Sample Questions - Standard Cost
1. What is meant by standard cost?
2. What is the difference between ideal standards and attainable standards?
3. BXK management likes to set high performance standards. BXK's management ensures no employee or manager gets a bonus or compliment no matter how hard a manager or an employee works.
a. What type of standard cost does BXK use in setting their standards
b. What do you think are the ethical concerns that may result from BXK's standards?
4. Discuss what is meant by variance in standard costing.
5. Identify the main considerations used in setting standards for:
a. Direct labor cost.
b. Direct material cost.
6. AJK productions had set its standard materials price at $10 per meter. AJ productions purchased 12,500 meters of production materials at a reduced price of $9.20 after a hard bargain. Only 10,500 meters of the purchases products were used. Compute:
a. The direct materials price variance. (State whether the variance was favorable or unfavorable)
b. The materials quantity variance supposing AJ's standard quantity is 10,000 meters. (State whether the variance was favorable or unfavorable)
Biding Manufacturers are specialized in making high quality school bags. The following information was obtained from its internal accounting records for the month of April.
| Actual labor cost | $40,000 |
| Actual labor hours | 2,000 |
| Standard labor rate | $13 |
| Standard labor hours per bag | 0.50 |
| Actual Bags produced | 4,200 |
7. Compute AJK's labor rate variance for April.
8. Compute AJK's labor efficiency variance.
9. Beach Fanaticas Company is a company specialized in making outfits for summer beach tourists. The company's records showed that the company had a budgeted overhead of $9,500, an applied overhead of $8,000 and an actual overhead of $10,000.
Compute the following:
a. The overhead spending variance.
b. The overhead volume variance.
10. Mr. Quinns is a new accountant at Pinnings limited. He has been handed over a limited information about the actual cost of materials and labor for the company. The records he had been given shows that the company had a standard cost for direct materials for $40,000 and the standard cost for direct labor at $60,000. In addition, the following variance information was on the company's juornal records.
| Variance | Amount |
|---|---|
| Labor rate variance | $2,000 |
| Labor efficiency variance | −$800 |
| Material price variance | $3,000 |
| Material quantity variance | −$200 |
Compute the following:
a. Actual costs for direct materials.
b. Actual costs for direct labor.