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

A standard cost is a predetermined cost calculated in advance of production, based on expected levels of efficiency and prices.

Question 2

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

Accepted Answer

Ideal standard

Answer

Ideal standards assume perfect conditions with no waste, idle time, or inefficiency, making them rarely achievable in practice.

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

Material price variance = (Standard price – Actual price) × Actual quantity purchased, isolating the effect of price differences on cost.

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

Standard quantity for actual output = 100 × 5 = 500 kg; variance = (500 – 520) × £3 = £60 adverse.

Question 5

The direct labour rate variance is calculated as:

Accepted Answer

(Standard rate – Actual rate) × Actual hours worked

Answer

Labour rate variance = (Standard rate – Actual rate) × Actual hours worked, measuring the cost impact of paying more or less per hour than standard.

ACCA Applied Knowledge Practice Test