BSAIS-2nd year

In the space provided, write the word TRUE if the statement is correct and the word
FALSE if the statement is wrong.
FALSE1.Inventories cannot be valued at standard cost in financial statements.
FALSE2.Standard cost is the industry average cost for a particular item.
TRUE3.A standard is a unit amount, whereas a budget is a total amount.
TRUE4.Standard costs may be incorporated into the accounts in the general ledger.
TRUE5.An advantage of standard costs is that they simplify costing of inventories and reduce
clerical costs.
FALSE6.Setting standard costs is relatively simple because it is done entirely by accountants.
TRUE7.Normal standards should be rigorous but attainable.
FALSE8.Actual costs that vary from standard costs always indicate inefficiencies.
FALSE9.Ideal standards will generally result in favorable variances for the company.
TRUE10.Normal standards incorporate normal contingencies of production into the standards.
FALSE11.Once set, normal standards should not be changed during the year.
TRUE12.In developing a standard cost for direct materials, a price factor and a quantity factor
must be considered.
FALSE13.A direct labor price standard is frequently called the direct labor efficiency standard.
FALSE14.The standard predetermined overhead rate must be based on direct labor hours as the
standard activity index.
FALSE15.Standard cost cards are the subsidiary ledger for the Work in Process account in a
standard cost system.
TRUE16.A variance is the difference between actual costs and standard costs.
TRUE17.If actual costs are less than standard costs, the variance is favorable.
FALSE18.A materials quantity variance is calculated as the difference between the standard
direct materials price and the actual direct materials price multiplied by the actual
quantity of direct materials used.
TRUE19.An unfavorable labor quantity variance indicates that the actual number of direct labor
hours worked was greater than the number of direct labor hours that should have been
worked for the output attained.
FALSE20.Standard cost + price variance + quantity variance = Budgeted cost.
TRUE 21.There could be instances where the production department is responsible for a direct
materials price variance.
TRUE22.The starting point for determining the causes of an unfavorable materials price
variance is the purchasing department.
TRUE23.An overhead variance consists of a controllable variance and a volume variance.
TRUE24.Variance analysis facilitates the principle of "management by exception."
FALSE25.A credit to a Materials Quantity Variance account indicates that the actual quantity of
direct materials used was greater than the standard quantity of direct materials allowed.
FALSE26.A standard cost system may be used with a job order cost system but not with a
process cost system.
FALSE27.Companies assign overhead to jobs by debiting Work in Process Inventory for actual
hours multiplied by the standard overhead rate.
FALSE28.The overhead controllable variance relates primarily to fixed overhead costs.
TRUE29.The overhead volume variance relates only to fixed overhead costs.
TRUE30.If production exceeds normal capacity, the overhead volume variance will be favorable.