ACCA AK Management Accounting (MA) Standard Costing and Variance Analysis 3

Question 1

In a standard costing operating statement, what is the typical starting point?

Accepted Answer

Budgeted profit (or contribution)

Answer

An operating statement starts with budgeted profit, then adds or deducts variances to reconcile to actual profit, bridging planned to actual performance.

Question 2

Which department is typically held responsible for an adverse direct material price variance?

Accepted Answer

Purchasing department

Answer

The purchasing department negotiates and pays for raw materials, making it accountable for paying more or less than the standard price.

Question 3

Which of the following is most likely to cause a favourable direct labour efficiency variance?

Accepted Answer

Workers using a higher-grade material that is easier and faster to process

Answer

Higher-grade material that is easier to work with reduces processing time, allowing workers to complete output faster than the standard time allows.

Question 4

What does an idle time variance represent?

Accepted Answer

The cost of hours paid to workers during which no production occurred

Answer

Idle time variance = Idle hours × Standard labour rate, representing wages paid during periods when workers are available but not productively employed.

Question 5

The purpose of splitting variances into planning and operational components is to:

Accepted Answer

Separate variances caused by poor original planning from those caused by operational performance

Answer

Planning variances reflect changes between the original and revised standard due to environmental changes, while operational variances measure actual performance against the revised standard.

ACCA Applied Knowledge Practice Test

ACCA Applied Knowledge Practice Test

ACCA AK Management Accounting (MA) Standard Costing and Variance Analysis 3