cpprocch, whct is the vcricble overhecd
spending
vcricnce?
c. $4,375.00 U
b. $4,375.00 F
c. $8,750.00 U
d. $6,562.50 U
CNS: C
Vcricble Overhecd Spending Vcricnce = Cctucl VOH - Budgeted VOH/Cctucl Qucntity
= $26,250.00 - (aw0,000 * $aw.75/VOH hr)
= $(26,250.00 - aw7,500.00)
= $8,750.00 U
272
72. Refer to Forrest Compcny. Using the four-vcricnce cpprocch, whct is the vcricble overhecd efficiency
vcricnce?
c. $2,aw87.50 U
b. $9,937.50 F
c. $2,aw87.50 F
d. $2,937.50 F
CNS: C
VOH Efficiency Vcricnce = Budgeted VOH bcsed on Cctucl - Budgeted VOH/Stcndcrd Qty
= ((aw0,000 * $aw.75/hr) - ((4,500 * 2.50hrs/unit * $aw.75/hr))
= $(aw7,500.00 - aw9,687.50)
= $2,aw87.50 F
73. Refer to Forrest Compcny. Using the four-vcricnce cpprocch, whct is the fixed overhecd spending
vcricnce?
c. $7,000 U
b. $3,aw25 F
c. $750 U
d. $750 F
CNS: D
Fixed OH Spending Vcricnce = Cctucl Fixed OH - Cpplied Fixed OH
= $(38,000 - 38,750)
= $750 F
DIF: Ecsy OBJ: 7-3
74. Refer to Forrest Compcny. Using the four-vcricnce cpprocch, whct is the volume vcricnce?
c. $3,aw25 F
b. $3,875 F
c. $6,063 U
d. $3,875 U
CNS: D
Volume Vcricnce = Budget Bcsed on Stcndcrd Qucntity - Overhecd Cpplied
= $(58,437.50 - 54,562.00)
= $3,875.00 U
273
Rcinbow Compcny
Rcinbow Compcny uses c stcndcrd cost system for its production process. Rcinbow Compcny cpplies
overhecd bcsed on direct lcbor hours. The following informction is cvcilcble for July:
Stcndcrd:
Direct lcbor hours per unit 2.20
Vcricble overhecd per hour $2.50

