Chapter 10 SmartBook Assignment
True or False: Managers reluctance to constantly adjust the workforce in response to decreases in the amount of work that needs to be done often leads to an unfavorable labor efficiency variance.
true
True or False: All materials variances are generally the responsibility of the production manager.
false - the production manager is generally responsible for the quantity variance and the purchasing manager is generally responsible for the price variance.
True or False: A favorable labor rate variance is always favorable for a company.
false - 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.
True or False: Quantity standards refer to the price to be paid for each unit of the input.
false - quantity standards are the amount of each input needed to produce a product. Price standards specify the price to be paid.
How much should be paid for each unit of an input is specified by a(n) ________ standard.
price
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 difference between actual results and the flexible budget amount is a(n) __________ variance.
spending
How much should be paid for an input is indicated by a price __________.
standard
The amount of direct-labor hours that should be used to produce one unit of finished goods is the _________ hours per unit.
standard
To calculate a quantity variance, multiply the _________ quantity times the standard price and compare it to the standard quantity allowed times the ___________ price.
standard ; actual
Standard quantities and the cost of the inputs to make a single product are accumulated on a(n) __________ ________ card.
standard cost
The final, delivered price that should be paid for each unit of direct materials is the _________ price per unit of materials.
standard or budgeted
A benchmark used in measuring performance is called a(n) ___________.
standard or metric
Material requirements plus an allowance for normal inefficiencies are added together to determine the _________ ___________ of a direct material per unit of output.
standard quantity
The difference between the standard and the actual direct labor hourly rates is reflected in the _________ __________ variance.
labor rate
Standard costs are a key element in the __________ by __________ approach utilized by some companies.
management ; exception
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 purchasing manager is generally responsible for the material _________ variance, and the production manager is generally responsible for the material _________ variance.
price ; quantity
The material variance terms price and quantity are replaced with the terms __________ and __________ when computing direct labor variances.
rates ; hours
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 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 (7,000 - 6,700) × $3.50 = $1,050
Given the following, the standard cost of this item is $ ______ per unit. (enter answer as a whole number.) Direct materials per unit: 2 pounds Direct material cost: $2.50 per pound Direct labor per unit: .75 hours Direct labor rate: $16.00 per hour Variable overhead rate: $8.00 per hour
$23 ($16.00 × .75) + $2.50 + $8 = $22.5 ≈ $23
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: A) $300 U B) $300 F C) $1,500 F D) $1,500 U E) $1,800 U
A) $300 U $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; and Standard labor rate $14.00 per hour. A) $4,125 Unfavorable B) $4,350 Unfavorable C) $4,200 Favorable
A) $4,125 Unfavorable The labor rate variance is: AH(AR-SR): 5,500 × ($14.75 - $14.00) = $4,125 Unfavorable
Select all that apply. An unfavorable labor efficiency variance can result from ______. A) poorly motivated workers B) insufficient product demand C) the payment of overtime premiums D) faulty equipment
A) poorly motivated workers B) insufficient product demand D) faulty equipment
The standard labor rate per hour ______. A) reflects the expected mix of workers B) is often determined using time and motion studies C) should only include hourly wages and employment taxes D) should account for differences in skill and seniority
A) reflects the expected mix of workers
Select all that apply. Advantages to using a standard cost system include ______. A) standard costs can simplify bookkeeping B) standards can provide benchmarks for individuals to judge their own performance C) standards provide feedback that can reduce employee morale D) too much emphasis on standards can impede other objectives
A) standard costs can simplify bookkeeping B) standards can provide benchmarks for individuals to judge their own performance
An unfavorable materials quantity variance occurs when ______. A) the actual amount of material used is greater than the standard amount of material allowed for the actual output B) too much material is purchased C) the actual price paid for material is greater than the standard price allowed for the material
A) the actual amount of material used is greater than the standard amount of material allowed for the actual output
If the actual level of activity is greater than the planned level of activity, the activity variances will be ______. A) unfavorable B) favorable
A) unfavorable
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; and Standard labor rate $14.00 per hour. A) $4,125 Unfavorable B) $4,200 Favorable C) $4,425 Favorable
B) $4,200 Favorable $14.00 × (5,800 - 5,500) = $4,200 Favorable. This is the labor rate variance.
