Standard costing and variance analysis - material and labour variances, activity based costing - Question Bank

1. If the standard mix of materials is A:B = 2:1, and actual mix used is A:B = 1:1, this would primarily affect which variance?
A) Material Price Variance
B) Material Usage Variance
C) Material Mix Variance
D) Material Yield Variance
2. The primary goal of variance analysis is to:
A) Prove that standards are always met
B) Identify deviations from standards and investigate their causes
C) Eliminate all costs
D) Set higher standards for future periods
3. Which of the following is a 'support-level' activity in ABC?
A) Assembling a product
B) Setting up a machine
C) General factory administration
D) Packaging a product
4. An organisation using ABC may find that low-volume, high-complexity products are:
A) Under-costed
B) Over-costed
C) Accurately costed
D) Not affected by ABC
5. An organisation using ABC may find that high-volume products are:
A) Under-costed
B) Over-costed
C) Accurately costed
D) Not affected by ABC
6. Which variance is calculated to measure the difference between the standard cost of actual output and the actual cost of materials purchased, considering both price and quantity effects?
A) Material Usage Variance
B) Material Price Variance
C) Material Cost Variance
D) Material Yield Variance
7. The purpose of calculating both Labour Efficiency Variance and Labour Rate Variance is to:
A) Isolate the impact of labour hours from labour cost
B) Combine material and labour efficiencies
C) Determine overall profitability
D) Simplify cost control measures
8. The purpose of calculating both Material Usage Variance and Material Price Variance is to:
A) Isolate the impact of material quantity from material cost
B) Combine material and labour efficiencies
C) Determine overall profitability
D) Simplify cost control measures
9. Which of the following is a 'unit-level' activity in ABC?
A) Machine setup
B) Product design
C) Drilling holes in a product
D) Customer order processing
10. If a company uses Activity-Based Costing, the cost of a product is likely to be higher if it:
A) Is produced in large volumes
B) Requires complex setups
C) Uses standard components
D) Has fewer design changes
11. In ABC, which cost pool is typically associated with the number of times a production run is started?
A) Machine Setup
B) Production Scheduling
C) Material Handling
D) Quality Inspection
12. Actual labour hours worked were 500 hours at $12/hour. Standard labour rate was $10/hour. The Labour Rate Variance is:
A) $1000 Adverse
B) $1000 Favorable
C) $500 Adverse
D) $500 Favorable
13. Standard quantity of material allowed for 50 units is 100 kg. Actual output was 60 units, and actual material used was 110 kg. Standard price is $2/kg. The Material Usage Variance is:
A) $20 Adverse
B) $20 Favorable
C) $10 Adverse
D) $10 Favorable
14. Standard material price is $10/kg. Actual material purchased was 200 kg at $11/kg. The Material Price Variance is:
A) $200 Adverse
B) $200 Favorable
C) $100 Adverse
D) $100 Favorable
15. Standard labour rate is $15/hour. Actual hours worked for a task were 100 hours, but standard hours allowed were 80 hours. The Labour Efficiency Variance is:
A) $300 Adverse
B) $300 Favorable
C) $200 Adverse
D) $200 Favorable
16. If standard labour hours allowed for 10 units is 5 hours, and actual output is 20 units, the standard labour hours allowed for actual output is:
A) 5 hours
B) 10 hours
C) 15 hours
D) 20 hours
17. Standard cost per unit = Standard material price × Standard material quantity per unit. If standard material price is $5/kg and standard quantity is 2 kg/unit, the standard material cost per unit is:
A) $2.5
B) $5
C) $7
D) $10
18. The standard quantity of material allowed for a batch of 100 units is 50 kg. If 120 units are produced, the standard quantity allowed for actual output would be:
A) 50 kg
B) 60 kg
C) 100 kg
D) 120 kg
19. Which type of variance is calculated to reconcile the difference between the standard hours allowed for actual output and the hours paid for, at the standard rate?
A) Labour Efficiency Variance
B) Labour Rate Variance
C) Labour Idle Time Variance
D) Labour Cost Variance
20. A 'batch-level' activity in ABC is an activity that is performed:
A) For each unit produced
B) For each batch of product
C) For each customer order
D) Whenever a product is designed
21. In ABC, overhead costs are allocated to products based on:
A) Direct labour hours
B) Machine hours
C) Consumption of activities
D) Volume of production
22. Which of the following is a potential disadvantage of Activity-Based Costing?
A) Under-costing of complex products
B) Over-costing of simple products
C) High implementation and maintenance costs
D) Less accurate overhead allocation
23. The main advantage of ABC over traditional costing is:
A) Simplicity and lower implementation cost
B) More accurate allocation of overhead costs
C) Focus on direct labour costs
D) Easier to understand for all employees
24. Which of the following is a common cost driver for an 'Order Processing' activity in ABC?
A) Number of machine hours
B) Number of customer orders
C) Number of inspections
D) Number of setups
25. ABC is particularly useful for companies with:
A) Few products and low overheads
B) Many products and high overheads
C) Only direct labour costs
D) Standardized production processes
26. What is a 'cost driver' in the context of Activity-Based Costing?
A) A measure of the amount of an activity that is consumed by a product
B) The total cost of an activity
C) The profit margin of a product
D) The direct material cost of a product
27. In Activity-Based Costing, costs are first traced to:
A) Products
B) Customers
C) Activities
D) Departments
28. Activity-Based Costing (ABC) is a costing method that identifies activities in an organization and assigns the cost of each activity to all products and services according to the actual consumption by each.