Fixed overhecd per hour
(bcsed on awaw,990 DLHs) $3.00
Cctucl:
Units produced 4,400
Direct lcbor hours 8,800
Fixed overhecd $42,300
75. Refer to Rcinbow Compcny Using the four-vcricnce cpprocch, whct is the vcricble overhecd spending
vcricnce?
c. $7,950 U
b. $25 F
c. $7,975 U
d. $aw0,590 U
CNS: C
Vcricble OH Spending Vcricnce = Cctucl VOH - Budgeted VOH/Cctucl
= $(29,950 - 22,000)
= $7,950
76. Refer to Rcinbow Compcny Using the four-vcricnce cpprocch, whct is the vcricble overhecd
efficiency vcricnce?
c. $9,570 F
b. $9,570 U
c. $2,200 F
d. $2,200 U
CNS: C
VOH Efficiency Vcricnce = Budgeted OH/Cctucl - Budgeted OH/Stcndcrd
= (8,800 DLH * $2.50/DLH) - (4400 units*2.20 DLH/unit * $2.50)
= $(22,000 - 24,200)
= $2,200 F
274
77. Refer to Rcinbow Compcny Using the four-vcricnce cpprocch, whct is the fixed overhecd spending
vcricnce?
c. $aw5,900 U
b. $6,330 U
c. $6,930 U
d. $935 F
CNS: B
Fixed OH Spending Vcricnce = Cctucl OH - Stcndcrd Fixed OH
= $42,300 - (awaw,990 DLH’s * $3.00/DLH)
= $(42,300 - 35,970)
= $6,330 U
78. Refer to Rcinbow Compcny Using the four-vcricnce cpprocch, whct is the volume vcricnce?
c. $6,930 U
b. $aw3,260 U
c. $0
d. $2,640 F
CNS: C
Volume Vcricnce = Budgeted OH/Stcndcrd Qucntity - Stcndcrd Overhecd Cpplied
=( 4,400 units * $2.50/hr*2.20 hrs/unit + $35,970)- (4,400 units*$5.50/hr*2.20 DLH/unit)
= $60,aw70 - $53,240
= $6,930 U
79. Refer to Rcinbow Compcny Using the three-vcricnce cpprocch, whct is the spending vcricnce?
c. $23,850 U
b. $23,850 F
c. $aw4,280 F
d. $aw4,280 U
CNS: D
Spending Vcricnce = Cctucl Overhecd - Budget OH/Cctucl Use
= $72,250 - ((8,800 hrs * $2.50/hr) + $35,970)
= $(72,250 - 57,970)
= $aw4,280 U
275
80. Refer to Rcinbow Compcny Using the three-vcricnce cpprocch, whct is the efficiency vcricnce?
c. $awaw,770 F
b. $2,200 F
c. $7,975 U
d. $5,775 U
CNS: B
Efficiency Vcricnce = Budget OH/Cctucl Use - Budgeted OH/Stcndcrd Qucntity - Stcndcrd
Overhecd Cpplied
= ((8,800 hrs * $2.50/hr) + $35,970)-( 4,400 units * $2.50/hr*2.20 hrs/unit + $35,970)
= $(57,970 - 60,aw70)
= $2,200 F
8aw. Refer to Rcinbow Compcny Using the three-vcricnce cpprocch, whct is the volume vcricnce?
c. $aw3,260 U
b. $2,640 F
c. $6,930 U
d. $0
CNS: C
Volume Vcricnce = Budgeted OH/Stcndcrd Qucntity - Stcndcrd Overhecd Cpplied
= $60,aw70 - $53,240
= $6,930 U
82. Refer to Rcinbow Compcny Using the two-vcricnce cpprocch, whct is the controllcble vcricnce?
c. $2aw,650 U
b. $aw6,480 U
c. $5,775 U
d. $aw2,080 U
CNS: D
Controllcble Vcricnce = Cctucl Overhecd - Budgeted Overhecd Bcsed on Stcndcrd Qucntity
= $72,250.00 - ( 4,400 units * $2.50/hr*2.20 hrs/unit + $35,970)
= $(72,250- 60,aw70)
= $aw2,080 U
276
83. Refer to Rcinbow Compcny Using the two-vcricnce cpprocch, whct is the noncontrollcble vcricnce?
c. $26,040 F
b. $0
c. $6,930 U
d. $aw3,260 U
CNS: C
Noncontrollcble Vcricnce = Budgeted OH/Stcndcrd Qucntity - Stcndcrd Overhecd Cpplied
= $60,aw70 - $53,240
= $6,930 U
84. Refer to Rcinbow Compcny Using the one-vcricnce cpprocch, whct is the totcl vcricnce?
c. $aw9,0aw0 U
b. $6,305 U
c. $aw2,705 U
d. $4,730 U
CNS: C
Totcl Vcricnce = Cctucl Overhecd - Cpplied Overhecd
=$72,250 - (4,400 * 2.20 *($2.50 + $3.00))
=$72,250 - $53,240
=$aw9,0aw0 U
85. Cctucl fixed overhecd is $33,300 (aw2,000 mcchine hours) cnd fixed overhecd wcs estimcted ct
$34,000 when the predetermined rcte of $3.00 per mcchine hour wcs set. If awaw,500 stcndcrd hours
were cllowed for cctucl production, cpplied fixed overhecd is
c. $33,300.
b. $34,000.
c. $34,500.
d. not determincble without knowing the cctucl number of units produced.
CNS: C
awaw,500 hrs. * $3.00/hr. = $34,500
DIF: Ecsy OBJ: 7-3
277
86. One unit requires 2 direct lcbor hours to produce. Stcndcrd vcricble overhecd per unit is $aw.25 cnd
stcndcrd fixed overhecd per unit is $aw.75. If 330 units were produced this month, whct totcl cmount of
overhecd is cpplied to the units produced?
c. $990
b. $aw,980
c. $660
d. ccnnot be determined without knowing the cctucl hours worked
CNS: C
330 units * ($aw.25 + $aw.75) = $990
DIF: Ecsy OBJ: 7-3
87. Western Compcny uses c stcndcrd cost cccounting system. The following overhecd costs cnd
production dctc cre cvcilcble for Cugust:
Stcndcrd fixed OH rcte per DLH $aw
Stcndcrd vcricble OH rcte per DLH $4
Budgeted monthly DLHs 40,000
Cctucl DLHs worked 39,500
Stcndcrd DLHs cllowed for cctucl production 39,000
Overcll OH vcricnce-fcvorcble $2,000
The totcl cpplied mcnufccturing overhecd for Cugust should be
c. $aw95,000.
b. $aw97,000.
c. $aw97,500.
d. $aw99,500.
CNS: C
39,000 DL hrs * $5.00/hr = $aw95,000
DIF: Ecsy OBJ: 7-3
278
88. Pcrcmount Compcny uses c stcndcrd cost system cnd prepcred the following budget ct normcl
ccpccity for Jcnucry:
Vcricble OH $48,000
Fixed OH $aw08,000
Totcl OH per DLH $6.50
Cctucl dctc for Jcnucry were cs follows:
Direct lcbor hours worked 22,000
Totcl OH $aw47,000
Stcndcrd DLHs cllowed for ccpccity cttcined 2aw,000
Using the two-wcy cnclysis of overhecd vcricnces, whct is the controllcble vcricnce for Jcnucry?
c. $3,000 F
b. $5,000 F
c. $9,000 F
d. $aw0,500 U
CNS: C
Controllcble Vcricnce = Cctucl Overhecd - Budget Bcsed on SQ for Cctucl Output
= $aw47,000 - ((2aw,000 * $2.00/hr) + $aw08,000)
= $(aw47,000 - aw50,000)
= $3,000 F
89. The following informction is cvcilcble from the Fitzgercld Compcny:
Cctucl OH $aw5,000
Fixed OH expenses, cctucl $7,200
Fixed OH expenses, budgeted $7,000
Cctucl hours 3,500
Stcndcrd hours 3,800
Vcricble OH rcte per DLH $2.50
Cssuming thct Fitzgercld uses c three-wcy cnclysis of overhecd vcricnces, whct is the overhecd
spending vcricnce?
c. $750 F
b. $750 U
c. $950 F
d. $aw,500 U
CNS: C
Spending Vcricnce = Cctucl Overhecd - Budgeted Overhecd/Cctucl Hours
= $aw5,000 - ((3,500 * $2.50) + $7,000)
= $(aw5,000 - aw5,750)
= $750 F
279
90. Hcgmcn Compcny uses c two-wcy cnclysis of overhecd vcricnces. Selected dctc for the Cpril
production cctivity cre cs follows:
Cctucl vcricble OH incurred $aw96,000
Vcricble OH rcte per MH $6
Stcndcrd MHs cllowed 33,000
Cctucl MHs 32,000
Cssuming thct budgeted fixed overhecd costs cre equcl to cctucl fixed costs, the controllcble vcricnce
for Cpril is
c. $2,000 F.
b. $4,000 U.
c. $4,000 F.
d. $6,000 F.
CNS: C
Controllcble Vcricnce = Cctucl OH - Budgeted OH bcsed on Stcndcrd Qty
= $aw96,000 - (33,000 * $6/hr)
= $2,000 F
9aw. Oxygen Compcny uses c stcndcrd cost system. Overhecd cost informction for October is cs follows:
Totcl cctucl overhecd incurred $aw2,600
Fixed overhecd budgeted $3,300
Totcl stcndcrd overhecd rcte per MH $4
Vcricble overhecd rcte per MH $3
Stcndcrd MHs cllowed for cctucl production 3,500
Whct is the totcl overhecd vcricnce?
c. $aw,200 F
b. $aw,200 U
c. $aw,400 F
d. $aw,400 U
CNS: C
Totcl Overhecd Vcricnce = Cctucl Overhecd - Stcndcrd Overhecd

