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Select the best answer.
1. A standard cost:
A) is the "true" cost of a unit of production.
B) is a budget for the production of one unit of a product or service.
C) can be useful in calculating equivalent units.
D) is the average cost within an industry.
E) is the actual cost from previous years.
2. The term "management by exception" is best defined as:
A) choosing exceptional managers.
B) controlling actions of subordinates through acceptance of management techniques.
C) investigating unfavorable variances.
D) devoting management time to investigate significant variances.
E) controlling costs so that non-zero variances are treated as "exceptional."
3. Consider the following statements:
I) Behavioral scientists find that perfection standards often discourage employees and result in low worker morale.
II) Practical standards are also known as attainable standards.
III) Practical standards incorporate a certain amount of inefficiency such as that caused by an occasional machine breakdown.
Which of the above statements is (are) true?
D) II and III.
E) I, II, and III.
4. Most companies base the calculation of the materials price variance on the:
A) number of units purchased.
B) number of units spoiled.
C) number of units that should have been used.
D) number of units actually used.
E) number of units to be purchased during the next accounting period.
5. Thomas recently completed 24,000 units of a product that was expected to consume five pounds of direct material per finished unit. The standard price of the direct material was $6 per pound. If the firm purchased and consumed 110,000 pounds in manufacturing (cost = $605,000), the direct-materials quantity variance would be figured as:
E) none of the above.
6. The individual generally responsible for the direct-material price variance is the:
A) sales manager.
B) production supervisor.
C) purchasing manager.
D) finance manager.
E) head of the human resources department.
7. In which department would an investigation normally begin regarding an unfavorable materials quantity variance?
A) Quality control.
8. Justin Company recently purchased materials from a new supplier at a very attractive price. The materials were found to be of poor quality, and the company's laborers struggled significantly as they shaped the materials into finished product. In a desperation move to make up for some of the time lost, the manufacturing supervisor brought in more-senior employees from another part of the plant. Which of the following variances would have a high probability of arising from this situation?
A) Material price variance, favorable.
B) Material quantity variance, unfavorable.
C) Labor rate variance, unfavorable.
D) Labor efficiency variance, unfavorable.
E) All of the above.
9. Which of the following is a criticism of standard costing, as applied to today's manufacturing environment?
A) Automated manufacturing processes are very consistent in meeting production specifications, making variances very small and relatively unimportant.
B) Variance information is usually aggregated (i.e., combined) rather than associated with a particular batch of goods or a specific product line.
C) Traditional standard costing fails to focus on key business issues such as customer service and bringing products to market faster than the competition.
D) Standard costing pays considerable attention to labor cost and labor efficiency, which are becoming a relatively unimportant factor of production.
E) All of the above are valid criticisms.
10. To assess how customers perceive a company's products, management may study:
A) the number of customer complaints.
B) the number of warranty claims.
C) the number of products returned.
D) the cost of repairing returned products.
E) all of the above measures.
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