OpenStax Principles of Accounting, Volume 2: Managerial Accounting
Chapter 8: Standard Costs and Variances
Principles of Accounting, Volume 2: Managerial Accounting
Chapter 8: Standard Costs and Variances
Multiple Choice
1. LO 8.1 Why does a company use a standard costing system?
A. to identify variances from actual cost that assist them in maintaining profits
B. to identify nonperformers in the workplace
C. to identify what vendors are unreliable
D. to identify defective materials
Solution
A. A standard costing system assists a company in maintaining profits by helping the company
identify where there are variances so that it can investigate the cause of that variance and fix it.
2. LO 8.1 This standard is set at a level that may be reached with reasonable effort.
A. ideal standard
B. attainable standard
C. unattainable standard
D. variance from standard
Solution
B
3. LO 8.1 This standard is set at a level that could be achieved if everything ran perfectly.
A. ideal standard
B. attainable standard
C. unattainable standard
D. variance from standard
Solution
A
4. LO 8.1 This variance is the difference involving spending more or using more than the
standard amount.
A. favorable variance
B. unfavorable variance
C. no variance
D. variance
Solution
B
5. LO 8.1 This variance is the difference involving spending less, or using less than the standard
amount.
A. favorable variance
B. unfavorable variance
C. no variance
D. variance
Solution
A
6. LO 8.2 What are some possible reasons for a material price variance?
A. substandard material
B. labor rate increases
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,OpenStax Principles of Accounting, Volume 2: Managerial Accounting
Chapter 8: Standard Costs and Variances
C. labor rate decreases
D. labor efficiency
Solution
A
7. LO 8.2 When is the material price variance unfavorable?
A. when the actual quantity used is greater than the standard quantity
B. when the actual quantity used is less than the standard quantity
C. when the actual price paid is greater than the standard price
D. when the actual price is less than the standard price
Solution
C
8. LO 8.2 When is the material price variance favorable?
A. when the actual quantity used is greater than the standard quantity
B. when the actual quantity used is less than the standard quantity
C. when the actual price paid is greater than the standard price
D. when the actual price is less than the standard price
Solution
D
9. LO 8.2 What are some reasons for a material quantity variance?
A. building rental charges increase
B. labor rate decreases
C. more qualified workers
D. change in the actual cost of materials
Solution
C
10. LO 8.2 When is the material quantity variance favorable?
A. when the actual quantity used is greater than the standard quantity
B. when the actual quantity used is less than the standard quantity
C. when the actual price paid is greater than the standard price
D. when the actual price is less than the standard price
Solution
B
11. LO 8.2 When is the material quantity unfavorable?
A. when the actual quantity used is greater than the standard quantity
B. when the actual quantity used is less than the standard quantity
C. when the actual price paid is greater than the standard price
D. when the actual price is less than the standard price
Solution
A
12. LO 8.3 What are some possible reasons for a labor rate variance?
A. hiring of less qualified workers
B. an excess of material usage
C. material price increase
D. utilities usage change
Solution
A
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,OpenStax Principles of Accounting, Volume 2: Managerial Accounting
Chapter 8: Standard Costs and Variances
13. LO 8.3 When is the labor rate variance unfavorable?
A. when the actual quantity used is greater than the standard quantity
B. when the actual quantity used is less than the standard quantity
C. when the actual price is greater than the standard price
D. when the actual price is less than the standard price
Solution
C
14. LO 8.3 When is the labor rate variance favorable?
A. when the actual quantity used is greater than the standard quantity
B. when the actual quantity used is less than the standard quantity
C. when the actual price paid is greater than the standard price
D. when the actual price is less than the standard price
Solution
D
15. LO 8.3 What are some possible reasons for a direct labor time variance?
A. utility usage decrease
B. less qualified workers
C. office supplies spending
D. sales decline
Solution
B
16. LO 8.3 When is the direct labor time variance favorable?
A. when the actual quantity used is greater than the standard quantity
B. when the actual hours worked are less than the standard hours at the actual output level
C. when the actual price paid is greater than the standard price
D. when the actual price is less than the standard price
Solution
B
17. LO 8.3 When is the direct labor time variance unfavorable?
A. when the actual hours worked are greater than the standard hours at the actual output
level
B. when the actual quantity used is less than the standard quantity
C. when the actual price paid is greater than the standard price
D. when the actual price is less than the standard price
Solution
A
18. LO 8.4 A flexible budget ________.
A. predicts estimated revenues and costs at varying levels of production
B. gives actual figures for selling price
C. gives actual figures for variable and fixed overhead
D. is not used in overhead variance calculations
Solution
A
19. LO 8.4 The variable overhead rate variance is caused by the difference between which of the
following?