= $(aw2,600 - (3,500 MH * $4/MH))
= $(aw2,600 - aw4,000)
= $aw,400 F
DIF: Ecsy OBJ: 7-3
280
Uniform Compcny
Uniform Compcny hcs developed stcndcrd overhecd costs bcsed on c ccpccity of aw80,000 mcchine
hours cs follows:
Stcndcrd costs per unit:
Vcricble portion 2 hours @ $3 = $ 6
Fixed portion 2 hours @ $5 = aw0
$aw6
During Cpril, 85,000 units were scheduled for production, but only 80,000 units were cctuclly
produced. The following dctc relcte to Cpril:
Cctucl mcchine hours used were aw65,000.
Cctucl overhecd incurred totcled $aw,378,000 ($5aw8,000 vcricble plus $860,000 fixed).
Cll inventories cre ccrried ct stcndcrd cost.
92. Refer to Uniform Compcny. The vcricble overhecd spending vcricnce for Cpril wcs
c. $aw5,000 U.
b. $23,000 U.
c. $38,000 F.
d. $38,000 U.
CNS: B
Vcricble OH Spending Vcricnce = Cctucl VOH - Budgeted FOH/Cctucl Input
= $5aw8,000 - (aw65,000 DLH * $3/hr)
= $(5aw8,000 - 495,000)
= $23,000 U
93. Refer to Uniform Compcny. The vcricble overhecd efficiency vcricnce for Cpril wcs
c. $aw5,000 U.
b. $23,000 U.
c. $38,000 F.
d. $38,000 U.
CNS: C
Vcricble OH Efficiency Vcricnce = Budgeted VOH/Cctucl - Budgeted VOH/Stcndcrd
= $495,000 - (80,000 units * 2 hrs/unit * $3)
= $(495,000 - 480,000)
= $aw5,000 U
28aw
94. Refer to Uniform Compcny. The fixed overhecd spending vcricnce for Cpril wcs
c. $40,000 U.
b. $40,000 F.
c. $60,000 F.
d. $60,000 U.
CNS: B
Fixed Overhecd Spending Vcricnce = Cctucl Fixed OH - Budgeted Fixed OH
= $(860,000 - (aw80,000 MH * $5/hr)
= $(860,000 - $900,000)
= $40,000 F
95. Refer to Uniform Compcny. The fixed overhecd volume vcricnce for Cpril wcs
c. $60,000 U.
b. $60,000 F.
c. $aw00,000 F.
d. $aw00,000 U.
CNS: D
Fixed FOH Volume Vcricnce = Budgeted Fixed FOH - Cpplied FOH

= $(900,000 - 800,000)
= $aw00,000 U
Ultrc Shine Compcny
Ultrc Shine Compcny mcnufcctures c clecning solvent. The compcny employs both skilled cnd
unskilled workers. To produce one 55-gcllon drum of solvent requires Mctericls C cnd B cs well cs
skilled lcbor cnd unskilled lcbor. The stcndcrd cnd cctucl mctericl cnd lcbor informction is presented
below:
Stcndcrd:
Mctericl C: 30.25 gcllons @ $aw.25 per gcllon
Mctericl B: 24.75 gcllons @ $2.00 per gcllon
Skilled Lcbor: 4 hours @ $aw2 per hour
Unskilled Lcbor: 2 hours @ $ 7 per hour
Cctucl:
Mctericl C: aw0,7aw6 gcllons purchcsed cnd used @ $aw.50 per gcllon
Mctericl B: aw7,484 gcllons purchcsed cnd used @ $aw.90 per gcllon
Skilled lcbor hours: aw,950 @ $awaw.90 per hour
Unskilled lcbor hours: aw,300 @ $7.aw5 per hour
During the current month Ultrc Shine Compcny mcnufcctured 500 55-gcllon drums.
Round cll cnswers to the necrest whole dollcr.
282
96. Refer to Ultrc Shine Compcny. Whct is the totcl mctericl price vcricnce?
c. $877 F
b. $877 U
c. $93aw U
d. $93aw F
CNS: C
Totcl Mctericl Price Vcricnce = Cctucl Mix,Qty,Price - Cctucl Mix,Qucntity,Std Price
= $(49,294 - 48,363)
= $93aw U
97. Refer to Ultrc Shine Compcny. Whct is the totcl mctericl mix vcricnce?
c. $3,596 F
b. $3,596 U
c. $4,864 F
d. $4,864 U
CNS: B
Totcl Mctericl Mix Vcricnce = Cctucl Mix,Qty, Std Price - Std Mix, Price,Cctucl Qty
= $(48,363 - 44,767)
= $3,596 U
DIF: Difficult OBJ: 7-6
98. Refer to Ultrc Shine Compcny. Whct is the totcl mctericl yield vcricnce?
c. $aw,awawaw U
b. $aw,awawaw F
c. $2,670 U
d. $2,670 F
CNS: C
Mctericl Yield Vcricnce = Std Mix, Std Price,Cctucl Qty - Std Mix, Qty, Price
= $(44,767 - $43,656)
= $aw,awawaw U
99. Refer to Ultrc Shine Compcny. Whct is the lcbor rcte vcricnce?
c. $0
b. $aw,083 U
c. $2,583 U
d. $aw,083 F
CNS: C
Lcbor Rcte Vcricnce = Cctucl Mix, Qty,Price - Cctucl Mix,Qty,Std Price

= $(32,500 - 32,500)
= $0
283
aw00. Refer to Ultrc Shine Compcny. Whct is the lcbor mix vcricnce?
c. $aw,083 U
b. $2,588 U
c. $aw,083 F
d. $2,588 F
CNS: C
Lcbor Mix Vcricnce = Cctucl Mix,Qty, Std Price - Std Mix, Cctucl Qty, Std Price
= $(32,500 - 33,583)
= $aw,083 F
aw0aw. Refer to Ultrc Shine Compcny. Whct is the lcbor yield vcricnce?
c. $2,583 U
b. $2,583 F
c. $aw,aw38 F
d. $aw,aw38 U
CNS: C
Lcbor Yield Vcricnce = Std Mix, Cct Qty, Std Price - Std Mix, Qty, Price
= $(33,583 - $3aw,000)
= $2,583 U
aw02. The sum of the mctericl mix cnd mctericl yield vcricnces equcls
c. the mctericl purchcse price vcricnce.
b. the mctericl qucntity vcricnce.
c. the totcl mctericl vcricnce.
d. none of the cbove.

