1. T or F: Standardsare set for units; budgets are expressed in total dollars.
2. T or F: The standard cost per unit iscomputed by multiplying the standard quantity or hours by the
standard price or rate.
3. T or F: When actual revenue is above budgetor actual cost is below budget, a favorable variance
occurs.
4. T or F: Anunfavorable cost variance occurs when actual cost is higher thanbudget cost.
5. T or F With a flexible budget a manager can determine whatcosts should have been attained at a
given level of activity.
6. T or F : In a standard costing system wherethe denominator activity for the predetermined
overhead rate is labor-hours, overhead costs are applied to work inprocess on the basis of
actual hours worked.
7. T or F: A volumevariance and an efficiency variance are computed for fixed overheadcosts.
8. T or F: The budgetvariance represents the difference between the actual fixedoverhead cost
incurred during a period and the budgeted fixedoverhead cost.
9. T or F: Under theabsorption costing method, a company can increase profits byincreasing
production rather than by increasing sales.
10. T or F: Profitsmove in the same direction as sales when variable costing is usedif selling prices,
thesales mix, and the cost structure remain the same.
11. T or F: Thesalary of the CEO of Wal-Mart is a traceable fixed cost of thevarious WM stores.
12. T or F: Indirectcost is not traced directly to specific cost objects (products,jobs, or customers).
13. T or F: A costthat has already been incurred and therefore cannot be changed byany alternatives
issunk cost.
14. T or F:Generally, a product line should be dropped when the fixed coststhat can be avoided by dropping the product line are less than thecontribution margin that will be lost.
15. When the amount assigned to aresponsibility center is significantly influenced by the actions ofsomeone within the responsibility center, the item of cost is a_____________________.
16. In a _____________ cost system,every unit of product moving along the production line bears thesame amount of overhead cost, regardless of how much time itactually takes to process a particular unit.
17. In _______________ costing, nofixed overhead costs are charged to individual units of product, sono overhead rate for the fixed component of overhead costs need beused in the cost accounting system.
18. A cost that is incurred to supporta number of costing objects but cannot be traced to themindividually is a ___________________.
19. _______________is often regardedas the best approach to the transfer pricing problem, particularlyif transfer price negotiations routinely become bogged down.
20. A _______________ is simply thedifference between a predetermined norm or standard and the____________ results. Management wants to know not only what theamounts of the differences were but also, and more important, whythese occurred to take corrective action.
21. A _______________ center is anybusiness segment whose manger has control over both cost andrevenue. However, it generally does not have control overinvestment funds.
* Words banks for theabove Q15 through Q21: Absorbed, Actual, Budgeted, Common cost,Controllable cost, Cost, Full, Market price, Negotiated transferprice, Profit, Standards, Transfer price, Variable, &Variance.
1. T or F: Standardsare set for units; budgets are expressed in total dollars.
2. T or F: The standard cost per unit iscomputed by multiplying the standard quantity or hours by the
standard price or rate.
3. T or F: When actual revenue is above budgetor actual cost is below budget, a favorable variance
occurs.
4. T or F: Anunfavorable cost variance occurs when actual cost is higher thanbudget cost.
5. T or F With a flexible budget a manager can determine whatcosts should have been attained at a
given level of activity.
6. T or F : In a standard costing system wherethe denominator activity for the predetermined
overhead rate is labor-hours, overhead costs are applied to work inprocess on the basis of
actual hours worked.
7. T or F: A volumevariance and an efficiency variance are computed for fixed overheadcosts.
8. T or F: The budgetvariance represents the difference between the actual fixedoverhead cost
incurred during a period and the budgeted fixedoverhead cost.
9. T or F: Under theabsorption costing method, a company can increase profits byincreasing
production rather than by increasing sales.
10. T or F: Profitsmove in the same direction as sales when variable costing is usedif selling prices,
thesales mix, and the cost structure remain the same.
11. T or F: Thesalary of the CEO of Wal-Mart is a traceable fixed cost of thevarious WM stores.
12. T or F: Indirectcost is not traced directly to specific cost objects (products,jobs, or customers).
13. T or F: A costthat has already been incurred and therefore cannot be changed byany alternatives
issunk cost.
14. T or F:Generally, a product line should be dropped when the fixed coststhat can be avoided by dropping the product line are less than thecontribution margin that will be lost.
15. When the amount assigned to aresponsibility center is significantly influenced by the actions ofsomeone within the responsibility center, the item of cost is a_____________________.
16. In a _____________ cost system,every unit of product moving along the production line bears thesame amount of overhead cost, regardless of how much time itactually takes to process a particular unit.
17. In _______________ costing, nofixed overhead costs are charged to individual units of product, sono overhead rate for the fixed component of overhead costs need beused in the cost accounting system.
18. A cost that is incurred to supporta number of costing objects but cannot be traced to themindividually is a ___________________.
19. _______________is often regardedas the best approach to the transfer pricing problem, particularlyif transfer price negotiations routinely become bogged down.
20. A _______________ is simply thedifference between a predetermined norm or standard and the____________ results. Management wants to know not only what theamounts of the differences were but also, and more important, whythese occurred to take corrective action.
21. A _______________ center is anybusiness segment whose manger has control over both cost andrevenue. However, it generally does not have control overinvestment funds.
* Words banks for theabove Q15 through Q21: Absorbed, Actual, Budgeted, Common cost,Controllable cost, Cost, Full, Market price, Negotiated transferprice, Profit, Standards, Transfer price, Variable, &Variance.
Related questions
The standard cost card for the single product manufactured by Cutter, Inc., is given below:
| Inputs | (1) Standard Quantity or Hours | (2) Standard Price or Rate | Standard Cost (1) Ã (2) | ||||
| Direct materials | 4.2 yards | $ | 5.00 | per yard | $ | 21.00 | |
| Direct labor | 0.8 hours | $ | 15.00 | per hour | 12.00 | ||
| Variable overhead | 0.8 hours | $ | 1.50 | per hour | 1.20 | ||
| Fixed overhead | 0.8 hours | $ | 5.00 | per hour | 4.00 | ||
| Total standard cost per unit | $ | 38.20 | |||||
Manufacturing overhead is applied to production on the basis of standard direct labor-hours. During the year, the company worked 8,760 hours and manufactured 10,700 units of product. Selected data relating to the companyâs fixed manufacturing overhead cost for the year are shown below:
| Actual Fixed Overhead | Budgeted Fixed Overhead | Fixed Overhead Applied to Work in Process | |||||
| $42,000 | ? | ? hours à $? per hour = $? | |||||
| Budget variance, $? | Volume variance, $1,800 F | ||||||
Required:
1. What were the standard hours allowed for the yearâs production?
2. What was the amount of budgeted fixed overhead cost for the year?
3. What was the fixed overhead budget variance for the year? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)
4. What denominator activity level did the company use in setting the predetermined overhead rate for the year?