A. actual and standard allocation base
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, OpenStax Principles of Accounting, Volume 2: Managerial Accounting
Chapter 8: Standard Costs and Variances
B. actual and standard overhead rates
C. actual and budgeted units
D. actual units and actual overhead rates
Solution
B
20. LO 8.4 The variable overhead efficiency variance is caused by the difference between which
of the following?
A. actual and budgeted units
B. actual and standard allocation base
C. actual and standard overhead rates
D. actual units and actual overhead rates
Solution
B
21. LO 8.4 The fixed factory overhead variance is caused by the difference between which of the
following?
A. actual and standard allocation base
B. actual and budgeted units
C. actual fixed overhead and applied fixed overhead
D. actual and standard overhead rates
Solution
C
22. LO 8.5 Which of the following is a possible cause of an unfavorable material price variance?
A. purchasing too much material
B. purchasing higher-quality material
C. hiring substandard workers
D. buying substandard material
Solution
B
23. LO 8.5 Which of the following is a possible cause of an unfavorable material quantity
variance?
A. purchasing substandard material
B. hiring higher-quality workers
C. paying more than should have for workers
D. purchasing too much material
Solution
A
24. LO 8.5 Which of the following is a possible cause of an unfavorable labor efficiency
variance?
A. hiring substandard workers
B. making too many units
C. buying higher-quality material
D. paying too much for workers
Solution
A
25. LO 8.5 Which of the following is a possible cause of an unfavorable labor rate variance?
A. hiring too many workers
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Chapter 8: Standard Costs and Variances
Principles of Accounting, Volume 2: Managerial Accounting
Chapter 8: Standard Costs and Variances
Multiple Choice
1. LO 8.1 Why does a company use a standard costing system?
A. to identify variances from actual cost that assist them in maintaining profits
B. to identify nonperformers in the workplace
C. to identify what vendors are unreliable
D. to identify defective materials
Solution
A. A standard costing system assists a company in maintaining profits by helping the company
identify where there are variances so that it can investigate the cause of that variance and fix it.
2. LO 8.1 This standard is set at a level that may be reached with reasonable effort.
A. ideal standard
B. attainable standard
C. unattainable standard
D. variance from standard
Solution
B
3. LO 8.1 This standard is set at a level that could be achieved if everything ran perfectly.
A. ideal standard
B. attainable standard
C. unattainable standard
D. variance from standard
Solution
A
4. LO 8.1 This variance is the difference involving spending more or using more than the
standard amount.
A. favorable variance
B. unfavorable variance
C. no variance
D. variance
Solution
B
5. LO 8.1 This variance is the difference involving spending less, or using less than the standard
amount.
A. favorable variance
B. unfavorable variance
C. no variance
D. variance
Solution
A
6. LO 8.2 What are some possible reasons for a material price variance?
A. substandard material
B. labor rate increases
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,OpenStax Principles of Accounting, Volume 2: Managerial Accounting
