Indicate whether each of the following is true (T) or false (F) in the space provided.
In concept, standards and budgets are essentially the same. |
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Standards may be useful in setting selling prices for finished goods. |
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Ideal standards represent an efficient level of performance under normal operating conditions. |
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The materials price standard is based on the purchasing department”s best estimate of the cost of raw materials. |
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The direct labor quantity standard is based on current wage rates adjusted for anticipated changes such as cost of living adjustments included in many union contracts. |
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The standard predetermined overhead rate is based on an expected standard activity index. |
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An unfavorable variance suggests efficiencies in incurring costs and in using materials and labor. |
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The materials price variance is the difference between actual quantity of materials purchased times the standard cost and the standard quantity of materials times the standard cost. |
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The materials quantity variance is the difference between the standard cost times the actual quantity of materials used and the standard cost times the standard quantity used. |
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The materials price variance is normally caused by the production department. |
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Material quantity variances can be caused by inexperienced workers, faulty machinery, or carelessness. |
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The labor quantity variance is the difference between the actual rate times the standard hours and the standard rate times the standard hours. |
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The use of an inexperienced worker instead of an experienced employee can result in a favorable labor price variance but probably an unfavorable quantity variance. |
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An increase in the cost of indirect manufacturing costs such as fuel and maintenance may cause an overhead variance. |
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All variances should be reported to appropriate levels of management as soon as possible. |
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In using variance reports, top management normally looks carefully at every variance. |
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A standard cost system may be used with either job order or process costing. |
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Under a standard cost accounting system, a favorable labor price variance will result in a credit to Labor Price Variance. |
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The use of standard costs in inventory costing is prohibited in financial statements. |
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The overhead controllable variance is the difference between the actual overhead costs incurred and the budgeted costs for the standard hours allowed. |