Ch 10
a price variance is the difference between:
the actual price and the standard price multiplied by the actual amount of the input.
if manager consider it unwise to adjust the workforce in response to changes in the workload:
the direct labor workforce is really fixed in the short run.
managers consider it unwise to adjust the workforce in response to changes in workload:
the direct labor workforce is really fixed in the short run.
which statement regarding variable overhead variance analysis is true?
the variable overhead efficiency variance may depend on the efficiency of the direct labor.
if the actual level of activity is greater than the planned level of activity, the activity variances will be:
unfavorable
when the actual cost incurred exceeds the standard costs allowed for the actual level of output, the spending variance is _______.
unfavorable
when the standard purchase price is less than the actual price, the material price variance is __.
unfavorable
the standard price of the material is used in the calculation of the material quantity variance because:
using actual prices would hold the production manager responsible for the inefficiencies of the purchasing manager
the same basic formulas used for materials and labor are used to analyze the _____ portion of manufacturing overhead
variable
the standard cost for __ manufacturing overhead is computed the same way as the standard cost for direct labor.
variable
The standard rate per unit that a company expects to pay for variable overhead equals the _______.
variable portion of the predetermined overhead rate
When direct labor is used as the overhead allocation base, the variable overhead efficiency variance ______.
will be favorable when the direct labor efficiency variance is favorable
which of the following statements is true?
a labor efficiency variance is a quantity variance.
to calculate a quantity variance, multiply the __ quantity times the standard price and compare it to the standard quantity allowed times the __ price.
-actual -standard
which of the following are used in calculating the materials price variance?
-actual price of the input -actual quantity of the input purchased -standard price of the input
Standards are:
-benchmarks for measuring performance -compared to the actual quantities and costs of inputs -set for each major production input
the direct material spending variance:
-can be broken down into the quantity variance and the price variance. -explains what was spent on materials and what should have been spent. -needs to be decomposed for analysis.
which of the following are used to calculate the standard quantity per unit of direct materials?
-direct materials requirements per unit of finished product. -allowance for rejects -allowance for waste and spoilage
which of the following are reasons that the materials price variance is calculated at the time the materials are purchased?
-it allows multiple to be carried in the inventory accounts at standard cost. -this practice simplifies bookkeeping. -management can generate more timely variance reports.
standard costs are a key element in the __ by __ approach utilized by some companies.
-management -exception
excessive inventory on hand, especially in the work in process inventory account, leads to:
-obsolete goods -increased defects -inefficient operations
unfavorable labor rate variances may occur as a result of:
-overtime premiums being charged to the direct labor account. -skilled workers being assigned to jobs requiring little skill.
an unfavorable labor efficiency variance can result from:
-poorly motivated workers -insufficient product demand -faulty equipment
the materials price variance is computed when materials are __ and the materials quantity variance is computed when materials are __.
-purchased -used
direct material standards:
-should be based on input from production and purchasing managers -are based on input from production and purchasing managers.
when setting direct labor standards:
-some companies use rates based on an expected mix of workers -time and motion studies may be used -the production manager should be consulted
when calculating the labor rate variance, multiply the actual hours worked times the __ labor rate and compare it to the actual hours worked times the __ labor rate.
-standard -actual
which of the following are advantages to using a standard cost system?
-standard costs can simplify bookkeeping. -standards can provide benchmarks that can be used by individuals to judge their own performance.
the standard direct labor-hours per unit of an output includes:
-the estimated time to complete the unit -an allowance for cleanup and downtime.
when using a standard cost system:
-the information in the variance reports may be too old to be useful. -an undue emphasis on labor efficiency variances can create pressure to build excess inventory.
which of the following statements are true?
-when standards are not met, the reasons why should be investigated. -standards prove information for measuring performance.
a price __ indicated how much should be paid for an input.
...
A planning budget called for 500 units to be produced and total direct labor cost of $7,500. Actual production was 600 units and actual direct labor cost was $9,300. The spending variance is
300 U Reason: $7,500 ÷ 500 = $15 standard rate per unit × 600 = $9,000 flexible budget - $9,300 actual = $300 U
Use the following information to calculate the labor rate variance for Adkinson Company. Actual hours used 5,500 Standard hours allowed 5,800 Actual labor rate $14.75 per hour Standard labor rate $14.00 per hour
4,125 U
Use the following information to calculate the labor efficiency variance for Adkinson Company. Actual hours used 5,500 Standard hours allowed 5,800 Actual labor rate $14.75 per hour Standard rate $14.00 per hour
4200 F
The standard price of materials is $3.50 per pound and the standard quantity allowed for actual output is 7,000 pounds. If the actual quantity purchased and used was 6,700 pounds, and the actual price per pound was $3.40, the direct materials price variance is $
670 F
True or False: The standard hours per unit includes both direct and indirect labor hours.
