Ch 9 Accounting
When calculating the direct labor rate variance, take the actual hours worked times the _________________ labor rate and compare it to the actual hours worked times the __________________ labor rate
actual; standard
The direct 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
(SH - AH) × SR is the formula for the variable overhead ________________ variance.
efficiency
True or false: Favorable variances always indicate good performance.
false
True or false: Quantity standards refer to the price to be paid for each unit of the input.
false
True or false: The labor rate variance measures the productivity of direct labor.
false
The direct materials _________________ variance reflects the difference between the actual cost of a material and what the cost should have been according to the standard.
price
The actual cost is compared to what the cost should have been when calculating a(n) _______________ variance.
price/ spending
The materials quantity variance is generally the responsibility of the _______________ manager
production
The variable overhead efficiency variance ______.
really measures the efficiency of the underlying cost driver
Combining the direct labor rate variance with the direct labor efficiency variance is a way to compute the direct labor __________________ variance
spending
Combining the direct materials price variance with the direct materials quantity variance is a way to compute the direct materials _______________ variance
spending
True or false: 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 process of comparing actual and budgeted results is ______.
variance analysis
SR(SH - AH) is the formula for the direct ______ variance.
labor efficiency
The difference between the standard hours allowed for a job and the actual hours used is reflected in the direct __________________ _______________ variance
labor efficiency
A favorable material price variance ______.
may be due to price fluctuations may be based on the quality of the goods may be due to a quantity discount
How much should be paid for an input is specified by a(n) _______________ standard
price/cost
The materials quantity variance is generally the responsibility of the ____________________ manager
production
The materials price variance is generally the responsibility of the ___________________ manager
purchasing
The formula for the direct materials ____________________ variance is (SQ - AQ) × SP.
quantity
A system that records costs based on what managers think they should be rather than using actual costs is a(n) _______________ _____________ system
standard cost
The amount a company should spend to produce a single unit of product based on expected production and sales is shown on a(n) ________________ _________________ card
standard cost
The materials price variance is calculated using the ______.
standard price of the input actual price of the input actual quantity of the input purchased
Reasonable, efficient efforts from employees are required when standards used are ______.
tight but attainable
If the actual cost is greater than budgeted cost, the variance is labeled as _______________
unfavorable
If the actual hours worked exceeds the standard hours allowed for production, the direct labor efficiency variance will be ______.
unfavorable
A price variance is the difference between the ______.
actual price and the standard price multiplied by the actual amount of the input
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(n) ________________ variance
quantity
A flexible budget _________________ variance is calculated by comparing actual costs to the flexible budget.
spending
An unfavorable variance may be caused by ______ more than expected.
spending
Over- or underapplied variable manufacturing overhead is equal to the variable overhead ______ variance.
spending
A company with a $2,500 favorable direct materials price variance and a $700 unfavorable direct materials quantity variance has a direct material __________________ variance of $_________________ favorable.
spending, $1800
True or false: The variable overhead rate variance may not explain all the differences between actual spending and standard variable overhead.
true
The price variance is calculated using the ______ quantity of the input purchased.
actual
A variance is labeled as favorable when the ______.
actual cost is less than the standard or budgeted cost
Variable overhead variances are ______.
calculated using the same basic formulas as labor and material variances
A static budget shows variable supply cost of $6,250 based on 1,000 units. A flexible budget based on 1,200 units should show ______ for supplies.
$7,500
Abba, Inc. has developed the following standards for one of its products: Direct materials - 1/2 pound at $6.00 per pound Direct labor - 1/4 hour at $20.00 per hour Variable overhead - 20% of direct labor cost Total fixed overhead is expected to be $15,000 and the company expects to produce 7,500 units. The standard cost card for this product would show a cost per unit of ______.
$11; Reason: (1/2 x $6.00) + (1/4 x $20.00) + ($5.00 x 20%) + ($15,000/7,500) = $11.00 per unit
If the planned fixed overhead for 5,000 units is $120,000, what is the flexible budget fixed overhead for 4,500 units?
$120,000; Reason: Budgeted fixed costs do not change within the relevant range.
Based on the following information, calculate the variable overhead rate variance. Actual variable overhead cost $15,500 Actual hours used 4,200 Standard hours allowed 4,000 Standard variable overhead rate $3.75 per hour
$250 favorable
Use the following information to calculate the direct 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 Unfavorable; Reason: The direct labor rate variance is: AH(AR - SR): 5,500 × ($14.75 - 14.00) = $4,125 Unfavorable.