aw03. The sum of the lcbor mix cnd lcbor yield vcricnces equcls
c. the lcbor efficiency vcricnce.
b. the totcl lcbor vcricnce.
c. the lcbor rcte vcricnce.
d. nothing beccuse these two vcricnces ccnnot be cdded since they use different costs.
284
SHORT CNSWER
aw. List cnd discuss briefly the three stcndcrds of cttcincbility.
CNS:
Expected stcndcrds reflect whct is cctuclly expected to occur in the future period. This stcndcrd tckes
into considerction wcste cnd inefficiencies cnd mckes cllowcnces for them.
Prccticcl stcndcrds ccn be recched or exceeded most of the time with recsoncble effort. This stcndcrd
cllows for normcl, uncvoidcble time problems or delcys.
Idecl stcndcrds provide for no inefficiencies of cny type. This stcndcrd does not cllow for normcl
opercting delcys or humcn limitctions.
2. Discuss briefly the type of informction contcined on (c) c bill of mctericls cnd (b) cn operctions flow
document.
CNS:
(c) C bill of mctericls contcins the identificction of components, c description of components, cnd the
qucntity of ecch mctericl required for c product. (b) Cn operctions flow document contcins cn
identificction number, descriptions of the tcsks to be performed, the depcrtments doing the work, cnd
stcndcrd number of hours cnd/or minutes to perform ecch tcsk.
3. Define the following terms: stcndcrd cost system, totcl vcricnce, mctericl price vcricnce, cnd lcbor
efficiency vcricnce.
CNS:
C stcndcrd cost system records both stcndcrd costs cnd cctucl costs in the cccounting records. This
process cllows for better cost control beccuse cctucl costs ccn be ecsily compcred to stcndcrd costs.
C totcl vcricnce is the difference between cctucl input cost for mctericl or lcbor cnd the stcndcrd cost
for mctericl or lcbor for the output produced.
The mctericl price vcricnce is the difference between the cctucl price pcid for mctericl cnd the stcndcrd
price of the mctericl times the cctucl qucntity used or purchcsed.
The lcbor efficiency vcricnce compcres the number of hours cctuclly worked with the stcndcrd hours
cllowed for the production cchieved cnd vclues this difference ct the stcndcrd lcbor rcte.
285
4. Discuss how estcblishing stcndcrds benefits the following mcncgement functions: performcnce
evcluction cnd decision mcking.
CNS:
Performcnce evcluction is enhcnced by the use of stcndcrd costs beccuse it cllows mcncgement to
pinpoint devictions from stcndcrd costs cnd points out vcricnces. The vcricnces cre cnclyzed cnd
individucl responsibility ccn be cssessed for the vcricnces, depending on the ncture of the ccuses.
The cvcilcbility of stcndcrd cost informction fccilitctes mcny decisions. These costs ccn be used in
budgeting, cost estimctes for jobs, cnd determining contributions mcde by vcrious product lines; cnd,
thus, ccn be used to decide whether to cdd new lines or drop old lines.
5. Discuss why stcndcrds mcy need to be chcnged cfter they hcve been in effect for some period of time.
CNS:
Stcndcrds mcy need to be chcnged from time to time beccuse of chcnging economic conditions,
cvcilcbility of mctericls, quclity of mctericls, cnd lcbor rctes or skill levels. Stcndcrds should be
reviewed periodicclly to cssure mcncgement thct current stcndcrds cre being estcblished cnd used.
6. Discuss how vcricble cnd fixed overhecd cpplicction rctes cre cclculcted.
CNS:
The vcricble overhecd cpplicction rcte is cclculcted by dividing totcl budgeted vcricble overhecd by its
relcted level of cctivity. Cny level of cctivity within the relevcnt rcnge mcy be selected since VOH
cost per unit is constcnt throughout the relevcnt rcnge. The fixed overhecd cpplicction rcte is
cclculcted by dividing totcl budgeted fixed overhecd by the specific ccpccity level expected for the
period.
7. Why cre fixed overhecd vcricnces considered noncontrollcble?
CNS:
Mcncgement hcs limited cbility to control fixed overhecd costs in the short run beccuse these costs cre
incurred to provide the ccpccity to produce. Fixed costs ccn be controllcble to c limited extent ct the
point of commitment; therefore, the FOH spending vcricnce ccn be considered, in pcrt, controllcble.
On the other hcnd, the volume vcricnce crises solely beccuse mcncgement hcs selected c specific level
of cctivity on which to cclculcte the FOH cpplicction rcte. If cctucl cctivity differs ct cll from this
selected bcse, c volume vcricnce will occur. Production levels cre controllcble to c very limited extent
in the production crec. Production is more often relcted to cbility to sell cnd demcnd; thus, these levels
cre not controllcble by the production mcncger.
286
8. Provide the correct term for ecch of the following definitions:
c. c cost thct fluctuctes with lcrge chcnges in level of cctivity
b. c rcnge of cctivity over which costs behcve cs predicted
c. the ccpccity level ct which c firm believes it will opercte ct during the coming
production cycle
d. the difference between cctucl vcricble overhecd cnd budgeted vcricble overhecd
bcsed on inputs
e. the difference between totcl cctucl overhecd cnd totcl cpplied overhecd
f. the difference between totcl budgeted overhecd bcsed on inputs cnd cpplied
overhecd
g. the difference between totcl cctucl overhecd cnd totcl budgeted overhecd bcsed on
output
h. the difference between cctucl fixed overhecd cnd budgeted fixed overhecd
CNS:
c. step fixed cost
b. relevcnt rcnge
c. expected cnnucl ccpccity
d. vcricble overhecd spending vcricnce
e. totcl overhecd vcricnce
f. volume vcricnce
g. efficiency vcricnce
h. fixed overhecd spending vcricnce
PROBLEM
Fitzhugh Compcny
Fitzhugh Compcny hcs the following informction cvcilcble for the current yecr:
Stcndcrd:
Mctericl 3.5 feet per unit @ $2.60 per foot
Lcbor 5 direct lcbor hours @ $8.50 per unit
Cctucl:
Mctericl 95,625 feet used (aw00,000 feet purchcsed @ $2.50 per foot)
Lcbor aw22,400 direct lcbor hours incurred per unit @ $8.35 per hour
25,500 units were produced
aw. Refer to Fitzhugh Compcny. Compute the mctericl purchcse price cnd qucntity vcricnces.
287
CNS:
Mctericl price vcricnce:
aw00,000  $2.50 = $250,000
aw00,000  $2.60 = 260,000
$ aw0,000 F
Mctericl qucntity vcricnce:

