What is the primary purpose of standard costing?
a) To predict future profit levels
b) To control and monitor operational costs
c) To calculate the net income for the company
d) To reduce the total revenue of the business
What does variance analysis help managers to identify?
a) The cause of discrepancies between actual and standard costs
b) The financial position of the company
c) The company’s profitability
d) The company’s revenue growth
What is an unfavorable variance?
a) When actual costs are lower than standard costs
b) When actual revenue exceeds the budgeted revenue
c) When actual costs exceed standard costs
d) When there is no difference between actual and standard costs
What is a favorable variance?
a) When actual costs exceed standard costs
b) When actual costs are lower than standard costs
c) When actual revenue is less than expected
d) When there is a complete match between actual and budgeted performance
Which of the following is NOT a component of total variance?
a) Price variance
b) Volume variance
c) Efficiency variance
d) Revenue variance
The direct materials price variance is calculated as the difference between:
a) Actual cost and standard cost of materials
b) Standard price and actual price of materials
c) Actual price and standard quantity of materials
d) Standard cost and actual quantity of materials
The direct labor efficiency variance is the difference between:
a) Standard labor cost and actual labor cost
b) Actual hours worked and standard hours allowed, multiplied by the standard labor rate
c) Actual labor rate and standard labor rate
d) Standard hours allowed and actual hours worked
Which of the following variances is related to the efficiency of labor usage?
a) Direct materials price variance
b) Direct labor rate variance
c) Direct materials efficiency variance
d) Direct labor efficiency variance
How is the total direct materials cost variance calculated?
a) Direct materials price variance + Direct materials efficiency variance
b) Direct materials price variance + Direct labor rate variance
c) Direct materials efficiency variance + Direct labor efficiency variance
d) Direct labor rate variance + Direct labor efficiency variance
What is the formula for calculating the sales volume variance?
a) (Actual sales units – Budgeted sales units) × Standard contribution margin
b) (Actual sales revenue – Budgeted sales revenue) × Standard contribution margin
c) (Budgeted sales units – Actual sales units) × Standard contribution margin
d) (Standard contribution margin – Actual sales units) × Budgeted sales volume
The materials quantity variance is calculated by comparing the actual quantity of materials used with:
a) Standard cost of materials
b) Standard quantity of materials allowed
c) Actual price of materials
d) Actual labor costs
Which of the following variances indicates how efficiently the materials were used?
a) Direct labor rate variance
b) Direct labor efficiency variance
c) Direct materials price variance
d) Direct materials efficiency variance
What is the primary objective of variance analysis?
a) To determine the overall profitability of the business
b) To identify deviations from expected performance and provide corrective actions
c) To calculate tax liabilities
d) To forecast future sales figures
Which variance shows the impact of a difference between the actual cost of raw materials and the budgeted cost?
a) Direct labor rate variance
b) Direct materials price variance
c) Direct labor efficiency variance
d) Direct materials efficiency variance
What is a fixed cost volume variance related to?
a) Changes in fixed costs due to efficiency changes
b) Changes in production volume affecting fixed costs
c) Changes in variable costs due to labor efficiency
d) Changes in selling prices affecting fixed costs
What does the direct labor rate variance measure?
a) The difference between the actual and standard hours worked
b) The difference between the actual and standard labor rates
c) The difference between actual labor costs and standard labor costs
d) The efficiency of direct labor usage
Which of the following is a key benefit of using standard costing in an organization?
a) It simplifies decision-making for management
b) It increases the tax liabilities for the company
c) It allows the company to set more flexible prices for products
d) It eliminates the need for detailed financial analysis
How can a company address an unfavorable variance in material costs?
a) By increasing sales prices
b) By improving efficiency in the production process to reduce material wastage
c) By reducing the workforce
d) By purchasing higher-quality materials
What does the volume variance in sales refer to?
a) The difference between actual and budgeted revenue
b) The difference between actual and budgeted sales volume
c) The difference between actual and budgeted contribution margin
d) The difference between actual and standard costs
Which of the following is NOT considered in the calculation of the direct labor efficiency variance?
a) Actual labor hours worked
b) Standard labor hours allowed
c) Actual labor rate
d) Standard labor rate
The materials price variance is calculated by comparing:
a) Actual price of materials and standard price of materials
b) Actual quantity of materials and standard quantity of materials
c) Actual labor rate and standard labor rate
d) Actual labor hours worked and standard labor hours allowed
What is the effect of a favorable direct labor rate variance?
a) The company is paying more than expected for labor
b) The company is paying less than expected for labor
c) The company is using fewer labor hours than expected
d) The company is achieving higher production levels than expected
What is the direct materials quantity variance?
a) The difference between actual and standard material prices
b) The difference between actual and standard material usage
c) The difference between actual and standard material costs
d) The difference between actual and budgeted material costs
Which of the following is an example of a volume variance?
a) The difference between actual sales units and expected sales units
b) The difference between actual material costs and expected material costs
c) The difference between actual labor costs and expected labor costs
d) The difference between actual and standard direct materials prices
The sales price variance is the difference between:
a) Actual sales and budgeted sales
b) Actual sales revenue and standard sales revenue
c) Actual quantity sold and budgeted quantity sold
d) Standard sales price and actual sales price, multiplied by the actual quantity sold
What does the variable overhead efficiency variance measure?
a) The difference between the actual and standard labor hours worked
b) The difference between the actual and standard overhead costs incurred
c) The difference between the actual variable overhead rate and standard variable overhead rate
d) The difference between the actual hours worked and standard hours allowed for overhead application
Which of the following factors may contribute to an unfavorable variance in overhead costs?
a) Decreased labor productivity
b) Lower-than-expected material costs
c) Efficient use of production capacity
d) Improved labor efficiency
