Chapter 10 (Exam 3)

If poor-quality materials results in excessive labor processing time, the

purchasing

The difference between the actual materials used in production and the standard amount allowed for the actual output is reflected in the materials ________ variance.

quantity

The spending variance is: Multiple choice question. (AQ x AP) - (SQ x SP) (AQ x AP) - (AQ x SP) (AQ x SP) - (SQ x SP)

(AQ x AP) - (SQ x SP)

The materials price variance is the difference between the actual price of materials: Multiple choice question. and the standard price for materials with the difference multiplied by the standard quantity of material allowed and the standard price for materials with the difference multiplied by the actual quantity of materials times the actual quantity of materials and the standard price of materials times the standard quantity allowed for production

and the standard price for materials with the difference multiplied by the actual quantity of materials

The material variance terms price and quantity are replaced with the terms _________ and __________ when computing direct labor variances.

rate; hours

The labor rate variance measures the productivity of direct labor. True false question.

False Reason: The labor rate variance reflects the difference between the actual and standard direct labor rates.

The labor efficiency variance is generally the responsibility of the ______ manager. Multiple choice question. production accounting purchasing personnel

production

A materials price variance is equivalent to a labor ________ variance and a materials quantity variance is equivalent to a labor ________ variance.

rate; efficiency

When the actual hourly rate is lower than the standard hourly rate, the labor rate variance is _________.

unfavorable

If managers consider it unwise to adjust the workforce in response to changes in workload: Multiple choice question. the direct labor workforce is really fixed in the short run insufficient demand will lead to an unfavorable labor rate variance insufficient demand will lead to a favorable labor efficiency variance idle workers should be used to build inventory

the direct labor workforce is really fixed in the short run

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: Multiple choice question. $1,500 F $300 F $1,800 U $1,500 U $300 U

$1,500 U Reason: $7,500 ÷ 500 = $15 standard rate per hour x 600 = $9,000 flexible budget - $7,500 planning budget = $1,500 U

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: Multiple choice question. $1,500 U $300 F $300 U $1,500 F $1,800 U

$1,500 U Reason: $7,500 ÷ 500 = $15 standard rate per hour x 600 = $9,000 flexible budget - $7,500 planning budget = $1,500 U

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: Multiple choice question. $1,500 F $1,500 U $300 U $1,800 U $300 F

$300 U Reason: $7,500/500 = $15 standard rate per unit x 600 = $9,000 flexible budget - $9,300 actual = $300 U

All materials variances are generally the responsibility of the production manager.

False Reason: The production manager is generally responsible for the quantity variance and the purchasing manager is generally responsible for the price variance.

True or false: The standard hours or quantity allowed for an input is the amount of the input that should have been used to produce the standard output for the period.

False Reason: The standard hours or quantity allowed is the amount of the input that should have been used to produce the "actual", not standard, output.

Which of the following statements is true?

The variable part of manufacturing overhead is analyzed using the same basic formulas used for materials and labor.The variable part of manufacturing overhead is analyzed using the same basic formulas used for materials and labor.

The materials price variance is calculated using the ______ quantity of the input purchased. Multiple choice question. standard actual

actual

A price variance is the difference between the: Multiple choice question. actual price and the standard price multiplied by the standard amount allowed standard quantity allowed and the actual quantity used multiplied by the actual price actual price and the standard price multiplied by the actual amount of the input standard quantity allowed and the actual quantity used multiplied by the standard price

actual price and the standard price multiplied by the actual amount of the input

A quantity variance is: Multiple choice question. calculated using the standard price of the input based only on the standard quantity of inputs calculated using the actual price of the input based only on the actual quantity of inputs

calculated using the standard price of the input

The variable overhead ____________ variance measures activity differences and the variable overhead ____________ variance measures cost differences.

efficiency; rate

Select all that apply Excessive inventory on hand, especially in the work in process inventory account, may lead to: price increases in direct materials high defect rates obsolete goods inefficient operations

high defect rates obsolete goods inefficient operations

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

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.

price

The amount of an input that should have been used to produce the actual output is known as the _______ quantity or hours allowed.

standard

The labor efficiency variance is the difference between actual hours used and standard hours allowed multiplied by the ______ hourly rate. Multiple choice question. standard actual

standard

An unfavorable materials quantity variance occurs when: Multiple choice question. the actual price paid for material is greater than the standard price allowed for the material the actual amount of material used is greater than the standard amount of material allowed for the actual output too much material is purchased

the actual amount of material used is greater than the standard amount of material allowed for the actual output

A labor rate variance is ________ when the standard hourly rate is lower than the actual rate. Multiple choice question. unfavorable favorable

unfavorable

If the actual level of activity is greater than the planned level of activity, the activity variances will be: Multiple choice question. favorable unfavorable

unfavorable

SP(AQ-SQ) is the formula for the materials _____ variance.

quantity

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: Multiple choice question. unfavorable favorable

favorable

The difference between the standard and the actual direct labor hourly rates is reflected in the _________ _________ variance.

labor; rate

The materials quantity variance is generally the responsibility of the ________ department manager.

production

Which of the following statements are correct?

