Accounting 2 – Chapter 23 – Test 3 – Review MC

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Standard costs are used in companies for a variety of reasons. Which of the following is not one of the benefits for using standard costs?

Used to indicate where changes in technology and machinery need to be made.

Manufacturing companies use standard costs for the following except:

Variable costs

Several people play an essential part in setting standards. Which of the following is incorrect as to setting standards?

Quality managers provide quality measures that will be used to evaluate rejects.

Standards that represent levels of operation that can be attained with reasonable effort are called:

normal standards

Which of the following conditions normally would not indicate that standard costs should be revised?

Actual costs differed from standard costs for the preceding week.

The principle of exceptions allows managers to

focus on correcting variances between standard costs and actual costs.

The standard price and quantity of direct materials are separated because:

direct materials prices are controlled by the purchasing department, and quantity used is controlled by the production department

Standard costs are divided into which of the following components?

Price Standard and Quantity Standard

A favorable cost variance occurs when

Standard costs are more than actual costs.

Total manufacturing cost variance includes:

Direct materials cost variance, direct labor cost variance, factory overhead cost variance

Periodic comparisons between planned objectives and actual performance are reported in:

budget performance reports

Which of the following is not a reason standard costs are separated in two components?

variances brings attention to discrepancies in the budget and requires managers to revise budgets closer to actual.

If the actual quantity of direct materials used in producing a commodity differs from the standard quantity, the variance is termed:

quantity variance

If the price paid per unit differs from the standard price per unit for direct materials, the variance is termed:

price variance

If the wage rate paid per hour differs from the standard wage rate per hour for direct labor, the variance is termed:

rate variance

If the actual direct labor hours spent producing a commodity differ from the standard hours, the variance is termed:

time variance

The formula to compute direct material quantity variance is to calculate the difference between

(actual quantity * standard price) – standard costs

The formula to compute direct labor rate variance is to calculate the difference between

actual costs – (actual hours * standard rate)

The formula to compute direct labor time variance is to calculate the difference between

(actual hours * standard rate) – standard costs

Which of the following would not lend itself to applying direct labor variances?

Administrative assistant

Which of the following is not a reason for a direct materials quantity variance?

Material requiring rework

The formula to compute direct materials price variance is to calculate the difference between

actual costs – (actual quantity * standard price)

Assuming that the standard fixed overhead rate is based on full capacity, the cost of available but unused productive capacity is indicated by the:

factory overhead cost volume variance

The controllable variance measures:

the efficiency of using variable overhead resources

The unfavorable volume variance may be due to all but the following factors:

unexpected increases in the cost of utilities

Favorable volume variances may be harmful when:

production in excess of normal capacity cannot be sold

Incurring actual indirect factory wages in excess of budgeted amounts for actual production results in a:

controllable variance

A negative fixed overhead volume variance can be caused due to the following except:

Increase in utility costs

The use of standards for nonmanufacturing expenses is:

not as common as it is for manufacturing costs

If at the end of the fiscal year the variances from standard are significant, the variances should be transferred to the:

work in process, cost of goods sold, and finished goods accounts

Variances from standard costs are usually reported to:


At the end of the fiscal year, variances from standard costs are usually transferred to the:

cost of goods sold account

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