A) True
B) False
C) Partially True
D) Depends on the industry
29. An adverse Idle Time Variance indicates:
A) Workers were idle for more than the standard allowed idle time
B) Workers were idle for less than the standard allowed idle time
C) Workers were paid a lower rate than standard
D) Workers were more efficient than standard
30. What is the formula for Idle Time Variance?
A) (Standard Rate - Actual Rate) × Actual Idle Hours
B) (Standard Rate × Standard Hours) - (Actual Rate × Actual Hours)
C) (Standard Rate × Actual Idle Hours)
D) (Actual Rate × Actual Idle Hours)
31. Idle Time Variance is a part of which other variance?
A) Labour Cost Variance
B) Labour Rate Variance
C) Labour Efficiency Variance
D) Material Usage Variance
32. The total Labour Cost Variance is the sum of:
A) Labour Rate Variance and Labour Efficiency Variance
B) Labour Efficiency Variance and Labour Idle Time Variance
C) Labour Rate Variance and Labour Mix Variance
D) Labour Efficiency Variance and Labour Remuneration Variance
33. If the actual rate paid to labour is higher than the standard rate, the Labour Rate Variance is:
A) Favorable
B) Adverse
C) Zero
D) Undetermined
34. Which variance helps in identifying whether workers were more or less productive than expected?
A) Labour Rate Variance
B) Labour Cost Variance
C) Labour Efficiency Variance
D) Labour Idle Time Variance
35. A favorable Labour Rate Variance occurs when:
A) Actual rate paid is higher than standard rate
B) Actual rate paid is lower than standard rate
C) Actual hours worked are more than standard hours allowed
D) Actual hours worked are less than standard hours allowed
36. An adverse Labour Efficiency Variance occurs when:
A) Actual hours worked are less than standard hours allowed
B) Actual hours worked are more than standard hours allowed
C) Actual rate paid is lower than standard rate
D) Actual rate paid is higher than standard rate
37. Labour Rate Variance (LRV) measures the difference between the standard labour rate and the actual labour rate paid for the hours worked. What is the formula for LRV?
A) (Standard Rate × Standard Hours) - (Actual Rate × Actual Hours)
B) (Standard Rate - Actual Rate) × Actual Hours
C) (Standard Hours - Actual Hours) × Standard Rate
D) (Actual Rate - Standard Rate) × Actual Hours
38. Labour Efficiency Variance (LEV) measures the difference between the standard hours allowed for the actual output and the actual hours worked. What is the formula for LEV?
A) (Standard Rate × Standard Hours) - (Actual Rate × Actual Hours)
B) (Standard Rate - Actual Rate) × Actual Hours
C) (Standard Hours - Actual Hours) × Standard Rate
D) (Actual Hours - Standard Hours) × Actual Rate
39. Labour Cost Variance (LCV) is the difference between the standard labour cost for the actual output and the actual labour cost incurred. What is the formula for LCV?
A) (Standard Rate × Standard Hours) - (Actual Rate × Actual Hours)
B) (Standard Rate - Actual Rate) × Actual Hours
C) (Standard Hours - Actual Hours) × Standard Rate
D) (Actual Hours - Standard Hours) × Standard Rate
40. Which of the following is NOT a type of labour variance?
A) Labour Cost Variance
B) Labour Efficiency Variance
C) Labour Idle Time Variance
D) Labour Mix Variance
41. The total Material Cost Variance is the sum of:
A) Material Price Variance and Material Usage Variance
B) Material Usage Variance and Material Yield Variance
C) Material Price Variance and Material Mix Variance
D) Material Usage Variance and Material Purchase Variance
42. If the actual quantity of material used is less than the standard quantity allowed for the output, the Material Usage Variance is:
A) Adverse
B) Favorable
C) Zero
D) Irrelevant
43. Which variance helps in identifying inefficiencies in the use of materials?
A) Material Price Variance
B) Material Cost Variance
C) Material Usage Variance
D) Material Mix Variance
44. A favorable Material Usage Variance occurs when:
A) Actual quantity used is more than standard quantity
B) Actual quantity used is less than standard quantity
C) Actual price is higher than standard price
D) Actual cost is higher than standard cost
45. An adverse Material Price Variance occurs when:
A) Actual price is lower than standard price
B) Actual price is higher than standard price
C) Actual quantity used is less than standard quantity
D) Actual quantity purchased is more than standard quantity
46. Material Price Variance (MPV) measures the difference between the standard price of material and the actual price paid for the quantity purchased or used. What is the formula for MPV?
A) (Standard Price × Standard Quantity) - (Actual Price × Actual Quantity)
B) (Standard Price - Actual Price) × Actual Quantity
C) (Standard Quantity - Actual Quantity) × Standard Price
D) (Actual Price - Standard Price) × Actual Quantity
47. Material Usage Variance (MUV) measures the difference between the standard quantity of material allowed for the actual output and the actual quantity of material used. What is the formula for MUV?
A) (Standard Price × Standard Quantity) - (Actual Price × Actual Quantity)
B) (Standard Price - Actual Price) × Actual Quantity
C) (Standard Quantity - Actual Quantity) × Standard Price
D) (Actual Output Standard Quantity / Standard Output) × Standard Price - Actual Cost
48. Material Cost Variance (MCV) is the difference between the standard cost of materials for the actual output and the actual cost of materials used. What is the formula for MCV?
A) (Standard Price × Standard Quantity) - (Actual Price × Actual Quantity)
B) (Standard Price - Actual Price) × Actual Quantity
C) (Standard Quantity - Actual Quantity) × Standard Price
D) (Actual Output Standard Quantity / Standard Output) × Standard Price - Actual Cost
49. Which of the following is NOT a type of material variance?
A) Material Cost Variance
B) Material Usage Variance
C) Material Yield Variance
D) Material Price Variance
50. What is the primary purpose of standard costing?
A) To determine the selling price of a product
B) To establish a benchmark for cost control and performance evaluation
C) To calculate depreciation on assets
D) To record historical costs
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