17 Questions
What is the primary purpose of establishing standard costs?
To provide a basis for intelligent forecasting and projections
Which department is primarily responsible for determining the standard unit cost of materials?
Purchasing department
If the selling price of the product 'Tungki' is ₱150 per unit, what is the contribution margin per unit?
₱50.00
If the fixed costs for the Tungki product line are ₱500,000 per month, what is the breakeven point in units?
8,333 units
If the actual direct labor cost for the Tungki product is ₱10 per hour, what is the labor rate variance per unit?
₱12.00 favorable
What is the primary use of standard costs in pricing?
All of the above
What is the purpose of using standard costs in interim reporting?
All of the above
Which type of variance is the broadest and represents the difference between actual and budgeted amounts?
Static (or master) budget variance
What does the flexible budget variance represent?
The difference between actual costs and standard costs at the actual level of activity
Which of the following statements about variances is true?
A variance should be investigated, analyzed, and avoided in the future
How is a variance classified if the actual cost exceeds the standard cost?
Unfavorable
What is the primary use of standard costs in cost-volume-profit analysis?
To determine the breakeven point in units and pesos
Which of the following is NOT a use of standard costs mentioned in the text?
Inventory valuation
What is the purpose of using standard costs in responsibility accounting?
To make the assignment of controllable and non-controllable costs more meaningful and acceptable to managers
How are standard costs used in performance evaluation?
As meaningful benchmarks in evaluating actual performances of center managers, otherwise known as 'cost variances analysis'
What is the purpose of using standard costs in budgeting?
To serve as reliable bases in anticipating budgeted costs and expenses
What should be done with standard costs regularly?
They should be evaluated to maintain relevance, validity and reliability
Test your knowledge on standard cost evaluation to maintain relevance, validity, and reliability. Explore the common uses of standard costs in business operations.
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