Standard Costing MCQs 2024
Variance Analysis MCQs
Multiple Choice Questions and Answers (MCQs)
For B.Com, BBA, MBA, M.Com, CMA, CS and CA IPCC
In this exclusive page, you will get Standard Costing MCQs for various exams such B.Com, BBA, MCOM, MBA, CMA, CS, ICAI and UGC NET. These Standard Costing MCQs and Variance Analysis MCQs are also very much helpful for various competitive exams for commerce stream students.
You can also go through various links given below in the article for Chapter wise Management Accounting MCQs.
Introduction to Standard Costing
Standard: According to Prof. Eric L.Kohler, “Standard is a desired attainable objective, a performance, a goal, a model”. Standard may be used to a predetermined rate or a predetermined amount or a predetermined cost.
Standard Cost: Standard cost is predetermined cost or forecast estimate of cost.
I.C.M.A. Terminology defines Standard Cost as, “a predetermined cost, which is calculated from management standards of efficient operations and the relevant necessary expenditure. It may be used as a basis for price-fixing and for cost control through variance analysis”.
The other names for standard costs are predetermined costs, budgeted costs, projected costs, model costs, measured costs, specifications costs etc.
Standard cost is a predetermined estimate of cost to manufacture a single unit or a number of units of a product during a future period. Actual costs are compared with these standard costs.
Standard Costing: Standard Costing is defined by I.C.M.A. Terminology as, “The preparation and use of standard costs, their comparison with actual costs and the analysis of variances to their causes and points of incidence”. Standard costing is a method of ascertaining the costs whereby statistics are prepared to show:
(a) The standard cost
(b) The actual cost
(c) The difference between these costs, which is termed the variance” says Wheldon.
Choose the correct option:
1. Standard
costing is a technique of:
a) Planning business activities
b) Cost Control
c) Staffing
d) Motivating
Ans: b) Cost Control
2. Standard
costing is a yard stick for:
a) Measuring efficiency
b) Controlling prices
c) Reducing losses of business
d) Planning business
activities
Ans: a) Measuring efficiency
3. The difference
between actual cost and standard cost is known as:
a) Profit
b) Loss
c) Standard cost
d) Variance
Ans: d) Variance
4. Standard
costing involves:
a) Preparation and use of
standard costs
b) Comparison of
standard with actual
c) Analysis of
variances
d) All of the above
Ans: d) All of the above
5. Standard
costing technique is unsuitable for:
a) Job order industries
b) Non-standard product
manufacturers
c) Service industries
d) All of the above
Ans: d) All of the above
6. Which of the
following variance arises when more than one material is used in the manufacture
of a product?
a) Material price variance
b) Material usage variance
c) Material yield variance
d) Material mix variance
Ans: d) Material mix variance
7. Standard
costing is suitable for industries which are:
a) Producing standard
products
b) Producing goods of
repetitive nature
c) Sugar, Textiles,
Fertilizers, steel industries
d) All of the above
Ans: d) All of the above
8. In which
industry standard costing system is more widely applied?
a) Manufacturing industry
b) Service industry
c) Steel Industry
d) Cotton Industry
Ans: a) Manufacturing industry
9. Which of the
following is an advantage of standard costing?
a) Promoting and
measuring efficiencies.
b) Controlling and
reducing costs.
c) Helps in fixation of
selling prices.
d) All of the above.
Ans: d) All of the above.
10. Which of the
following is a disadvantage of standard costing?
a) Costly technique
b) Difficult to
establish standard
c) Unsuitable for
Job-order and service industries.
d) All of the above
Ans: d) All of the above
11. Basic
standard is established for a:
a) Long period.
b) Short period
c) Current period
d) Indefinite period
Ans: d) Indefinite period
12. Excess of
actual cost over standard cost is known as:
a) Abnormal
effectiveness
b) Unfavourable variance
c) Favourable variance
d) None of these
Ans: b) Unfavourable variance
13. Standards
cost is used:
a) To ascertain the
breakeven point
b) To establish
cost-volume profit relationship
c) As a basis for price fixation and cost control through variance
analysis
d) None of the above
Ans: c) As a basis for price fixation and
cost control through variance analysis
14. From cost
control point of view the standard most commonly used is:
a) Expected standard
b) Theoretical standard
c) Normal standard
d) Basic standard
Ans: a) Expected standard
15. Three types
of standards are
a) Current standard
b) Basic standard
c) Normal standard
d) All of the above
Ans: d) All of the above
16. For the
purpose of Proof, Material Cost Variance is equal to:
a) Material Usage =
Variance + Material Mix variance
b) Material Price
Variance + Material Usage Variance
c) Material Price
Variance + Material yield variance
d) Material Mix
Variance + Material Yield Variance
Ans: b) Material Price Variance +
Material Usage Variance
17. Cost variance
is the difference between:
a) The standard cost
and marginal cost
b) The standards cost
and budgeted cost
c) The standards cost
and the actual cost
d) None of these
Ans: c) The standards cost and the actual
cost
18. Which of the following is not the main component of
standard cost?
a) Standard Rate
b) Standard output
c) Actual Yield
d) All of the above
Ans: d) All of the above
19. Standard costing is not applicable in:
a) Job order industries
b) Non-standard product
manufacturers
c) Service industries
d) All of the above
Ans: d) All of the above
20. Which of the following statement is true?
a) In order to
calculate costs, a company should use either standard costing or budgetary
control but not both of these techniques.
b) Idle time variance
is always unfavorable.
c) Overheads volume
variable is always favourable.
d) Overhead expenditure
variance plus overheads efficiency variance is equal to overheads budget
variance for variable overheads.