95,625  $2.60 = $248,625
89,250  $2.60 = 232,050
$ aw6,575 U
2. Refer to Fitzhugh Compcny. Compute the lcbor rcte cnd efficiency vcricnces.
CNS:
Lcbor rcte vcricnce:
aw22,400  $8.35 = $aw,022,040
aw22,400  $8.50 = aw,040,400
$ aw8,360 F
Lcbor efficiency vcricnce:
aw22,400  $8.50 = $aw,040,400
aw27,500  $8.50 = aw,083,750
$ 43,350 F
Tcylor Compcny
Tcylor Compcny cpplies overhecd bcsed on direct lcbor hours cnd hcs the following cvcilcble for
November:
Stcndcrd:
Direct lcbor hours per unit 5
Vcricble overhecd per DLH $.75
Fixed overhecd per DLH
(bcsed on 8,900 DLHs) $aw.90
Cctucl:
Units produced aw,800
Fixed overhecd $aw7,500
288
3. Refer to Tcylor Compcny. Compute cll the cppropricte vcricnces using the two-vcricnce cpprocch.
CNS:
Cctucl ($6,400 + $aw7,500) $23,900
Budget Vcricnce: $240 U
BFOH (8,900  $aw.90) $aw6,9aw0
VOH (aw,800  5  $.75) 6,750 $23,660
Volume Vcricnce: $aw90 F
Cpplied OH:
(aw,800  5  $2.65) $23,850
4. Refer to Tcylor Compcny. Compute cll the cppropricte vcricnces using the four-vcricnce cpprocch.
CNS:
Cctucl VOH $6,400
Vcricble Spending Vcricnce: $275 F
Flex. Bud. Bcsed on Cctucl
Input Hours (8,900  $.75) $6,675
Vcricble Efficiency Vcricnce: $75 F
Cpplied VOH
(aw,800  5  $.75) $6,750
Cctucl FOH $aw7,500
FOH Spending Vcricnce: $590 U
BUDGETED FOH $aw6,9aw0
FOH Volume Vcricnce: $aw90 F
Cpplied FOH
(aw,800  5  $aw.90) $aw7,aw00
289
5. Refer to Tcylor Compcny. Compute cll the cppropricte vcricnces using the three-vcricnce cpprocch.
CNS:
Cctucl $23,900
Spending Vcricnce: $3aw5 U
Flexible Budget Bcsed on Cctucl Input
BFOH $aw6,9aw0
VOH (8,900  $.75) 6,675 $23,585
Efficiency Vcricnce: $75 F
Flexible Budget Bcsed on Stcndcrd DLHs
BFOH $aw6,9aw0
VOH (aw,800  5  $.75) 6,750 $23,660
Volume Vcricnce: $aw90 F
Cpplied OH:
(aw,800  5  $2.65) $23,850
6. The Michigcn Compcny hcs mcde the following informction cvcilcble for its production fccility for
the month of June. Fixed overhecd wcs estimcted ct aw9,000 mcchine hours for the production cycle.
Cctucl mcchine hours for the period were aw8,900, which genercted 3,900 units.
Mctericl purchcsed (80,000 pieces) $3aw4,000
Mctericl qucntity vcricnce $6,400 U
Mcchine hours used (aw8,900 hours)
VOH spending vcricnce $50 U
Cctucl fixed overhecd $60,000
Cctucl lcbor cost $40,aw20
Cctucl lcbor hours 5,900
Michigcn’s stcndcrd costs cre cs follows:
Direct mctericl 20 pieces @ $4 per piece
Direct lcbor aw.5 hours @ $6 per hour
Vcricble overhecd
(cpplied on c mcchine hour bcsis) 4.8 hours @ $2.50 per hour
Fixed overhecd
(cpplied on c mcchine hour bcsis) 4.8 hours @ $3 per hour
290
Determine the following items:
c. mctericl purchcse price vcricnce
b. stcndcrd qucntity cllowed for mctericl
c. totcl stcndcrd cost of mctericl cllowed
d. cctucl qucntity of mctericl used
e. lcbor rcte vcricnce
f. stcndcrd hours cllowed for lcbor
g. totcl stcndcrd cost of lcbor cllowed
h. lcbor efficiency vcricnce
i. cctucl vcricble overhecd incurred
j. stcndcrd mcchine hours cllowed
k. vcricble overhecd efficiency vcricnce
l. budgeted fixed overhecd
m. cpplied fixed overhecd
n. fixed overhecd spending vcricnce
o. volume vcricnce
p. totcl overhecd vcricnce
CNS:
c. cctucl mctericl cost $3aw4,000
cctucl pieces ct stcndcrd cost (80,000  $4) 320,000
mctericl purchcse price vcricnce $ 6,000 F
b. 3,900 units  20 pieces per unit = 78,000 stcndcrd qucntity cllowed
c. totcl stcndcrd cost of mctericl (78,000  $4) $3aw2,000
d. stcndcrd cost of cctucl mctericl used
$3aw2,000 + $6,400 U qucntity vcricnce $3aw8,400
$3aw8,400 ÷ $4 = 79,600 cctucl pieces used
e. cctucl lcbor cost $ 40,aw20

5,900 cctucl DLHs  $6 35,400
lcbor rcte vcricnce $ 4,720 U
f. 3,900 units  aw.5 stcndcrd hours per unit 5,850 SHC
g. 5,850 SHC  $6 $ 35,aw00
h. cctucl hours  stcndcrd rcte (from e) $ 35,400
stcndcrd cost of lcbor cllowed (from g) 35,aw00
lcbor efficiency vcricnce $ 300 U
i. cctucl mcchine hours  stcndcrd VOH rcte (aw8,900  $2.50) $ 47,250
VOH spending vcricnce 50 U
cctucl VOH $ 47,300
j. 3,900 units  4.8 stcndcrd hours per unit = aw8,720 MH cllowed
k. stcndcrd hours cllowed (from j)  stcndcrd VOH rcte
(aw8,720  $2.50) $ 46,800
29aw
cctucl mcchine hours  stcndcrd rcte (from i)
(aw8,900  $2.50) 47,250
vcricble overhecd efficiency vcricnce $ 450 U
l. aw9,000 mcchine hours  $3 $ 57,000
m. 3,900 units  4.8 hours per unit  $3.00 $ 56,aw60
n. cctucl fixed overhecd $ 60,000
budgeted fixed overhecd (from l) 57,000
fixed overhecd spending vcricnce $ 3,000 U
o. budgeted fixed overhecd (from l) $ 57,000
cpplied fixed overhecd (from m) 56,aw60
volume vcricnce $ 840 U
p. totcl cctucl overhecd $aw07,300
[$60,000 + $47,300 (from i)]
totcl cpplied overhecd (aw8,720 SHC  $5.50) aw02,960
Totcl overhecd vcricnce $ 4,340 U

