MCQ On Standard Costing | Variance Analysis MCQs

Standard Costing MCQs
Variance Analysis MCQs
Multiple Choice Questions and Answers (MCQs)

Choose the correct option:

1. Standard costing is a technique of:

a)      Planning business activities

b)      Cost Control

c)       Staffing

d)      Motivating

2. Standard costing is a yard stick for:

a)      Measuring efficiency

b)      Controlling prices

c)       Reducing losses of business

d)      Planning business activities

3. The difference between actual cost and standard cost is known as:

a)      Profit

b)      Loss

c)       Standard cost

d)      Variance

4. Standard costing involves:

a)      Preparation and use of standard costs

b)      Comparison of standard with actual

c)       Analysis of variances

d)      All of the above

5. Standard costing technique is unsuitable for:

a)      Job order industries

b)      Non-standard product manufacturers

c)       Service industries

d)      All of the above

6. Standard costing is suitable for industries which are:

a)      Producing standard products

b)      Producing goods of repetitive nature

c)       Sugar, Textiles, Fertilizers, steel industries

d)      All of the above

7. Which of the following is an advantage of standard costing?

a)      Promoting and measuring efficiencies.

b)      Controlling and reducing costs.

c)       Helps in fixation of selling prices.

d)      All of the above.

8. Which of the following is a disadvantage of standard costing?

a)      Costly technique

b)      Difficult to establish standard

c)       Unsuitable for Job-order and service industries.

d)      All of the above

9. Basic standard is established for a:

a)      Long period.

b)      Short period

c)       Current period

d)      Indefinite period

10. Excess of actual cost over standard cost is known as

a)      Abnormal effectiveness

b)      Unfavourable variance

c)       Favourable variance

d)      None of these

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11. Standards cost is used

a)      To ascertain the breakeven point

b)      To establish cost-volume profit relationship

c)       As a basis for price fixation and cost control through variance analysis

d)      None of the above

12. From cost control point of view the standard most commonly used is:

a)      Expected standard

b)      Theoretical standard

c)       Normal standard

d)      Basic standard

13. Three types of standards are

a)      Current standard

b)      Basic standard

c)       Normal standard

d)      All of the above

14. For the purpose of Proof, Material Cost Variance is equal to:

a)      Material Usage = Variance + Material Mix variance

b)      Material Price Variance + Material Usage Variance

c)       Material Price Variance + Material yield variance

d)      Material Mix Variance + Material Yield Variance

15. Cost variance is the difference between:

a)      The standard cost and marginal cost

b)      The standards cost and budgeted cost

c)       The standards cost and the actual cost

d)      None of these

State whether the following statements are true or false:

1.       Standard cost and estimated cost are different.                        True

2.       The technique of standard costing may not be applicable in case of small industries.                True

3.       Standard costing is a method of cost ascertainment.               False

4.       Variances are calculated for both material and labour.            True

5.       Standard cost is most suitable to job order industries.                            False

6.       Relevant costs are historical in nature.                           False

7.       Standards cost, once fixed cannot be altered.                            True

8.       Historical costs are not relevant for decision making.               True

9.       Fixing standards is the work of industrial engineer or the production people and not of cost accountant. False

10.   Material cost variance and labour cost variance are always equal.      False

11.   Marginal Cost = Total Cost – Variable Cost.                   False, Fixed Cost

Fill in the blanks:

1.       Standard cost is a predetermined cost.

2.       Material Cost Variance = Material Price Variance + Material Mix variance + Material yield variance.

3.       The difference between actual cost and standard cost is known as differential cost.   Variance

4.       MCV = MPC + MUV.

5.       MUV = MMV + MYV.

6.       Favourable variance arises when actual costs are less than standard cost.

7.       Adverse variance arises when actual revenue is less than standard revenue.

8.       Standard time is decided by time and motion study.

9.       Standard cost when fixed is recorded on standard card.

10.   Direct Labour Cost Variance = Standard Cost for actual production x actual Cost of Production.

11.   Standard means a criterion or a yardstick against which actual activity can be compared to determine the difference between two.

12.   Idle time variance = Idle time x standard rate.

13.   Management by exception is exercising control over Unfavourable items.

14.   Control in standard costing is achieved by variance analysis.

15.   Variance analysis helps the management in controlling performance.