Ans: b) Idle time variance is always
unfavorable.
21. Which of the following statement is correct?
a) Standard cost is an
estimated or predetermined cost of performing an operation or producing a good
or service, under normal conditions.
b) Standard costing is
a control technique that reports variances by comparing actual costs to pre-set
standards so facilitating action through management by exception.
c) Both a & b
d) None of the above
Ans: c) Both a & b
22. What is the correct test of material variances?
a) mcv = mpv + mmv
b) mcv = mmv + muv
c) mcv = mpv + muv
d) mcv = mmv + myv
Ans: c) mcv = mpv + muv
23. What is the correct test of material variances?
a) muv = mpv + mmv
b) muv = mmv + muv
c) muv = mmv + myv
d) muv = mmv + myv
Ans: c) muv = mmv + myv
24. Which of the following variance arises when more than
one material is used?
a) Material Cost
Variance
b) Material Price
Variance
c) Material Usage
Variance
d) Material Mix
Variance
Ans: d) Material Mix Variance
25. The deviations between actual and standard cost is
known as:
a) Multiple analysis
b) Variable cost
analysis
c) Variance analysis
d) Linear trend
analysis
Ans: b) Variable cost analysis
26. Which of the following can be used to calculate
material price variance?
a) Actual Quantity
b) Standard Rate
c) Actual Rate
d) All of the above
Ans: d) All of the above
27. Cost control is also known as:
a) Cost Management
b) Cost containment
c) Both a & b
d) None of the above
Ans: c) Both a & b
28. Which is not a reason for an idle time variance?
a) Strikes and lockouts
b) Power failures
c) Machine breakdown
d) Uncontrollable loss
of time
Ans: d) Uncontrollable loss of time
29. Which of the following cannot be a reason of
unfavorable direct materials price variance?
a) Actual loss is more
than estimated loss.
b) Actual rate is less
than standard rate.
c) Both a & b
d) None of the above
Ans: c) Both a & b
30. Which of the following is not quantity based variance?
a) Material Cost Variance
b) Material Usage Variance
c) Material Mix Variance
d) Material Price Variance
Ans: d) Material Price Variance
Also Read Management Accounting MCQs (Chapter wise MCQs)
Marginal and Absorption Costing MCQs
MCQ on Budget and Budgetary Control
Financial Statement and Financial Statements Analysis MCQs
Standard Costing MCQS (Fill in the blanks):
1.
Standard cost is a predetermined cost.
2.
Material Cost Variance = Material Price Variance +
Material Mix variance + Material yield variance.
3.
The purpose of standard costing is to control cost
and promote efficiency.
4.
The difference between actual cost and standard cost
is known as Variance.
5.
MCV = MPC + MUV.
6.
MUV = MMV + MYV.
7.
Favourable variance arises when actual costs are less
than standard cost.
8.
Adverse variance arises when actual revenue is less
than standard revenue.
9.
Standard time is decided by time and motion
study.
10.
Standard cost when fixed is recorded on standard card.
11.
The cost of product as determined under standard cost
system is predetermined cost.
12.
Direct Labour Cost Variance = Standard Cost for actual
production x actual Cost of Production.
13.
Standard means a criterion or a yardstick against
which actual activity can be compared to determine the difference between
two.
14.
Idle time variance = Idle time x standard
rate.
15.
Management by exception is exercising control
over Unfavourable items.
16.
Control in standard costing is achieved by variance
analysis.
17.
Variance analysis helps the management in controlling performance.
18.
Standard costing is helping the management in fixation
of selling price.
19.
Standard costing is the preparation of standard costs
and their comparison with actual cost and the analysis of variance.
20.
The difference between the actual quantity and the
standard quantity, multiplied by the standard price is the material usage
variance.
21.
There are two types of standard used in
the process of establishment of standard costing system.
22.
Cost control is also known as cost management.
23.
The difference between the actual price and the
standard price, multiplied by the actual quantity of materials purchased is the
material price variance.
24. Material
price, mix, usage and revised quantity variances are measured on input
basis, whereas material yield variance is measured on output basis.
25.
Labour cost variance is equal to standard labour cost for actual output minus actual
labour cost for actual output.
Standard Costing MCQs (State whether the following statements are true or false:)
1. Standard cost and estimated cost are
different. True
2. The technique of standard costing may not be applicable in case of
small
industries. True
3.
Standard costing is a method of cost
ascertainment. False
4.
Variances are calculated for both material and
labour. True
5.
Manufacturers normally establish standard costs for cost control. True
6.
Standard cost is most suitable to job order
industries. False
7.
Relevant costs are historical in
nature. False
8.
Standards cost, once fixed cannot be
altered. True
9.
Historical costs are not relevant for decision
making. True
10.
Fixing standards is the work of industrial engineer or the
production people and not of cost accountant. False
11.
Material cost variance and labour cost variance are always
equal. False
12.
Marginal Cost = Total Cost – Variable
Cost. False,
Fixed Cost
13.
Labour cost variance can be proved with: LCV = LEV + LRV + Idle
Time variance. True
14.
Standard costing is a technique which aims at cost control. True
15.
The objective of standard costing is to control cost through
setting standards. True
16. The difference between actual cost and standard cost
is known as differential cost. False
17.
Standard costing technique is not ideal for small concerns because
it is costly. True
18. Favourable labour efficiency variance indicates better
productivity. True
19.
Standard costs are always determined in advance. True
20. Standard costing is more widely applied in manufacturing industries. True
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