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Cost systems using detailed estimates of each element of manufacturing cost entering into the finished product are called budgeted cost systems.

A) True
B) False

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Oak Company produces a chair that requires 6 yds. of material per unit. The standard price of one yard of material is $7.50. During the month, 8,500 chairs were manufactured, using 48,875 yards. Journalize the entry to record the standard direct materials used in production.

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The standard factory overhead rate is $10 per direct labor hour ($8 for variable factory overhead and $2 for fixed factory overhead) based on 100% capacity of 30,000 direct labor hours. The standard cost and the actual cost of factory overhead for the production of 5,000 units during May were as follows: The standard factory overhead rate is $10 per direct labor hour ($8 for variable factory overhead and $2 for fixed factory overhead)  based on 100% capacity of 30,000 direct labor hours. The standard cost and the actual cost of factory overhead for the production of 5,000 units during May were as follows:   What is the amount of the factory overhead volume variance? A)  $12,500 favorable B)  $10,000 unfavorable C)  $12,500 unfavorable D)  $10,000 favorable What is the amount of the factory overhead volume variance?


A) $12,500 favorable
B) $10,000 unfavorable
C) $12,500 unfavorable
D) $10,000 favorable

E) C) and D)
F) B) and C)

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While setting standards, the managers should never allow for spoilage or machine breakdowns in their calculations.

A) True
B) False

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If the standard to produce a given amount of product is 1,000 units of direct materials at $11 and the actual was 800 units at $12, the direct materials quantity variance was $2,200 unfavorable.

A) True
B) False

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The following data relate to direct materials costs for November: The following data relate to direct materials costs for November:   What is the direct materials price variance? A)  $3,600 favorable B)  $160 favorable C)  $3,760 favorable D)  $3,600 unfavorable What is the direct materials price variance?


A) $3,600 favorable
B) $160 favorable
C) $3,760 favorable
D) $3,600 unfavorable

E) A) and B)
F) A) and C)

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Standard and actual costs for direct materials for the manufacture of 1,000 units of product were as follows: Standard and actual costs for direct materials for the manufacture of 1,000 units of product were as follows:

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Determine the (a) quantity var...

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The variance from standard for factory overhead cost resulting from operating at a level above or below 100% of normal capacity is termed volume variance.

A) True
B) False

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The formula to compute direct labor rate variance is to calculate the difference between


A) actual costs + (actual hours * standard rate)
B) actual costs - standard cost
C) (actual hours * standard rate) - standard costs
D) actual costs - (actual hours * standard rate)

E) All of the above
F) C) and D)

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If the standard to produce a given amount of product is 2,000 units of direct materials at $12 and the actual was 1,600 units at $13, the direct materials quantity variance was $5,200 favorable.

A) True
B) False

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The difference between the standard cost of a product and its actual cost is called a variance.

A) True
B) False

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Ruby Company produces a chair that requires 5 yds. of material per unit. The standard price of one yard of material is $7.50. During the month, 8,400 chairs were manufactured, using 43,700 yards at a cost of $7.30 per yard. Determine the (a) price variance, (b) quantity variance, and (c) cost variance.

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(a) Price variance = ($7.50 - ...

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If the standard to produce a given amount of product is 600 direct labor hours at $17 and the actual was 500 hours at $15, the time variance was $1,500 unfavorable.

A) True
B) False

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The following data relate to direct labor costs for February: The following data relate to direct labor costs for February:   What is the direct labor rate variance? A)  $14,000 favorable B)  $14,000 unfavorable C)  $15,400 favorable D)  $15,400 unfavorable What is the direct labor rate variance?


A) $14,000 favorable
B) $14,000 unfavorable
C) $15,400 favorable
D) $15,400 unfavorable

E) A) and D)
F) None of the above

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The formula to compute direct materials price variance is to calculate the difference between


A) actual costs - (actual quantity * standard price)
B) actual cost + standard costs
C) actual cost - standard costs
D) (actual quantity * standard price) -standard costs

E) A) and B)
F) A) and C)

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Standard cost variances are usually not reported in reports to stockholders.

A) True
B) False

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An unfavorable cost variance occurs when budgeted cost at actual volumes exceeds actual cost.

A) True
B) False

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A company records their inventory purchases at standard cost but also records purchase price variances. The company purchased 5,000 widgets $8.00. The standard cost for the widgets is $7.60. Which of the following would be included in the journal entry?


A) $38,000 Debit to Accounts Payable
B) $ 2,000 Credit to Direct Materials Price Variance
C) $ 2,000 Debit to Accounts Payable
D) $ 2,000 Debit to Direct Materials Price Variance

E) B) and C)
F) A) and D)

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A favorable cost variance occurs when


A) Actual costs are more than standard costs.
B) Standard costs are more than actual costs.
C) Standard costs are less than actual costs.
D) None of the above.

E) All of the above
F) A) and B)

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A budget performance report compares actual results with the budgeted amounts and reports differences for possible investigation.

A) True
B) False

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