STANDARD COSTING AND VARIANCE ANALYSIS
REVIEW QUESTION
A. OBJECTIVE TYPE AND MULTIPLE CHOICE QUESTIONS
1. (A) Standare costing involves the:
(A) Standard costing involves the:
(a) Fixation of estimated cost (b) Determination of standard cost (c) Setting of budgeted cost.
(B) The difference between actual cost and standard cost is known as:
(a) Variance (b) Profit (c) Differential cost.
(C) Standard costing helps in :
(a) Measuring efficiency (b) Reducing losses (c) Controlling prices.
(D) Standard Costing cannot be used :
(a) Where management is inefficient. (b) Workers are slow (c) Where non-standard products are manufactured.
(E) Basic standard is established for a:
(a) Short period (b) Current period (c) Indefinite period.
[Ans. A (b), B (a), C (a) D (c), E (c)]
2. Correct the following:
(a) Material Price Variance Standard Quantity (Standard Price - Actual Price)
(b) Material Mix Variance Standard cost of standard mix - Actual cost of actual mix)
(c) Idle Time Variance Idle Hours x Actual Rate
(d) Expenditure Variance = (Budgeted Fixed Overheads - Standard Fixed Overheads)
(e) Sales Price Variance = Standard Quantity (Actual Price - Standard Price).
(d) - Actual Fixed
[Ans. (a) Actual quantity, (b) - Standard cost of actual mix (c) x Standard Rate Overheads (e) Actual Quantity.]
3. Fill in the blanks :
(a) Three types of standards are 1., 2., 3......
(b) Idle time variance is =......
(c) The technique of standard costing may not be applicable in case of
(d) Total labour cost variance= .......
(e) Material usage variance = Material mix variance +..........
[Ans. (a) Current standard, basic standard and normal standard (b) Idle Time x Standard Rate (c) Small concerns (d) Rate of Pay Variance + Labour efficiency variance (e) Yield Variance]
B. SHORT ANSWER TYPE QUESTIONS
1. What is meant by standard cost?Answer:
2. What do you mean by standard costing?
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3. What is meant by variance?
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4. What is material cost variance?
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5. What do you understand by labour cost variance?
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6. What is labour efficiency variance?
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7. What is idle time variance?
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8. Name any two control ratios.
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9. Mention any three advantages of standard costing.
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10. Give any three limitations of standard costing.
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11. What is the significance of variance analysis?
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12. How is material price variance computed?
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13. How is material yield variance computed?
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14. How will you compute labour mix variance?
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C. ESSAY TYPE QUESTIONS
1. What is meant by Standard Costing? Distinguish between Standard Cost and Estimated Cost?
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2. What are the advantages of Standard Costing? Also discuss the limitations of standard costing.
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3. Distinguish between Standard Costing and Budgetary Control.
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4. Discuss the preliminary steps for establishing a system of standard costing.
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5. Write short notes on the following:
(a) Current Standard
(b) Basic Standard
(c) Normal Standard.
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6. Describe the managerial uses of variance analysis.
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7. Explain in brief the various types of variances used in standard costing.
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8. Write notes on:
(a) Material Cost Variance
(b) Idle Time Variance
(c) Calendar Variance
(e) Material Yield Variance.
(d) Sales Mix Variance
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9. Describe the accounting treatment of variances.
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10. Explain and illustrate (a) Labour Efficiency Variance (b) Wage Rate Variance.
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11. Variance accounts are basically a device of standard costing, yet overhead cost variance and overhead variance do occur in historical cost system. Illustrate these concepts.
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12. What are standard cost? What are the principal advantages and management reasons for developing and using standard cost system?
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13. What do you understand by Standard Costing? How is it related to Budgetary Control?
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14. Explain the relationship between Standard Costing and Budgetary Control. How are the standards for material and labour cost determined?
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15. What is variance analysis? What is its significance in decision-making?
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16. "Standard Costing is always accompanied by a system of budgeting, but budgetary control may be operated in business where standard costing would be impracticable". Discuss giving objectives and limitations of both.
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17. What is the meaning and importance of standard costing? Discuss the preliminary steps for establishing a system of standard costing.
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18. Differentiate between standard costs and budgeted costs. Explain their practical utility and applications.
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19. Explain controllable variances and non-controllable variances giving appropriate examples. How this distinction helps management in controlling cost?
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20. What are control ratios. How are these calculated? Explain.
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