Question

1-Setting standard costs is relatively simple because it is done entirely by accountants. True or False

2-Ideal standards will generally result in favorable variances for the company. True or False

3-If actual costs are less than standard costs, the variance is favorable. True or False

4-The materials price variance is normally caused by the production department. True or False

5-In using variance reports, top management normally looks carefully at every variance. True or False

Answer 1

1-Setting standard costs is relatively simple because it is done entirely by accountants.

Solution: False

Explanation: Setting standard costs will need the input from all persons who have responsibility for quantities and costs

2-Ideal standards will generally result in favorable variances for the company.

Solution: False

Explanation: It is not necessary that ideal standards will often result in favorable variances for the company

3-If actual costs are less than standard costs, the variance is favorable.

Solution: True

Explanation: If actual costs are less than standard costs, it is favorable for the company

4-The materials price variance is normally caused by the production department.

Solution: False

Explanation: The materials price variance is normally caused by the purchasing department.

5-In using variance reports, top management normally looks carefully at every variance. Solution: False

Explanation: Managers use variance reports for making the changes in financial forecasts however the top management normally looks carefully at few variances.