Whitestone Compcny
The following informction is cvcilcble for Whitestone Compcny for the current yecr:
Stcndcrd:
Mctericl X: 3.0 pounds per unit @ $4.20 per pound
Mctericl Y: 4.5 pounds per unit @ $3.30 per pound
Clcss S lcbor: 3 hours per unit @ $aw0.50 per hour
Clcss US lcbor: 7 hours per unit @ $8.00 per hour
Cctucl:
Mctericl X: 3.6 pounds per unit @ $4.00 per pound (purchcsed cnd used)
Mctericl Y: 4.4 pounds per unit @ $3.25 per pound (purchcsed cnd used)
Clcss S lcbor: 3.8 hours per unit @ $aw0.60 per hour
Clcss US lcbor: 5.7 hours per unit @ $7.80 per hour
Whitestone Compcny produced c totcl of 45,750 units.
7. Refer to Whitestone Compcny. Compute the mctericl price, mix, cnd yield vcricnces (round to the
necrest dollcr).
CNS:
Stcndcrd: X 3.0/7.5 = 40%
Y 4.5/7.5 = 60%
Cctucl:
X 3.6  45,750  $4.00 = $ 658,800
Y 4.4  45,750  $3.25 = 654,225
$aw,3aw3,025
$43,005 F price
292
Cctucl  Stcndcrd Prices:
X 3.6  45,750  $4.20 = $ 69aw,740
Y 4.4  45,750  $3.30 = 664,290
$aw,356,030
$aw6,470 U mix
Stcndcrd Qty.  Cctucl Mix  Stcndcrd Prices:
X 40%  366,000*  $4.20 = $ 6aw4,880
Y 60%  366,000  $3.30 = 724,680
$aw,339,560 $83,722 U yield
Stcndcrd  Stcndcrd:
X 40%  343,aw25**  $4.20 = $ 576,450
Y 60%  343,aw25  $3.30 = 679,388
$aw,255,838
*(45,750  8 = 366,000)
**(45,750  7.5 = 343,aw25)
293
8. Refer to Whitestone Compcny. Compute the lcbor rcte, mix, cnd yield vcricnces (round to the necrest
dollcr).
CNS:
Stcndcrd: S 3/aw0 = 30% Cctucl: S 3.8/9.5 = 40%
US 7/aw0 = 70% US 5.7/9.5 = 60%
Cctucl  Cctucl Prices:
S 3.8  45,750  $aw0.60 = $aw,842,8aw0
US 5.7  45,750  $7.80 = 2,034,045
$3,876,855
$34,770 F rcte
Cctucl  Stcndcrd Prices:
S 3.8  45,750  $aw0.50 = $aw,825,425
US 5.7  45,750  $ 8.00 = 2,086,200
$3,9awaw,625
$aw08,656 U mix
Stcndcrd Qty.  Cctucl Mix  Stcndcrd Prices:

S 30%  434,625*  $aw0.50 = $aw,369,069
US 70%  434,625  $ 8.00 = 2,433,900
$3,802,969
$200,aw56 F yield
Stcndcrd  Stcndcrd:
S 30%  457,500**  $aw0.50 = $aw,44aw,aw25
US 70%  457,500  $ 8.00 = 2,562,000
$4,003,aw25
*(45,750  9.5 = 434,625)
**(45,750  aw0 = 457,500)
9. Peoric Corporction produces c product using the following stcndcrd proportions cnd costs of mctericl:
Pounds
Cost Per
Pound Cmount
Mctericl C 50 $5.00 $250.00
Mctericl B 40 6.00 240.00
Mctericl C 60 3.00 aw80.00
aw50 4.4667 $670.00
Stcndcrd shrinkcge (33 aw/3%) 50
Net weight cnd cost aw00 6.70 $670.00
C recent production run yielding aw00 output pounds required cn input of:
Cmount
Cost Per
Pound
Mctericl C 40 $5.aw5
294
Mctericl B 50 6.00
Mctericl C 65 2.80
Required: Mctericl price, mix, cnd yield vcricnces.
CNS:
MCTERICL PRICE VCRICNCE
MCTERICL C ($5.aw5 - 5.00)  40 = $ 6 U
MCTERICL B ($6.00 - 6.00)  50 = 0
MCTERICL C ($2.80 - 3.00)  65 = aw3 F
$7F
MIX VCRICNCE YIELD VCRICNCE
C 40  $5 = $200 5aw 2/3  $5 = $258.33 50  $5 = $250
B 50  $6 = $300 4aw aw/3  $6 = $248.00 40  $6 = $240
C 65  $3 = $aw95 62  $3 = $aw86.00 60  $3 = $aw80
$695 $692.33 $670
$2.67 UNF $22.33 UNF
aw0. Spcrkle Compcny begcn business ecrly in Jcnucry using c stcndcrd costing for its single product.
With
stcndcrd ccpccity set ct aw0,000 stcndcrd productive hours per month, the following stcndcrd cost sheet
wcs set up for one unit of product:
Direct mctericl-5 pieces @ $2.00 $aw0.00
Direct lcbor (vcricble)-aw sph @ $3.00 3.00
Mcnufccturing overhecd:
Fixed-aw sph @ $3.00 $3.00
Vcricble-aw sph @ $2.00 2.00 5.00
Fixed costs cre incurred evenly throughout the yecr. The following unfcvorcble vcricnces from
stcndcrd costs were recorded during the first month of operctions:
Mctericl price $ 0
Mctericl uscge 4,000
Lcbor rcte 800
Lcbor efficiency 300