False
True or false: All materials variances are generally the responsibility of the production manager
False
Which of the following statements are true? 2
Standard cost reports may be too outdated to be useful. Managers should not use standards to assign blame.
the variable overhead rate variance uses the same basic formula as the labor rate variance except that the variable overhead rates are used instead of the direct labor rates.
TRUE
the materials price variance is calculated using the __ quantity of the input purchased.
actual
the variable overhead efficiency variance compares the __ hours times the standard rate with the standard hours allowed for the actual output times the __ rate.
actual standard
to calculate a price variance, multiply the __ quantity times the actual price and compare it to the actual quantity times the __ price.
actual standard
the standard quantity allowed equals:
actual output x standard quantity
The materials price variance is calculated using the ______.
actual quantity of the input purchased, standard price of the input, actual price of the input
The material quantity variance reflects the difference between the ____________ quantity of materials used in production and the ____________ quantity allowed for the actual output.
actual standard
the materials price variance is the difference between the actual price of materials.
and the standard price for materials with the difference multiplied by the actual quantity of materials.
direct labor variances:
are computed in the same way as material variances.
a quantity variance:
is calculated used the standard price of the input
standard costs may:
be used to compute both flexible budget activity and spending variances.
a quantity variance is _______.
calculated using the standard price of the input
the standard quantity or hours and the standard price or rate required to produce a unit of a specific product is shown on a standard __ __.
cost card.
The difference between the actual level of activity and the standard activity allowed for the actual output x the variable part of the predetermined overhead rate is the variable overhead ___________ variance.
efficiency
The difference between the actual price paid for the material and what should have been paid according to the standard is reflected in the direct materials _______ variance.
efficiency
the difference between the actual hours used and the standard hours allowed for the actual output is used in the calculation of the labor __ variance.
efficiency
the variable overhead __ variance measures activity differences and the variable overhead __ variance measures cost differences.
efficiency rate
when the standard cost allowed for the actual output is less than the standard cost allowed for the planned output the activity variance is labeled as:
favorable.
The materials price variance is generally calculated at the time materials are purchased because ______.
it allows materials to be carried in the inventory accounts at standard cost management can generate more timely variance reports it simplifies bookkeeping
SR(AH-SH) is the formula for the __ variance
labor efficiency
poor supervision is one possible cause of an unfavorable __ variance.
labor efficiency
when demand for a product is insufficient to keep all of the production workers busy and no layoffs occur, an unfavorable ___ ______ variance may occur
labor efficiency
SR(AH-SH)
labor efficiency variance
The difference between the standard and the actual direct labor hourly rates is reflected in the _____ _______variance.
labor rate
the terms price and quantity are used when computing direct ______ variance, while the terms rate and hours are used when computing direct _______ variances.
material, labor
the standard labor rate per hour:
may be a single rate for all employees in a department.
an unfavorable materials quantity variance:
occurs when the actual amount of material used is greater than the standard amount of material allowed for the actual output of the period.
a(n) __ standard specifies how much should be paid for an input.
price
the purchasing manager is generally responsible for the material __ variance, and the production manager is generally responsible for the material __ variance.
price quantity
the __ manager is usually responsible for controlling the labor efficiency variance.
production
the __ supervisor is generally responsible for controlling the labor rate variance.
production
the labor efficiency variance is generally the responsibility of the _________ manager.
production
the materials quantity variance is generally the responsibility of the __ department manager.
production
If poor-quality materials results in excessive labor processing time, the ____________ manager will probably be held responsible for the labor efficiency variance.
purchase
Most companies compute the material price variance when materials are __ and the material quantity variance when materials are __.
purchased used
SP(AQ-SQ) is the formula for the materials _____ variance.
quantity
__ standards specify how much input should be used to produce a produce or provide a service.
quantity
__ standards specify how much input should be used to produce a product or provide a service.
quantity
the difference between the amount of an input used and the amount that should have been used, all evaluated at the standard price for the input, is called a __ variance.
quantity
The material variance terms price and quantity are replaced with the terms ____________ and ____________ when computing direct labor variances.
rate, hours
The amount of direct-labor hours that should be used to produce one unit of finished goods is _______ hours per unit.
standard
The labor efficiency variance is the difference between actual hours used and standard hours allowed multiplied by the ______ hourly rate.
standard
a benchmark used in measuring performance is called a(n) __.
standard
material requirements plus an allowance for unavoidable waste are added together to determine the __ quantity of a material input per unit of output.
standard
material requirements plus and allowance for unavoidable waste are added together to determine the __ quantity of a material input per unit of output.
standard
the __ price per unit of an input should reflect the expected cost of the raw materials less an discounts taken.
standard
the amount of an input that should have been used to produce the actual output is known as the __ quantity or hours allowed.
standard
standard quantities and the cost of the inputs to make a single product are accumulated on a(n) __ __ card.
standard cost
standard quantities and the cost of the inputs to make a single product are accumulated on a(n) __ __card.
standard cost
the most difficult standard to determine is probably the:
standard hours per unit.
