For each of the following statement, answer T or F and explain why shortly. 1. T

Question

For each of the following statement, answer T or F and explain why shortly.

1. The standard direct labor rate would not include any allowance for fringe benefits or other labor-related costs.

2. Standards set by an organizations must reflect efficiency future operations of that organization.

3. Management by exceptions means that a manager's attentions must be directed to those parts of an organization where things are proceeding in accordance with plans.

4. A cost variance is favorable if the actual price or quantity is greater than standards price or quantity.

5. Included in direct material quantuty standards should be an allowance for unavoidable waste, spoilage, and other normal inefficiencies.

6. In standard costing, practical standards can be used to forecast cash flows and to plan inventory, as well as to signal abnormal diviations in costs.

Explanation / Answer

1) The standard direct labor rate would not include any allowance for fringe benefits or other labor-related costs..FALSE

Explanation: The standard direct labor rate should include not only wages, but also fringe benefits and other labor-related costs

2) Standards set by an organizations must reflect efficiency future operations of that organization...TRUE

Explanation: Standards are set by an organizations to reflect the efficiency of the organization's performance

3) Management by exceptions means that a manager's attentions must be directed to those parts of an organization where things are proceeding in accordance with plans..FALSE

Explanation: It means that things are not proceeding according to plans.

4) A cost variance is favorable if the actual price or quantity is greater than standards price or quantity...FALSE

Explanation: When actual price is higher than standard price then there is an unfavorable variance.

5) Included in direct material quantity standards should be an allowance for unavoidable waste, spoilage, and other normal inefficiencies...TRUE

Explanation: The direct material quantity standards should reflect the amount of material required for each unit of finished product, and also the allowance for unavoidable waste, spoilage, and other normal inefficiencies

6) In standard costing, practical standards can be used to forecast cash flows and to plan inventory, as well as to signal abnormal diviations in costs...TRUE

Explanation: Under standard costing practical standards are used for the purpose to forecast cash flows

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