Question

1.) A standard cost system:

Multiple Choice:

(A) Cannot be used in conjunction with a job-cost system.

(B) Is not permissible for financial-reporting purposes.

(C.) Is most easily introduced in conjunction with a process-cost system.

(D) Is useful for planning but not control purposes.

(E.) Is useful for cost control but not planning purposes.

2.) Which one of the following is the difference in direct material costs between the actual cost incurred during the period and the total standard cost in the flexible budget for the units manufactured during the period?

Multiple Choice:

(A) Direct materials price variance.

(B) Direct materials mix variance.

(C.) Direct materials usage variance.

(D) Direct materials flexible-budget variance.

(E.) Direct materials efficiency variance.

Answer 1

Solution. 1.The correct answer is option C.

Explanation: Option A is false as standard cost system is not used in conjunction with a job-cost system. Option B holds false as standard cost system is applied in order to facilitate financial-reporting purposes through preparation of budgets and costs and must comply with the principles. Option C holds true. Option D is wrong as its primary objective to identify and manage plan and control performance. Option E holds false as it is for both the planning and control purposes.

2.The correct answer is option D.

Explanation: Option A encompasses difference between the actual cost of direct material and the standard cost of consumed or purchased quantity and is not applicable. Option B encompasses difference between the cost of standard and actual proportion of materials consumed in the production process so is false. Option C and E are same and encompasses difference between the standard and actual material quantity used valued at standard cost per unit and is false. Option D encompasses establishment of flexible budget on standard cost measures and holds true for the given question.