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 A) $640 F B) $600 U C) $600 F D) $640 U
B) $600 U SP(AQ-SQ) = $3.00(5,200 - 5,000) = $600 U
Select all that apply. The standard hours per unit of an output includes ______. A) an allowance for vacation time B) an allowance for spoilage and waste C) an allowance for cleanup and downtime D) the estimated time to complete the unit
C) an allowance for cleanup and downtime D) the estimated time to complete the unit
SR(AH - SH) is the formula for the ______ variance. A) labor rate B) material price C) labor efficiency D) material quantity
C) labor efficiency
The labor efficiency variance is generally the responsibility of the ______ manager. A) personnel B) purchasing C) production D) accounting
C) production
The standard cost for ______ manufacturing overhead is computed the same way as the standard cost for direct labor. A) fixed B) both variable and fixed C) variable
C) variable
A price variance is the difference between the ______. A) actual price and the standard price multiplied by the standard amount allowed B) standard quantity allowed and the actual quantity used multiplied by the standard price C) standard quantity allowed and the actual quantity used multiplied by the actual price D) actual price and the standard price multiplied by the actual amount of the input
D) actual price and the standard price multiplied by the actual amount of the input
The standard rate per unit that a company expects to pay for variable overhead equals the ______. A) total actual overhead the company expects to incur B) variable portion of actual overhead the company expects to incur C) total predetermined overhead rate D) variable portion of the predetermined overhead rate
D) variable portion of the predetermined overhead rate
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 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
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.
actual ; standard
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 hours used and the standard hours allowed for the actual output is used in the calculation of the labor _________ variance.
efficiency
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 variable overhead _________ variance measures activity differences and the variable overhead __________ variance measures cost differences.
efficiency ; rate
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 - the standard hours or quantity allowed is the amount of the input that should have been used to produce the actual, not standard, output.
True or False: The standard hours per unit includes both direct and indirect labor hours.
false - the standard hours per unit only includes direct labor hours.
When less hours are worked than the standard hours allows, the labor efficiency variance is __________.
favorable
When the actual hourly rate is lower than the standard hourly rate, the labor rate variance is ___________.
favorable
When the actual quantity of materials used is less than the standard quantity allowed, the material quantity variance is labeled as ___________.
favorable
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
purchasing
The materials price variance is generally the responsibility of the __________ department manager.
purchasing
How much input should be used to produce a product or provide a service is a(n)__________ standard.
quantity
SP(AQ-SQ) is the formula for the materials _________ variance.
quantity
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 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 or efficiency
AH(AR - SR) is the formula for the variable overhead __________ variance.
rate
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 standard purchase price is less than the actual price paid for materials, the material price variance is ________.
unfavorable
The same basic formulas used for materials and labor are used to analyze the ________ portion of manufacturing overhead.
variable
Given the following information, calculate the variable overhead efficiency variance. Actual hours: 1,500 Standard hours allowed: 1,350 Actual variable overhead rate: $3.00 per hour Standard variable overhead rate: $3.50 per hour A) $525 Unfavorable B) $450 Unfavorable C) $525 Favorable D) $450 Favorable
A) $525 Unfavorable (1,350 - 1,500) × $3.50 = $525 Unfavorable.
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 ______. A) $600 F B) $580 U C) $580 F D) $600 U
A) $600 F 6,000 × ($4.00 - $4.10) = $600 F
Which of the following statements is true? A) A labor efficiency variance is a quantity variance. B) The variance that computes the price difference for materials is called a material rate variance. C) Quantity variances are computed for direct materials, direct labor and fixed overhead. D) Price variances can only be computed for direct materials and direct labor.
A) A labor efficiency variance is a quantity variance.
