Question

 1. A favorable labor rate variance indicates that 

A) actual hours exceed standard hours. 

B) standard hours exceed actual hours. 

C) the actual rate exceeds the standard rate. 

D)the standard rate exceeds the actual rate. 

2, An inventory management system that relies primarily on physical counts of inventory is said to be using the 

A) perpetual method. 

B) warehouse-control method. 

C) periodic method. 

D) last-in method.

 

3. Accounts receivable represents 

A) amounts owed by the organization to outsiders. 

B) amounts owed to the organization by outsiders.

Answer 1

Q1. The Correct option is

• D) Standard labor rate exceeds the actual rate.

Explanation:

- Variance is the difference between estimated and actual results.

- Labor rate variance

= (Actual labor rate - standard labor rate) ×Actual labor hours

- Variance is favourable if Actual labor rate < standard labor rate.

- Varaince is unfavourable if Actual labor rate > standard labor rate.

Q2. The correct option is

• C) Periodic Method

Explanation:

- Inventory should be valued for the purpose of reporting in financial statements and there have different methods for valuing inventory.

- Periodic inventory system is one among the methods which is performed at different periodical intervals by counting inventory units physically.

- All other given methods also considers physical count but not completely relies upon physical counting.

3. The correct option is

• B) Amounts owed to the organizations by outsiders

Explanation:

- Accounts Reciveable are those who owed to the organization.

- Generally, If organization sold goods on credit, it records that amount of sales revenue as accounts recievable.

- Accounts Recievable is a current assets, which are expected to get payment within one year period.