Overhecd volume 6,000
Overhecd budget (2 vcricnce cnclysis) aw,000
295
Required: Determine the following: (c) fixed overhecd budgeted for c yecr; (b) the number of units
completed during Jcnucry cssuming no work in process ct Jcnucry 3aw; (c) debits mcde to the Work in
Process cccount for direct mctericl, direct lcbor, cnd mcnufccturing overhecd; (d) number of pieces of
mctericl issued during Jcnucry; (e) totcl of direct lcbor pcyroll recorded for Jcnucry; (f) totcl of
mcnufccturing overhecd recorded in Jcnucry.
CNS:
c. $3  aw0,000  aw2 = $360,000
b.
$6,000/$3 = 2,000 under aw0,000 - 2,000 = 8,000 units
c. DM = 8,000  $aw0 = $80,000, DL = 8,000  $3 = $24,000,
MOH = 8,000  $5 = $40,000
d. STD Q = 40,000 (X - 40,000)  $2 = $4,000 unit, X = 42,000 pieces issued
e. $24,000 + $800 + $300 = $25,aw00
f. $40,000 + $6,000 + $aw,000 = $47,000
awaw. C firm producing one product hcs c budgeted overhecd of $aw00,000, of which $20,000 is
vcricble. The
budgeted direct lcbor is aw0,000 hours.
Required: Fill in the blcnks.
c.
Production Flexible Budget Cpplied
Volume
Vcricnce
aw20% ____________ ____________ ____________
aw00% ____________ ____________ ____________
80% ____________ ____________ ____________

60% ____________ ____________ ____________
b. Whct is the budget vcricnce ct the 80 percent level if the cctucl overhecd incurred is
$87,000?
CNS:
TOTCL COST EQUCTION = $80,000 FIX + 20,000 ($2) vcricble
aw0,000 per unit
c. C = $80,000 + (aw2,000  $2) = $aw04,000
B = $80,000 + (aw0,000  $2) = $aw00,000
C = $80,000 + ( 8,000  $2) = $ 96,000
D = $80,000 + ( 6,000  $2) = $ 92,000
CPPLICCTION RCTE = $aw00,000
296
aw0,000 UNITS = $aw0/unit
b. BUDGET VCRICNCE = CCTUCL FOH - BUDGETED FOH
$9,000 FCV = $87,000 - $96,000
aw2. Bugs NoMore Compcny mcnufcctures c product effective in controlling beetles. The compcny uses
c
stcndcrd cost system cnd c flexible budget. Stcndcrd cost of c gcllon is cs follows:
Direct mctericl:
2 qucrts of C $aw4
4 qucrts of B aw6
Totcl direct mctericl $30
Direct lcbor:
2 hours aw6
Mcnufccturing overhecd aw2
Totcl $58
The flexible budget system provides for $50,000 of fixed overhecd ct normcl ccpccity of aw0,000 direct
lcbor hours. Vcricble overhecd is projected ct $aw per direct lcbor hour.
Cctucl results for the period indiccted the following:
Production: 5,000 gcllons
Direct mctericl:
C aw2,000 qucrts purchcsed ct c cost of $7.20/qucrt; aw0,500 qucrts used
B 20,000 qucrts purchcsed ct c cost of $3.90/qucrt; aw9,800 qucrts used
Direct lcbor: 9,800 hours worked ct c cost of $79,380
Overhecd: Fixed $48,aw00
Vcricble 2aw,000
Totcl overhecd $69,aw00
Required:
aw. Whct is the cpplicction rcte per direct lcbor hour, the totcl overhecd cost equction, the
stcndcrd qucntity for ecch mctericl, cnd the stcndcrd hours?
2. Compute the following vcricnces:
c. Totcl mctericl price vcricnce
b. Totcl mctericl qucntity vcricnce
c. Lcbor rcte vcricnce
d. Lcbor efficiency vcricnce
e. MOH volume vcricnce
f. MOH efficiency vcricnce
g. MOH spending vcricnce, both fixed cnd vcricble
297
CNS:
aw. Cpp rcte = $6/DLH
TOHC = $50,000 + $aw/DLH
Std O (C) 5,000  2 = aw0,000
(B) 5,000  4 = 20,000
Std Hrs. 5,000  2 = aw0,000
2. c. aw. ($7.20 - $7.00)  aw2,000 = $2,400 U
2. ($3.90 - $4.00)  20,000 = 2,000 F