Chapter 8: Standard Costs and Variances
C. labor rate decreases
D. labor efficiency
Solution
A
7. LO 8.2 When is the material price variance unfavorable?
A. when the actual quantity used is greater than the standard quantity
B. when the actual quantity used is less than the standard quantity
C. when the actual price paid is greater than the standard price
D. when the actual price is less than the standard price
Solution
C
8. LO 8.2 When is the material price variance favorable?
A. when the actual quantity used is greater than the standard quantity
B. when the actual quantity used is less than the standard quantity
C. when the actual price paid is greater than the standard price
D. when the actual price is less than the standard price
Solution
D
9. LO 8.2 What are some reasons for a material quantity variance?
A. building rental charges increase
B. labor rate decreases
C. more qualified workers
D. change in the actual cost of materials
Solution
C
10. LO 8.2 When is the material quantity variance favorable?
A. when the actual quantity used is greater than the standard quantity
B. when the actual quantity used is less than the standard quantity
C. when the actual price paid is greater than the standard price
D. when the actual price is less than the standard price
Solution
B
11. LO 8.2 When is the material quantity unfavorable?
A. when the actual quantity used is greater than the standard quantity
B. when the actual quantity used is less than the standard quantity
C. when the actual price paid is greater than the standard price
D. when the actual price is less than the standard price
Solution
A
12. LO 8.3 What are some possible reasons for a labor rate variance?
A. hiring of less qualified workers
B. an excess of material usage
C. material price increase
D. utilities usage change
Solution
A
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,OpenStax Principles of Accounting, Volume 2: Managerial Accounting
Chapter 8: Standard Costs and Variances
13. LO 8.3 When is the labor rate variance unfavorable?
A. when the actual quantity used is greater than the standard quantity
B. when the actual quantity used is less than the standard quantity
C. when the actual price is greater than the standard price
D. when the actual price is less than the standard price
Solution
C
14. LO 8.3 When is the labor rate variance favorable?
A. when the actual quantity used is greater than the standard quantity
B. when the actual quantity used is less than the standard quantity
C. when the actual price paid is greater than the standard price
D. when the actual price is less than the standard price
Solution
D
15. LO 8.3 What are some possible reasons for a direct labor time variance?
A. utility usage decrease
B. less qualified workers
C. office supplies spending
D. sales decline
Solution
B
16. LO 8.3 When is the direct labor time variance favorable?
A. when the actual quantity used is greater than the standard quantity
B. when the actual hours worked are less than the standard hours at the actual output level
C. when the actual price paid is greater than the standard price
D. when the actual price is less than the standard price
Solution
B
17. LO 8.3 When is the direct labor time variance unfavorable?
A. when the actual hours worked are greater than the standard hours at the actual output
level
B. when the actual quantity used is less than the standard quantity
C. when the actual price paid is greater than the standard price
D. when the actual price is less than the standard price
Solution
A
18. LO 8.4 A flexible budget ________.
A. predicts estimated revenues and costs at varying levels of production
B. gives actual figures for selling price
C. gives actual figures for variable and fixed overhead
D. is not used in overhead variance calculations
Solution
A
19. LO 8.4 The variable overhead rate variance is caused by the difference between which of the
following?
A. actual and standard allocation base
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, OpenStax Principles of Accounting, Volume 2: Managerial Accounting
Chapter 8: Standard Costs and Variances
B. actual and standard overhead rates
C. actual and budgeted units
D. actual units and actual overhead rates
Solution
B
20. LO 8.4 The variable overhead efficiency variance is caused by the difference between which
of the following?
A. actual and budgeted units
B. actual and standard allocation base
C. actual and standard overhead rates
D. actual units and actual overhead rates
Solution
B
21. LO 8.4 The fixed factory overhead variance is caused by the difference between which of the
following?
A. actual and standard allocation base
B. actual and budgeted units
C. actual fixed overhead and applied fixed overhead
D. actual and standard overhead rates
Solution
C
22. LO 8.5 Which of the following is a possible cause of an unfavorable material price variance?
A. purchasing too much material
B. purchasing higher-quality material
C. hiring substandard workers
D. buying substandard material
Solution
B
23. LO 8.5 Which of the following is a possible cause of an unfavorable material quantity
variance?
A. purchasing substandard material
B. hiring higher-quality workers
C. paying more than should have for workers
D. purchasing too much material
Solution
A
24. LO 8.5 Which of the following is a possible cause of an unfavorable labor efficiency
variance?
A. hiring substandard workers
B. making too many units
C. buying higher-quality material
D. paying too much for workers
Solution
A
25. LO 8.5 Which of the following is a possible cause of an unfavorable labor rate variance?
A. hiring too many workers
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