ACCA AK Management Accounting (MA) Standard Costing and Variance Analysis

Question 1

What is a standard cost?

Accepted Answer

A predetermined cost for a unit of output based on expected conditions

Answer

The actual cost incurred during production

Answer

The historical average cost calculated over the past year

Answer

The lowest possible cost achievable under perfect conditions

Question 2

Which type of standard assumes perfect operating conditions with no wastage or inefficiency?

Accepted Answer

Ideal standard

Answer

Basic standard

Answer

Current standard

Answer

Attainable standard

Question 3

The direct material price variance measures the difference between:

Accepted Answer

The standard price and actual price paid for the actual quantity purchased

Answer

The standard quantity and actual quantity of material used

Answer

The budgeted cost and actual cost of materials for budgeted production

Answer

The standard cost and actual cost for the standard quantity

Question 4

A company has a standard material usage of 5 kg per unit at £3/kg. Actual production was 100 units using 520 kg. What is the material usage variance?

Accepted Answer

£60 adverse

Answer

£60 favourable

Answer

£156 adverse

Answer

£156 favourable

Question 5

The direct labour rate variance is calculated as:

Accepted Answer

(Standard rate – Actual rate) × Actual hours worked

Answer

(Standard hours – Actual hours) × Standard rate

Answer

(Standard hours – Actual hours) × Actual rate

Answer

(Standard rate – Actual rate) × Standard hours

Question 6

If workers complete actual output in fewer hours than the standard allows, the direct labour efficiency variance will be:

Accepted Answer

Favourable, as fewer hours were used than the standard allows

Answer

Adverse, as actual hours were less than budgeted hours

Answer

Nil, because time savings have no monetary effect

Answer

Adverse, because any deviation from standard is unfavourable

Question 7

An adverse variance indicates that:

Accepted Answer

Actual costs were higher or actual revenues were lower than standard

Answer

Actual performance was better than standard

Answer

The standard was set at an unrealistically high level

Answer

The budget was exceeded solely due to uncontrollable external factors