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Standard Cost Evaluation Quiz

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Questions and Answers

What is the primary purpose of establishing standard costs?

To determine the selling price of products

To set performance standards for managers

To provide a basis for intelligent forecasting and projections (correct)

To evaluate the efficiency of the purchasing department

Which department is primarily responsible for determining the standard unit cost of materials?

Purchasing department (correct)

Production department

Accounting department

Industrial engineering department

If the selling price of the product 'Tungki' is ₱150 per unit, what is the contribution margin per unit?

₱116.80

₱33.20

₱283.20

₱50.00 (correct)

If the fixed costs for the Tungki product line are ₱500,000 per month, what is the breakeven point in units?

8,333 units Signup and view all the answers

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 Signup and view all the answers

What is the primary use of standard costs in pricing?

All of the above Signup and view all the answers

What is the purpose of using standard costs in interim reporting?

All of the above Signup and view all the answers

Which type of variance is the broadest and represents the difference between actual and budgeted amounts?

Static (or master) budget variance Signup and view all the answers

What does the flexible budget variance represent?

The difference between actual costs and standard costs at the actual level of activity Signup and view all the answers

Which of the following statements about variances is true?

A variance should be investigated, analyzed, and avoided in the future Signup and view all the answers

How is a variance classified if the actual cost exceeds the standard cost?

Unfavorable Signup and view all the answers

What is the primary use of standard costs in cost-volume-profit analysis?

To determine the breakeven point in units and pesos Signup and view all the answers

Which of the following is NOT a use of standard costs mentioned in the text?

Inventory valuation Signup and view all the answers

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 Signup and view all the answers

How are standard costs used in performance evaluation?

As meaningful benchmarks in evaluating actual performances of center managers, otherwise known as 'cost variances analysis' Signup and view all the answers

What is the purpose of using standard costs in budgeting?

To serve as reliable bases in anticipating budgeted costs and expenses Signup and view all the answers

What should be done with standard costs regularly?

They should be evaluated to maintain relevance, validity and reliability Signup and view all the answers