15
.
Answer (C) is correct. Standard costs are expected or attainable costs. Normally, the
standard costs established are those expected to be actually incurred, not those reflecting
an ideal efficiency level.
Answer (A) is incorrect because product costs normally include both variable and fixed costs.
Answer (B) is incorrect because product costs normally include both fixed and variable costs.
Answer (D) is incorrect because a joint cost is the cost of producing two or more inseparable
products.
16
Answer (A) is correct. Price (rate) variance equals the difference between the actual and
standard price of an input, multiplied by the actual quantity.
Answer (B) is incorrect because controllable variance in two-way analysis is the part of the
total factory overhead variance not attributable to the volume variance.
Answer (C) is
incorrect because spending variance is an overhead variance. For variable overhead, it is the
difference between actual costs and the product of the actual activity and the budgeted
application rate. For fixed overhead, the spending (also known as the budget or flexible
budget) variance is the difference between actual and budgeted fixed costs. In three-way
analysis, the two spending variances isolated in four-way analysis are combined. In two-way
analysis, the two spending variances and the variable overhead efficiency variance are
combined. Answer (D) is incorrect because quantity (usage) variance is an efficiency
variance for direct materials.
17
.
REQUIRED:
The definition of an efficiency variance.
DISCUSSION:
(D)
An efficiency variance compares the actual use of inputs with the
budgeted quantity of inputs allowed for the activity level achieved. The variance equals this
difference multiplied by the budgeted unit price.
The result is to isolate the cost effect of
using more or fewer units of input than budgeted.
Answer (A) is incorrect because a flexible budget amount minus a static budget amount is a
volume variance.
Answer (B) is incorrect because an efficiency variance cannot be
determined using only income amounts.
Answer (C) is incorrect because actual unit price

minus budgeted unit price times the actual units produced, is a price variance.
18
.
Answer (D) is correct. An efficiency variance is calculated by multiplying the difference
between standard and actual usage times the standard cost per unit of input. The efficiency
variances can be divided into yield and mix variances. These variances are calculated only
when the production process involves combining several materials or classes of labor in
varying proportions (when substitutions are allowable in combining resources).
Answer (A) is incorrect because a spending variance is not the same as an efficiency
variance.
Answer (B) is incorrect because a price variance is not the same as an efficiency
variance.
Answer (C) is incorrect because a volume variance is based on fixed costs, while
an efficiency variance is based on variable costs.

#### You've reached the end of your free preview.

Want to read all 86 pages?

- Spring '10
- JONES
- Accounting, Cost Accounting, Variance