Building inventories can reduce unfavorable labor efficiency variances. Excessive inventories contribute to inefficient operations.

True or false: A favorable labor rate variance is always favorable for a company.

False Reason: A favorable labor rate variance may not be favorable when lower-paid workers are less efficient than those with the proper pay rate and skills. The result could be an overall unfavorable labor variance.

Select all that apply The materials price variance is calculated using the: standard quantity allowed of the input for the actual output actual quantity of the input purchased standard price of the input actual price of the input

actual quantity of the input purchased standard price of the input actual price of the input

Using the information provided, calculate the materials quantity variance. Standard price: $3.00 per pound Actual price: $3.20 per pound Actual quantity used: 5,200 pounds Standard quantity allowed: 5,000 pounds Multiple choice question. $600 U $640 U $640 F $600 F

$600 U Reason: SP(AQ-SQ) = $3.00(5,200 - 5,000) = $600 U

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 quantity variance is $ ___________ __________.

1,050; 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

Which of the following statements is true? Multiple choice question. A labor efficiency variance is a quantity variance. Quantity variances are computed for direct materials, direct labor and fixed overhead. The variance that computes the price difference for materials is called a material rate variance. Price variances can only be computed for direct materials and direct labor.

A labor efficiency variance is a quantity variance. EXPLANATIONS: B) Reason: Quantity variances are computed for variable, not fixed overhead. C) Reason: This is called a material price variance. D) Reason: A price variance can also be computed for variable overhead.

Select all that apply Which of the following statements are true? How production supervisors use direct labor workers can lead to labor rate variances. Overtime premiums can cause an unfavorable labor rate variance. Assigning highly skilled, highly paid workers to low skill, low pay level jobs will cause a favorable labor rate variance. Wage rates paid to workers are unpredictable in most companies.

How production supervisors use direct labor workers can lead to labor rate variances. Overtime premiums can cause an unfavorable labor rate variance.

Select all that apply Which of the following statements are true? The production manager is usually responsible for the materials quantity variance. Material quantity variances are always unfavorable and can never be favorable. Material quantity variances due to inferior materials are the responsibility of the purchasing department.

The production manager is usually responsible for the materials quantity variance. Material quantity variances due to inferior materials are the responsibility of the purchasing department.

Select all that apply Which of the following statements are true? The purpose of using standards is to assess blame and responsibility. When actual results depart significantly from the standard, the reasons why should be investigated. Standards are only used in managerial accounting. Standards provide information for measuring performance.

When actual results depart significantly from the standard, the reasons why should be investigated. Standards provide information for measuring performance.

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

To calculate a price variance, multiply the ________ quantity times the actual price and compare it to the actual quantity times the ________ price.

actual; standard

Select all that apply Standards are: benchmarks for measuring performance rarely used outside of management accounting set for each major production input or task compared to the actual quantities and costs of inputs

benchmarks for measuring performance set for each major production input or task compared to the actual quantities and costs of inputs

Select all that apply An unfavorable labor efficiency variance can result from: the payment of overtime premiums faulty equipment poor-quality materials poorly motivated workers

faulty equipment poor-quality materials poorly motivated workers

A materials price variance is ________ when the standard price is higher than the actual price. Multiple choice question. favorable unfavorable

favorable

Select all that apply The materials price variance is: impacted by the delivery method chosen charged to the production manager when production problems occur generally the responsibility of the purchasing manager generally unfavorable when lower than standard quality materials are purchased

impacted by the delivery method chosen charged to the production manager when production problems occur generally the responsibility of the purchasing manager

The purchasing manager is generally responsible for the material ________ variance, and the production manager is generally responsible for the material ________ variance.

price; quantity

The materials price variance is generally the responsibility of the _________ department manager.

purchasing

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.

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 (n) _________ variance.

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 _______

quantity, efficiency, or usage

When the actual cost incurred exceeds the standard cost allowed for the actual level of output, the spending variance is: Multiple choice question. favorable unfavorable

unfavorable

When the actual quantity of materials used is less than the standard quantity allowed, the material quantity variance is labeled as _________.

unfavorable

When the standard purchase price is less than the actual price paid for materials, the material price variance is __________.

unfavorable

The difference between the standard and the actual variable overhead cost is reflected in the Multiple choice question. variable overhead rate variance variable overhead efficiency variance volume variance budget variance

variable overhead rate variance