Question;1. Inventories;cannot be valued at standard cost in financial statements.;2. Standard cost is the industry average cost;for a particular item.;3. A standard is a unit amount, whereas a;budget is a total amount.;4. Standard costs may be incorporated into the;accounts in the general ledger.;5. An advantage of standard costs is that they;simplify costing of inventories and reduce clerical costs.;6. Setting standard costs is relatively simple;because it is done entirely by accountants.;7. Normal standards should be rigorous but attainable.;8. Actual costs that vary from standard costs;always indicate inefficiencies.;9. Ideal standards will generally result in;favorable variances for the company.;10. Normal standards incorporate normal;contingencies of production into the standards.;11. Once set, normal standards should not be;changed during the year.;12. In developing a;standard cost for direct materials, a price factor and a quantity factor must;be considered.;13. A;direct labor price standard is frequently called the direct labor efficiency;standard.;14. The standard predetermined overhead rate;must be based on direct labor hours as the standard activity index.;15. Standard cost cards are the subsidiary;ledger for the Work in Process account in a standard cost system.;16. A variance is the difference between actual;costs and standard costs.;17. If actual costs are less than standard;costs, the variance is favorable.;18. A materials quantity variance is calculated;as the difference between the standard direct materials price and the actual;direct materials price multiplied by the actual quantity of direct materials;used.;19. An unfavorable labor quantity variance;indicates that the actual number of direct labor hours worked was greater than;the number of direct labor hours that should have been worked for the output;attained.;20. Standard cost + price variance + quantity;variance = Budgeted cost.;21. The overhead controllable variance relates;primarily to fixed overhead costs.;22. The overhead volume variance relates only;to fixed overhead costs.;23. If production exceeds normal capacity, the;overhead volume variance will be favorable.;24. There could be instances where the;production department is responsible for a direct materials price variance.;25. The;starting point for determining the causes of an unfavorable materials price;variance is the purchasing department.;26. The total overhead variance is the;difference between actual overhead costs and overhead costs applied to work;done.;27. Variance analysis facilitates the principle;of "management by exception.;28. A credit to a Materials Quantity Variance;account indicates that the actual quantity of direct materials used was greater;than the standard quantity of direct materials allowed.;29. A standard cost system may be used with a;job order cost system but not with a process cost system.;30. A debit to the Overhead Volume Variance;account indicates that the standard hours allowed for the output produced was;greater than the standard hours at normal capacity.;31. In concept, standards and budgets are essentially the same.;32. Standards may be useful in setting selling prices for finished;goods.;33. The materials price standard is based on the purchasing department's;best estimate of the cost of raw materials.;34. The materials price variance is normally caused by the production;department.;35. The use of an inexperienced worker instead of an experienced;employee can result in a favorable labor price variance but probably an;unfavorable quantity variance.;36. In using variance reports, top management normally looks carefully;at every variance.;37. The use of standard costs in inventory costing is prohibited in;financial statements.;a38. The overhead;controllable variance is the difference between the actual overhead costs incurred;and the budgeted costs for the standard hours allowed.
Paper#41718 | Written in 18-Jul-2015Price : $19