MCQ On Standard Costing | Variance Analysis MCQs

Standard Costing MCQs
Variance Analysis MCQs
Multiple Choice Questions and Answers (MCQs)
For B.Com, BBA, MBA, M.Com, CMA, CS and CA IPCC

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 not an advantage of standard costing system?

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

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

16. Which of the following is not the main component of standard cost?

a)    Standard Rate

b)   Standard output

c)    Actual Yield

d)   All of the above

17. Standard costing is not applicable in:

a)    Job order industries

b)   Non-standard product manufacturers

c)    Service industries

d)   All of the above

18. Which of the following statement is true?

a)    In order to calculate costs, a company should use either standard costing or budgetary control but not both of these techniques.

b)   Idle time variance is always unfavorable.

c)    Overheads volume variable is always favourable.

d)   Overhead expenditure variance plus overheads efficiency variance is equal to overheads budget variance for variable overheads.

19. Which of the following statement is correct?

a)    Standard cost is an estimated or predetermined cost of performing an operation or producing a good or service, under normal conditions.

b)   Standard costing is a control technique that reports variances by comparing actual costs to pre-set standards so facilitating action through management by exception.

c)    Both a & b

d)   None of the above

20. What is the correct test of material variances?

a)    mcv = mpv + mmv

b)   mcv = mmv + muv

c)    mcv = mpv + muv

d)   mcv = mmv + myv

21. What is the correct test of material variances?

a)    muv = mpv + mmv

b)   muv = mmv + muv

c)    muv = mmv + myv

d)   muv = mmv + myv

22. Which of the following variance arises when more than one material is used?

a)    Material Cost Variance

b)   Material Price Variance

c)    Material Usage Variance

d)   Material Mix Variance

23. Cost control is also known as:

a)      Cost Management

b)      Cost containment

c)       Both a & b

d)      None of the above

24. Which is not a reason for an idle time variance?

a)    Strikes and lockouts

b)   Power failures

c)    Machine breakdown

d)   Uncontrollable loss of time

25. Which of the following cannot be a reason of unfavorable direct materials price variance?

a)    Actual loss is more than estimated loss.

b)   Actual rate is less than standard rate.

c)    Both a & b

d)   None of the above

Also Read Management Accounting MCQs (Chapter wise MCQs)

Management Accounting MCQs

Marginal and Absorption Costing MCQs

MCQ on Budget and Budgetary Control

Ratio Analysis MCQs

Cash Flow Statement MCQs

Funds Flow Statement MCQs

Financial Statement and Financial Statements Analysis MCQs

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 purpose of standard costing is to control cost and promote efficiency.

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

5.         MCV = MPC + MUV.

6.         MUV = MMV + MYV.

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

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

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

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

11.     The cost of product as determined under standard cost system is predetermined cost.

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

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

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

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

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

17.     Variance analysis helps the management in controlling performance.

18.     Standard costing is helping the management in fixation of selling price.

19.     Standard costing is the preparation of standard costs and their comparison with actual cost and the analysis of variance.

20.     The difference between the actual quantity and the standard quantity, multiplied by the standard price is the material usage variance.

21.     There are two types of standard used in the process of establishment of standard costing system.

22.     Cost control is also known as cost management.

23.     The difference between the actual price and the standard price, multiplied by the actual quantity of materials purchased is the material price variance.

24. Material price, mix, usage and revised quantity variances are measured on input basis, whereas material yield variance is measured on output basis.

25. Labour cost variance is equal to standard labour cost for actual output minus actual labour cost for actual output.

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.         Manufacturers normally establish standard costs for cost control.   True

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

7.         Relevant costs are historical in nature.                           False

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

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

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

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

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

13.     Labour cost variance can be proved with: LCV = LEV + LRV + Idle Time variance. True

14.     Standard costing is a technique which aims at cost control.  True

15.     The objective of standard costing is to control cost through setting standards.           True

16.     The difference between actual cost and standard cost is known as differential cost.                               False

17.     Standard costing technique is not ideal for small concerns because it is costly.           True

18.     Favourable labour efficiency variance indicates better productivity.                                True

19.     Standard costs are always determined in advance. True

20.     Standard costing is more widely applied in manufacturing industries.             True

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