Standard price: I $3.00 per pound Actual price: I $3.20 per pound Actual quantity used: I 5,200 pounds Standard quantity allowed: I 5,000 pounds
$600 Unfavorable; Reason: SP(AQ - SQ) = $3.00(5,200 - 5,000) = $600 Unfavorable
Fancy Nails' master budget for June was based on 2,400 manicures and supplies were budgeted at a total cost of $1,800. During June, 2,500 manicures were done and the total cost for supplies was $2,000. Which of the following statements are true?
1. The spending variance is $125 U. 1. Reason: Flexible budget amount for supplies = ($1,800/2,400) = $0.75 x 2,500 manicures = $1,875 - $2,000 = $125 U 2. The volume variance is $75 U. 2.Reason: Flexible budget amount for supplies = ($1,800 ÷ 2,400) = $0.75 × 2,500 manicures = $1,875 - $1,800 master budget = $75 U.
A master budget calls for 3,000 units of production and budgeted fixed overhead of $6,000. Actual production was 3,500 units and total fixed overhead was $6,150. Which of the following statements is true?
The spending variance is ($150).
Standard cost systems ______.
are based on what managers think costs should be help managers budget and control costs help maintain consistency and quality
Direct labor variances ______.
are computed in the same way as material variances
Quantity and price standards ______.
are developed for both direct materials and direct labor
Direct labor standards ______.
are stated in terms of quantity and price use the time it should take to produce a single unit
Which of the following statements are true? a. An unfavorable variance is always an indication of a problem that needs correction. b. Sometimes a favorable variance can indicate poor performance. c. Favorable and unfavorable reflect a difference between actual and standard costs.
b. Sometimes a favorable variance can indicate poor performance. c. Favorable and unfavorable reflect a difference between actual and standard costs.
Which of the following shows how budgeted costs and revenues will change over different volumes? a. master budget b. flexible budget c. profit and loss statement d. static budget
b. flexible budget
Which of the following statements is true? a. Material quantity variances are generally the responsibility of the purchasing department. b. Material quantity variances are always unfavorable and can never be favorable. c. A direct material quantity variance is not impacted by waste. d. The production manager is most often responsible for the materials quantity variance.
d. The production manager is most often responsible for the materials quantity variance
Ideal standards are problematic because they ______.
demand peak effort at all times tend to discourage workers
The process of comparing actual and budgeted results is called ______________ ______________
variance analysis
A flexible budget ________________ variance is calculated by comparing the master budget to the flexible budget.
volume
Fancy Nail's monthly rent is $2,500. The company's static budget is based on an activity level of 2,000 manicures per month. It shows nail technician wages (a variable cost) of $20,000. Fancy Nails' flexible budget for 2,200 manicures will show ______.
wages of $22,000 rent expense of $2,500
The difference between the standard and the actual direct labor hourly rates is reflected in the _______________ _______________ variance
labor rate
A variable overhead rate variance may be favorable because ______.
less money was spent on supplies and other variable overhead items the relationship between variable overhead and direct labor may not be perfect
An unfavorable labor efficiency variance can result from ______.
poorly motivated workers
The price variance for direct labor is called the direct labor __________________ variance and the quantity variance for direct labor is called the direct labor ________________ variance.
rate; efficiency
The price variance for variable manufacturing overhead is called the variable overhead ________________ variance, and the quantity variance is called the variable overhead _________________ variance
rate; efficiency
The standard price of materials is $4.10 per pound and the standard quantity allowed for actual output is 5,800 pounds. If the actual quantity purchased and used was 6,000 pounds, and the actual price per pound was $4.00, the direct materials price variance is ______.
$699 F; Reason: 6,000 × ($4.00 - $4.10) = $600 F.
Which of the following are common causes of favorable variances? a. Producing and selling less units than expected b. Using less direct materials than expected c. Using less of a variable resource than expected d. Taking less time to produce a unit than expected
b. Using less direct materials than expected c. Using less of a variable resource than expected d. Taking less time to produce a unit than expected
A quantity variance is ______.
calculated using the standard price of the input
Which statement regarding variable overhead variance analysis is true? a. Variable overhead efficiency variances are impacted by the cost of overhead items. b. The variable overhead efficiency variance is exactly the same as the direct labor rate variance. c. Efficient use of variable overhead results in a favorable variable overhead efficiency variance. d. The variable overhead efficiency variance may depend on the efficiency of the cost driver.
d. The variable overhead efficiency variance may depend on the efficiency of the cost driver.
If the actual wage rate paid to employees is less than the standard rate allowed, the direct labor rate variance will be ______.
favorable
A budget that takes into account how costs are affected by changes in level of activity is a(n) _____________ budget
flexible
A company with a $400 favorable variable overhead rate variance and a $100 unfavorable variable overhead efficiency variance has a variable overhead _________________ variance of $____________________ favorable
spending; 300
