1. Manufacturers normally establish standard costs for
a. direct materials.
b. direct labor.
c. factory overhead.
d. All of these choices are correct.
2. Standards that can be attained with reasonable effort are known as __________ standards.
a. theoretical
b. normal
c. ideal
d. None of these choices are correct.
3. The differences between actual and standard costs are called __________ variances.
a. cost
b. profit
c. quantity
d. volume
4. A favorable cost variance results when
a. actual cost is greater than standard cost at actual volumes.
b. actual cost is less than standard cost at actual volumes.
c. actual cost is equal to standard cost at actual volumes.
d. actual cost is greater than standard cost at budgeted volumes.
5. The total direct materials cost variance is equal to the __________ variance and the __________ variance.
a. direct materials price; direct labor time
b. direct materials price; factory overhead volume
c. direct materials price; direct materials quantity
d. None of these choices are correct.
6. The direct labor rate variance and the direct labor time variance make up the
a. actual direct labor cost.
b. standard direct labor cost.
c. total direct labor cost variance.
d. None of these choices are correct.
7. Factory overhead has
a. fixed and variable cost elements.
b. fixed cost elements only.
c. variable cost elements only.
d. None of these choices are correct.
8. An unfavorable fixed factory overhead volume variance occurs when the
a. actual units produced is less than 100% of normal capacity.
b. actual units produced is more than 100% of normal capacity.
c. actual units sold is more than 100% of normal capacity.
d. None of these choices are correct.
9. An unfavorable volume variance may be due to
a. machine breakdowns.
b. work stoppages caused by lack of materials or skilled labor.
c. lack of enough sales orders to keep the factory operating at normal capacity.
d. All of these choices are correct.
10. The journal entry to record an unfavorable direct materials price variance would include a
a. credit to Direct Materials Price Variance.
b. debit to Direct Materials Price Variance.
c. credit to Materials.
d. None of these choices are correct.
11. Jake Shirt Co. used 5,300 square yards of polyester to produce 3,000 shirts. The standard quantity of material for the 3,000 shirts produced is 6,100 square yards. The standard price for direct materials is $4.00 per square yard. The entry to record the direct materials quantity variance would include a
a. debit to Direct Materials Quantity Variance for $3,200.
b. credit to Direct Materials Quantity Variance for $3,200.
c. debit to Direct Materials Quantity Variance for $12,000.
d. credit to Direct Materials Quantity Variance for $12,000.
12. In preparing an income statement for external users, the balances of the variance accounts are normally transferred to
a. Income Summary.
b. Work in Process.
c. Cost of Goods Sold.
d. Finished Goods Inventory.
13. A nonfinancial performance measure is often used to evaluate the __________ of a business activity.
a. time
b. quality
c. quantity
d. All of these choices are correct.
14. All of the following are examples of nonfinancial performance measures except
a. inventory turnover.
b. wait time.
c. number of customer complaints.
d. price variance.