Select all that apply. Which of the following are used to calculate the standard quantity per unit of direct materials? A) Allowance for waste and spoilage B) Direct materials requirements per unit of finished product C) Freight and transportation costs
A) Allowance for waste and spoilage B) Direct materials requirements per unit of finished product
Select all that apply. Which of the following statements are true? A) Overtime premiums can cause an unfavorable labor rate variance. B) Wage rates paid to workers are unpredictable in most companies. C) Assigning highly skilled, highly paid workers to low skill, low pay level jobs will cause a favorable labor rate variance. D) How production supervisors use direct labor workers can lead to labor rate variances.
A) Overtime premiums can cause an unfavorable labor rate variance. D) How production supervisors use direct labor workers can lead to labor rate variances.
Which statement regarding variable overhead variance analysis is true? A) The variable overhead efficiency variance may depend on the efficiency of direct labor. B) Efficient use of variable overhead results in a favorable variable overhead efficiency variance. C) Variable overhead variances are easy to interpret. D) The variable overhead efficiency variance uses exactly the same inputs as the direct labor efficiency variance.
A) The variable overhead efficiency variance may depend on the efficiency of direct labor.
A quantity variance is ______. A) calculated using the standard price of the input B) based only on the standard quantity of inputs C) based only on the actual quantity of inputs D) calculated using the actual price of the input
A) calculated using the standard price of the input
Select all that apply. The standard rate per hour includes ______. A) employment taxes B) the direct labor rate per hour C) employee-paid union dues D) fringe benefits
A) employment taxes B) the direct labor rate per hour D) fringe benefits
Select all that apply. The materials price variance is ______. A) impacted by the delivery method chosen B) charged to the production manager when production problems occur C) generally the responsibility of the purchasing manager D) generally unfavorable when lower than standard quality materials are purchased
A) impacted by the delivery method chosen B) charged to the production manager when production problems occur C) generally the responsibility of the purchasing manager
Select all that apply. Excessive inventory on hand, especially in the work in process inventory account, may lead to ______. A) inefficient operations B) high defect rates C) price increases in direct materials D) obsolete goods
A) inefficient operations B) high defect rates D) obsolete goods
Select all that apply. The materials price variance is generally calculated at the time materials are purchased because ______. A) it allows materials to be carried in the inventory accounts at standard cost B) management can generate more timely variance reports C) GAAP requires variances to be recognized when they are incurred D) it simplifies bookkeeping
A) it allows materials to be carried in the inventory accounts at standard cost B) management can generate more timely variance reports D) it simplifies bookkeeping
If managers consider it unwise to adjust the workforce in response to changes in workload ______. A) the direct labor workforce is really fixed in the short run B) insufficient demand will lead to an unfavorable labor rate variance C) insufficient demand will lead to a favorable labor efficiency variance D) idle workers should be used to build inventory
A) the direct labor workforce is really fixed in the short run
Select all that apply. When using a standard cost system, ______. A) the information in the variance reports may be too old to be useful. B) an undue emphasis on labor efficiency variances can create pressure to build excess inventory. C) the most important objective for the company is to meet the standards
A) the information in the variance reports may be too old to be useful. B) an undue emphasis on labor efficiency variances can create pressure to build excess inventory.
The same basic formulas used for materials and labor are used to analyze ______ portion of manufacturing overhead. A) the variable B) the fixed C) both the variable and fixed D) neither the variable nor fixed
A) the variable
Select all that apply. When setting direct labor standards ______. A) time and motion studies may be used B) the production manager should be consulted C) it is best to use "tight but attainable" standards D) it is important to consult the purchasing manager
A) time and motion studies may be used B) the production manager should be consulted C) it is best to use "tight but attainable" standards
When the standard hourly rate is lower than the actual rate, the labor rate variance is ______. A) unfavorable B) favorable
A) unfavorable
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; and Standard variable overhead rate $3.75 per hour. A) $250 Unfavorable B) $250 Favorable C) $500 Favorable D) $500 Unfavorable
B) $250 Favorable $15,750 (4,200 actual hours × $3.75) - $15,500 of actual overhead = $250 favorable.
