Multiple Choice Answers

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Question 1
A purpose of standard costing is to:
A. control costs.
B. allocate costs more accurately.
C. replace subjective decision making.
D. compute the breakeven point.
 
Question 2
A(n) __________ cost is synonymous with the product cost calculated in a conventional standard cost accounting system.
A. fixed
B. direct
C. joint
D. expected
 
Question 3
An expression of the hourly labor pay cost per function or job classification that is expected to exist during the next accounting period is the definition of a:
A. direct labor time standard.
B. direct materials quantity standard.
C. direct labor rate standard.
D. variable overhead rate.
 
Question 4
Multiplying the standard price of direct materials by the standard quantity for direct materials yields:
A. the direct materials price variance.
B. the direct materials quantity variance.
C. the standard direct materials cost.
D. nothing; the two components should be added together.
 
Question 5
Which of the following provides an explanation of why the variable overhead rate is separated from the fixed overhead rate in standard costing?
A. There is no justifiable reason; their separation is merely to simplify entries.
B. Both calculations divide by the same direct labor hours, but the numerator is different for each calculation.
C. The variable overhead rate is calculated using actual direct labor hours, whereas the fixed overhead rate is calculated using normal capacity direct labor hours.
D. Different application bases are generally appropriate.
 
Question 6
The primary difference between a fixed (static) budget and a flexible budget is that a fixed budget:
A. cannot be changed after the period begins, whereas a flexible budget can be changed after the period begins.
B. is concerned only with future acquisitions of fixed assets, whereas a flexible budget is concerned with expenses that vary with sales.
C. is a plan for a single level of production, whereas a flexible budget is several plans (one for each of several production levels).
D. includes only fixed costs, whereas a flexible budget includes only variable costs.
 
Question 7
The formula used to compute budgeted total cost at any level of activity is presented in the:
A. flexible budget.
B. performance report.
C. static budget.
D. cash flow forecast.
 
Question 8
The difference between the standard quantity allowed and the actual quantity used multiplied by standard price is the equation for computing the:
A. direct labor efficiency variance.
B. direct materials price variance.
C. direct labor rate variance.
D. direct materials quantity variance.
 
Question 9
The overhead variance is equal to the difference between:
A. fixed overhead costs and flexible overhead costs.
B. estimated overhead rate and applied overhead rate.
C. actual overhead costs and variable overhead costs.
D. actual overhead costs and standard overhead costs.
 
Question 10
A favorable fixed overhead volume variance for a manufacturing company could indicate:
A. the creation of excess inventory.
B. the actual overhead exceeded the budgeted overhead.
C. sales exceeded production.
D. variable overhead costs were less than fixed overhead costs.
 
Question 11
Irrelevant costs include costs that are:
A. different among alternatives.
B. avoidable.
C. sunk.
D. opportunity costs.
 
Question 12
The difference in total costs between two alternatives is referred to as the:
A. direct cost.
B. incremental cost.
C. sunk cost.
D. opportunity cost.
 
Question 13
The purpose of incremental analysis is to find the alternative:
A. that contributes the most to operating income.
B. that brings in the most revenue.
C. with the lowest fixed costs.
D. with the fewest relevant costs.
 
Question 14
In a special-order decision, which of the following costs would normally be irrelevant?
A. Packaging costs
B. Direct labor
C. Variable overhead
D. Fixed selling expenses
 
Question 15
Avoidable costs are important for:
A. product mix decisions.
B. sell or process-further decisions.
C. decisions to eliminate unprofitable segments.
D. pricing decisions for special orders.
 
Question 16
Direct costs include:
A. all product costs.
B. variable product costs.
C. some identifiable fixed costs and variable product costs.
D. some identifiable fixed costs.
 
Question 17
As a general rule, a segment should not be eliminated if:
A. the company is profitable.
B. its direct fixed costs exceed its contribution margin.
C. the segment’s fixed costs equal its variable costs.
D. its contribution margin exceeds direct fixed costs.
 
Question 18
The point at which products are separated in a joint production process is the:
A. split-off point.
B. joint product point.
C. separation point.
D. breakeven point.
 
Question 19
Relevant costs in a sell or process-further decision include:
A. costs of additional processing.
B. both additional revenues and additional costs.
C. revenues after additional processing.
D. joint product costs.
 
Question 20
The objective of the sell or process-further decision is to:
A. maximize production.
B. maximize joint costs.
C. minimize processing.
D. maximize operating income.