Question

1.A total variance is calculated as Actual cost of actual input-Standard cost of actual output

True or False

2.Total variances provide useful information for determining why the differences between actual and expected production costs occurred.

True or False

3. Standard costing system allows actual costs to be compared against norms for cost control purposes

True or False

4. A standard is a performance benchmark or norms used for planning and control purposes.

True or False

5. A total variance is calculated as: Actual cost of actual input- Standard cost of budgeted output

True or False

Answer 1

1) FALSE
Total Variance is the difference between the total actual cost of material and the budgeted cost of the material.
Total Actual Cost = ( Actual Price X Actual Quantity) OR (AP X AQ)
Total Budgeted Cost = (Standard Price X Standard Quantity) OR (SP X SQ)
Hence Total Variance would be = (SP X SQ) - (AP X AQ)

2. True
This is true that total variance analysis provides useful information for the variance

3. True
Standard costing helps us to identify the variance between the actual cost of the product produced and the estimated cost.

4. True
If a company has incurred more than the standard cost, then the company will not be able to meet the projected income. Hence standard is a benchmark for planning and control purpose.

5.True
Refer comments mentioned in point #1