Chapter 10. Standard Costs and Variances
When the actual hourly rate is lower than the standard hourly rate, the labor rate variance is
favorable
The standard rate per unit that a company expects to pay for variable overhead equals the ______.
variable portion of the predetermined overhead rate
Which of the following are used to calculate the standard quantity per unit of direct materials?
Allowance for waste and spoilage Direct materials requirements per unit of finished product
A price variance is the difference between the ______.
actual price and the standard price multiplied by the actual amount of the input
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
Most companies compute the material price variance when materials are ______ and the material quantity variance when materials are ______.
purchased, used
The purchasing manager is generally responsible for the material variance, and the production manager is generally responsible for the material variance.
price, quantity
The labor efficiency variance is generally the responsibility of the ______ manager.
production
Standard costs fit naturally into an integrated system of accounting.
responsibility
The difference between actual results and the flexible budget amount is a(n) variance.
spending
The amount of direct-labor hours that should be used to produce one unit of finished goods is the 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
benchmark used in measuring performance is called a(n)
standard
If poor-quality materials results in excessive labor processing time, the manager will probably be held responsible for the labor efficiency variance. (
purchasing
AH(AR - SR) is the formula for the variable overhead variance.
rate
The material variance terms price and quantity are replaced with the terms and when computing direct labor variances.
rate, hours
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
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
Material requirements plus an allowance for normal inefficiencies are added together to determine the of a direct material per unit of output.
quantity smart
If 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
f 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
SR(AH - SH) is the formula for the ______ variance.
labor efficiency
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.
$4,125 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.
$4,200 Favorable
True or false: The standard hours per unit includes both direct and indirect labor hours.
False
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, favorable, F
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.
250 favorable
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
Using the information provided, calculate the materials quantity variance.
600U 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 price variance is $
670, favorable
True or false: All materials variances are generally the responsibility of the production manager.
False
True or false: The labor rate variance measures the productivity of direct labor.
False
Which statement regarding variable overhead variance analysis is true?
The variable overhead efficiency variance may depend on the efficiency of direct labor.
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
The material quantity variance reflects the difference between the quantity of materials used in production and the quantity allowed for the actual output.
actual, spending
To calculate a price variance, multiply the quantity times the actual price and compare it to the actual quantity times the price.
actual, standard
When using a standard cost system, ______.
an undue emphasis on labor efficiency variances can create pressure to build excess inventory. the information in the variance reports may be too old to be useful.
Standards are ______.
benchmarks for measuring performance set for each major production input or task compared to the actual quantities and costs of inputs
A quantity variance is ______.
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
The materials price variance is generally calculated at the time materials are purchased because ______.
it simplifies bookkeeping management can generate more timely variance reports it allows materials to be carried in the inventory accounts at standard cost
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 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
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
When the actual cost incurred exceeds the standard cost allowed for the actual level of output, the spending variance is ______.
unfavorable
When the standard hourly rate is lower than the actual rate, the labor rate variance is ______.
unfavorable
The same basic formulas used for materials and labor are used to analyze ______ portion of manufacturing overhead.
variable
The standard cost for ______ manufacturing overhead is computed the same way as the standard cost for direct labor.
variable
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
Advantages to using a standard cost system include ______.
standard costs can simplify bookkeeping standards can provide benchmarks for individuals to judge their own performance
The materials price variance is calculated using the ______.
standard price of the input actual quantity of the input purchased actual price of the input
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
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 ______.
600F Reason: 6,000 × ($4.00 - $4.10) = $600 F
Poor supervision is one possible cause of an unfavorable ______ variance.
labor efficiency
True or false: The standard hours per unit includes both direct and indirect labor hours.
false
An unfavorable labor efficiency variance can result from ______.
faulty equipment insufficient product demand poorly motivated workers
The difference between the standard and the actual direct labor hourly rates is reflected in the variance.
labor rate