Given the following, compute the standard cost per widget. Direct materials per unit: 4 pounds Direct material cost: $1.25 per pound Direct labor per unit: 1.5 hours Direct labor rate: $10.00 per hour Variable overhead rate: $4.00 per hour A) $20.00 B) $26.00 C) $11.00 D) $21.00
B) $26.00 (4 pounds × $1.25) + Labor (1.5 hours × $10.00) + Overhead (1.5 hours × $4.00) = $26.00
The spending variance is ______. A) (AQ × AP) - (AQ × SP) B) (AQ × AP) - (SQ × SP) C) (AQ × SP) - (SQ × SP)
B) (AQ × AP) - (SQ × SP)
Select all that apply. Which of the following statements are correct? A) When the workforce is fixed, managers should focus on managing the labor efficiency variance. B) Building inventories can reduce unfavorable labor efficiency variances. C) Excessive inventories contribute to inefficient operations.
B) Building inventories can reduce unfavorable labor efficiency variances. C) Excessive inventories contribute to inefficient operations.
Select all that apply. Which of the following statements are true? A) Meeting standards is sufficient to remain competitive. B) Standard cost reports may be too outdated to be useful. C) Managers should not use standards to assign blame. D) Favorable variances are always better than unfavorable variances.
B) Standard cost reports may be too outdated to be useful. C) Managers should not use standards to assign blame.
Select all that apply. Which of the following statements are true? A) The purpose of using standards is to assess blame and responsibility. B) When actual results depart significantly from the standard, the reasons why should be investigated. C) Standards provide information for measuring performance. D) Standards are only used in managerial accounting.
B) When actual results depart significantly from the standard, the reasons why should be investigated. C) Standards provide information for measuring performance.
The materials price variance is calculated using the ______ quantity of the input purchased. A) standard B) actual
B) actual
Select all that apply. The materials price variance is calculated using the ______. A) standard quantity allowed of the input for the actual output B) actual price of the input C) actual quantity of the input purchased D)v standard price of the input
B) actual price of the input C) actual quantity of the input purchased D)v standard price of the input
The materials price variance is the difference between the actual price of materials ______. A) times the actual quantity of materials and the standard price of materials times the standard quantity allowed for production B) and the standard price for materials with the difference multiplied by the actual quantity of materials C) and the standard price for materials with the difference multiplied by the standard quantity of material allowed
B) and the standard price for materials with the difference multiplied by the actual quantity of materials
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 ______. A) unfavorable B) favorable
B) favorable
When the standard price is higher than the actual price, the materials price variance is ______. A) unfavorable B) favorable
B) favorable
Poor supervision is one possible cause of an unfavorable ______ variance. A) material price B) labor efficiency C) labor rate D) fixed overhead budget
B) labor efficiency
Most companies compute the material price variance when materials are ______ and the material quantity variance when materials are ______. A) used, purchased B) purchased, used C) purchased, purchased D) used, used
B) purchased, used
Select all that apply. The calculation of a standard price per unit of direct materials includes ______. A) allowance for unavoidable waste B) shipping costs C) purchase discounts D) purchase price of the materials
B) shipping costs C) purchase discounts D) purchase price of the materials
The labor efficiency variance is the difference between actual hours used and standard hours allowed multiplied by the ______ hourly rate. A) actual B) standard
B) standard
When the standard hours allowed are lower than the actual hours used, the labor efficiency variance is ______. A) favorable B) unfavorable
B) unfavorable
When direct labor is used as the overhead allocation base, the variable overhead efficiency variance ______. A) will always be unfavorable B) will be favorable when the direct labor efficiency variance is favorable C) cannot be calculated D) explains how efficient overhead resources were used
B) will be favorable when the direct labor efficiency variance is favorable
The standard price of the material is used in the calculation of the material quantity variance because ______. A) materials are acquired at their standard prices, not their actual prices B) actual prices are not known when the material quantity variance is calculated C) using actual prices is unfair to the purchasing manager D) using actual prices would hold the production manager responsible for the inefficiencies of the purchasing manager
D) using actual prices would hold the production manager responsible for the inefficiencies of the purchasing manager
True or False: The labor rate variance measures the productivity of direct labor.
false - the labor rate variance reflects the difference between the actual and standard direct labor rates.