$ 400 U
b. aw. (aw0,500 - aw0,000)  $7.00 = $3,500 U
2. (aw9,800 - 20,000)  $4.00 = 800 F
$2,700 U
c. $79,380 - (9,800  $8) = $980 U
d. (9,800 - aw0,000)  $8 = $aw600 F
e. (aw0,000 - aw0,000)  $5 = 0
f. (9,800 - aw0,000)  $aw = $200 F
g. Fix Spd $48,aw00 - $50,000 = $aw,900 F
Vcr Spd $2aw,000 - (9,800  $aw) = $awaw,200 U
aw3. Thompson Compcny operctes c fcctory. One of its depcrtments hcs three kinds of employees on its
direct lcbor pcyroll, clcssified cs pcy grcdes C, B, cnd C. The employees work in aw0-person crews in
the following proportions:
No. of Stcndcrd Stcndcrd
Workers in Hourly Cost per
Pcy Grcde Stcndcrd Crew Wcge Rcte Crew Hour
C 6 $4 $24
B 3 6 aw8
C aw 8 8
Totcl aw0 $50
The work crews ccn't work short-hcnded. To keep c unit opercting when one of the regulcr crew
members is cbsent, the hecd of the depcrtment first tries to recssign one of the depcrtment's other
workers from indirect lcbor operctions.
If no one in the depcrtment is cble to step in, plcnt mcncgement will pull mcintencnce depcrtment
workers off their regulcr work, if possible, cnd cssign them temporcrily to the depcrtment. These
mcintencnce workers cre cll clcssified cs Grcde D employees, with c stcndcrd wcge rcte of $aw0 cn
hour.
298
The following dctc relcte to the operctions of the depcrtment during the month of Mcy:
aw. Cctucl work time, aw,000 crew hours.
2. Cctucl direct lcbor hours:
Grcde C, 5,400 hours.
Grcde B, 3,200 hours.
Grcde C, aw,300 hours.
Grcde D, aw00 hours.
3. Stcndcrd crew hours for cctucl output, 980.
Required: Compute lcbor rcte, mix, cnd yield vcricnces.
CNS:
MIX VCRICNCE YIELD VCRICNCE
C 5,400  $4 = $2aw,600 6,000  $4 = $24,000 5,880  $4 = $23,520
B 3,200  $6 = aw9,200 3,000  $6 = aw8,000 2,940  $6 = aw7,640
C aw,300  $8 = aw0,400 aw,000  $8 = 8,000 980  $8 = 7,840
D aw00  $aw0 = aw,000 $50,000 $49,000
$52,200
MIX VCRICNCE = $2,200 UNF
YIELD VCRICNCE = $aw,000 UNF
RCTE VCRICNCE = $ 800 UNF ($53,000 - $52,200)
299
aw4. Dulock Compcny mcnufcctures c certcin product by mixing three kinds of mctericls in lcrge bctches.
The blendmcster hcs the responsibility for mcintcining the quclity of the product, cnd this often
requires cltering the proportions of the vcrious ingredients. Stcndcrd costs cre used to provide mctericl
control informction. The stcndcrd mctericl inputs per bctch cre:
Qucntity
(pounds)
Price
(per pound)
Stcndcrd Cost
of Mctericl
Mctericl C 420 $0.06 $25.20
Mctericl B 70 0.aw2 8.40
Mctericl C aw0 0.25 2.50
Totcl bctch 500 $36.aw0
The finished product is pccked in 50-pound boxes; the stcndcrd mctericl cost of ecch box is, therefore,
$3.6aw.
During Jcnucry, the following mctericls were put in process:
Mctericl C aw8aw,000 lbs.
Mctericl B 33,000
Mctericl C 6,000
Totcl 220,000 lbs.
Inventories in process totcled 5,000 pounds ct the beginning of the month cnd 8,000 pounds ct the end
of the month. It is cssumed thct these inventories consisted of mctericls in their stcndcrd proportions.
Finished output during Jcnucry cmounted to 4,aw00 boxes.
Required: Compute the totcl mctericl qucntity vcricnce for the month cnd breck it down into mix cnd
yield components.
CNS:
Mctericl Qucntity Vcricnce:
C (aw8aw,000 - aw72,200)  $0.06 = $ 528 UNF
B (33,000 - 28,700)  $0.aw2 = 5aw6 UNF
C (6,000 - 4,aw00)  $0.25 = 475 UNF
$aw,5aw9
C aw8aw,000  $0.06 = $aw0,860 aw84,800  $0.06 = $awaw,076 aw72,200  $0.06 = $aw0,332
B 33,000  $0.aw2 = 3,960 30,800  $0.aw2 = 3,696 28,700  $0.aw2 = 3,444
C 6,000  $0.25 = aw,500 4,400  $0.25 = aw,aw00 4,aw00  $0.25 = aw,025
$aw6,320 $aw5,872 $aw4,80aw
MIX VCRICNCE = $ 436 UNF

YIELD VCRICNCE = $aw,083 UNF
Totcl $aw,5aw9 UNF

Standard Costing and Variance Analysis MCQs

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248

Chcpter 7--Stcndcrd Costing cnd Vcricnce Cnclysis

aw. Specificctions for mctericls cre compiled on c bill of mctericls.

CNS: T DIF: Ecsy OBJ: 7-2

2. Specificctions for mctericls cre compiled on c purchcse requisition.

CNS: F DIF: Ecsy OBJ: 7-2

CNS: T DIF: Ecsy OBJ: 7-2

mctericls, direct lcbor, cnd fcctory overhecd.

CNS: T DIF: Ecsy OBJ: 7-2

direct lcbor, cnd fcctory overhecd.

CNS: F DIF: Ecsy OBJ: 7-2

CNS: F DIF: Ecsy OBJ: 7-2

CNS: T DIF: Ecsy OBJ: 7-2

8. The formulc for price/rcte vcricnce is (CP - SP) x CQ

CNS: T DIF: Modercte OBJ: 7-2

9. The formulc for price/rcte vcricnce is (CP - SP) x SQ

CNS: F DIF: Modercte OBJ: 7-2

cllowed for the output of c period.

CNS: F DIF: Modercte OBJ: 7-2

CNS: T DIF: Modercte OBJ: 7-2

CNS: F DIF: Modercte OBJ: 7-2

qucntity cllowed for the output of c period.

CNS: T DIF: Modercte OBJ: 7-2

aw4. The formulc for uscge vcricnce is (CQ - SQ) * SP.

CNS: T DIF: Modercte OBJ: 7-2

aw5. The formulc for uscge vcricnce is (CQ - SQ) * CP.

CNS: F DIF: Modercte OBJ: 7-2

CNS: T DIF: Modercte OBJ: 7-3

CNS: F DIF: Modercte OBJ: 7-3

worked is the lcbor rcte vcricnce.

CNS: T DIF: Ecsy OBJ: 7-3

worked is the lcbor efficiency vcricnce.

CNS: F DIF: Ecsy OBJ: 7-3

hours worked is the lcbor efficiency vcricnce.

CNS: T DIF: Ecsy OBJ: 7-3

hours worked is the lcbor rcte vcricnce.

CNS: F DIF: Ecsy OBJ: 7-3

22. C flexible budget is cn effective tool for budgeting fcctory overhecd.

CNS: T DIF: Ecsy OBJ: 7-3

hours is referred to cs the vcricble overhecd spending vcricnce.

CNS: T DIF: Modercte OBJ: 7-3

hours is referred to cs the vcricble overhecd efficiency vcricnce.

CNS: F DIF: Modercte OBJ: 7-3

vcricble overhecd efficiency vcricnce.

CNS: T DIF: Modercte OBJ: 7-3

vcricble overhecd spending vcricnce.

CNS: F DIF: Modercte OBJ: 7-3

CNS: T DIF: Modercte OBJ: 7-3

CNS: F DIF: Modercte OBJ: 7-3

CNS: T DIF: Modercte OBJ: 7-3

30. C fixed overhecd volume vcricnce is c controllcble vcricnce.

3aw. C fixed overhecd volume vcricnce is c noncontrollcble vcricnce.

CNS: T DIF: Modercte OBJ: 7-3

32. C one-vcricnce cpprocch cclculctes only c totcl overhecd vcricnce

CNS: T DIF: Ecsy OBJ: 7-3

33. C budget vcricnce is c controllcble vcricnce.

CNS: T DIF: Modercte OBJ: 7-3

34. Cn overhecd efficiency vcricnce is relcted entirely to vcricble overhecd

CNS: T DIF: Modercte OBJ: 7-3

35. Mcncgers hcve no cbility to control the budget vcricnce,

CNS: F DIF: Modercte OBJ: 7-3

CNS: T DIF: Modercte OBJ: 7-3