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Managerial Accounting 16th edition By Garrison -Test Bank
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Managerial Accounting, 16e (Garrison) Appendix 2A Activity-Based Absorption Costing 1) Feauto Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs). The compan...

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  • August 19, 2023
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,Managerial Accounting, 16e (Garrison)
Chapter 10 Standard Costs and Variances

1) Waste on the production line will result in an unfavorable materials price variance.

2) When the materials price variance is recorded at the time of purchase, raw materials are
recorded as inventory at standard cost.

3) Material price variances are often isolated at the time materials are purchased, rather than
when they are placed into production, to facilitate earlier recognition of variances.

4) The materials price variance is computed based on the amount of materials purchased during
the period.

5) The standard price per unit for direct materials should reflect the final, delivered cost of the
materials.

6) In general, the production manager is responsible for the materials price variance.

7) An unfavorable materials quantity variance occurs when the actual quantity used in
production is less than the standard quantity allowed for the actual output of the period.

8) The labor rate variance measures the difference between the actual hourly rate and the
standard hourly rate, multiplied by the standard hours allowed for the actual output.

9) If the actual hourly rate is greater than the standard hourly rate, the labor rate variance is
labeled unfavorable (U).

10) The labor efficiency variance is labeled favorable (F) if the actual hours used is less than the
standard hours allowed for the actual output.

11) If skilled workers with high hourly rates of pay are given duties that require little skill and
call for lower hourly rates of pay, this will result in a favorable labor rate variance.

12) The standard labor rate per hour should not include any employment taxes.

13) When more hours of labor time are necessary to complete a job than the standard allows, the
labor efficiency variance is unfavorable.

14) If demand is insufficient to keep everyone busy and workers are not laid off, a favorable (F)
labor efficiency variance often will be a result.

15) The variable overhead efficiency variance does not actually measure how efficiently variable
manufacturing overhead resources were used.




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Copyright © 2018 McGraw-Hill

,16) The variable overhead efficiency variance measures the difference between the actual level
of activity and the standard activity allowed for the actual output, multiplied by the variable part
of the predetermined overhead rate.

17) If variable manufacturing overhead is applied based on direct labor-hours, it is impossible to
have a favorable labor rate variance and unfavorable variable overhead rate variance for the same
period.

18) The variable overhead efficiency variance measures the difference between the actual level
of activity and the standard activity allowed for the actual output, multiplied by the fixed part of
the predetermined overhead rate.

19) If demand is insufficient to keep everyone busy and workers are not laid off, an unfavorable
(U) variable overhead efficiency variance often will be a result unless managers build excessive
inventories.

20) A quantity standard indicates how much of an input should be used to make a unit of product
or provide a unit of service.

21) The standard quantity or standard hours allowed refers to the amount of the input that should
have been used to produce the actual output of the period.

22) The production department should generally be responsible for materials price variances that
resulted from:
A) purchases made in uneconomical lot-sizes.
B) rush orders arising from poor scheduling.
C) purchase of the wrong grade of materials.
D) changes in the market prices of raw materials.

23) An unfavorable materials quantity variance indicates that:
A) actual usage of material exceeds the standard material allowed for output.
B) standard material allowed for output exceeds the actual usage of material.
C) actual material price exceeds standard price.
D) standard material price exceeds actual price.

24) The general model for calculating a quantity variance is:
A) Actual quantity of inputs used × (Actual price − Standard price).
B) Standard price × (Actual quantity of inputs used − Standard quantity allowed for output).
C) (Actual quantity of inputs used × Actual price) − (Standard quantity allowed for output ×
Standard price).
D) Actual price × (Actual quantity of inputs used − Standard quantity allowed for output).




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Copyright © 2018 McGraw-Hill

, 25) Poorly trained workers could have an unfavorable effect on which of the following
variances?

Labor Rate Variance Materials Quantity Variance
A) Yes Yes
B) Yes No
C) No Yes
D) No No

A) Choice A
B) Choice B
C) Choice C
D) Choice D

26) A favorable labor rate variance indicates that
A) actual hours exceed standard hours.
B) standard hours exceed actual hours.
C) the actual rate exceeds the standard rate.
D) the standard rate exceeds the actual rate.

27) Variable manufacturing overhead is applied to products on the basis of standard direct labor-
hours. If the labor efficiency variance is favorable, the variable overhead efficiency variance will
be:
A) favorable.
B) unfavorable.
C) zero.
D) either favorable or unfavorable.

28) If variable manufacturing overhead is applied on the basis of direct labor-hours and the
variable overhead rate variance is favorable, then:
A) the actual variable overhead rate exceeded the standard rate.
B) the standard variable overhead rate exceeded the actual rate.
C) the actual direct labor-hours exceeded the standard direct labor-hours allowed for the actual
output.
D) the standard direct labor-hours allowed for the actual output exceeded the actual hours.

29) Magno Cereal Corporation uses a standard cost system for its "crunchy pickle" cereal. The
materials standard for each batch of cereal produced is 1.4 pounds of pickles at a standard cost of
$3.00 per pound. During the month of August, Magno purchased 78,000 pounds of pickles at a
total cost of $253,500. Magno used all of these pickles to produce 60,000 batches of cereal. What
is Magno's materials quantity variance for August?
A) $1,500 Unfavorable
B) $18,000 Favorable
C) $19,500 Unfavorable
D) $54,000 Unfavorable



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Copyright © 2018 McGraw-Hill

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