chapter 5 accounting II

¡Supera tus tareas y exámenes ahora con Quizwiz!

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.

A price variance is the difference between the ______.

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

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

Poor supervision is one possible cause of an unfavorable ______ variance.

direct labor efficiency

(SH - AH) × SR is the formula for the variable overhead___________ variance. (Enter only one word per blank.)

efficiency

True or false: Favorable variances always indicate good performance.

false Reason: Variances reflect a difference between actual and standard costs. A favorable variance does not always indicate good performance.

If the actual wage rate paid to employees is less than the standard rate allowed, the direct labor rate variance will be ______.

favorable

The difference between the standard hours allowed for a job and the actual hours used is reflected in the direct_________ _________variance.

labor efficiency

The difference between the standard and the actual direct labor hourly rates is reflected in the ________ _________ variance. (Enter only one word per blank.)

labor rate

change both in total and per unit as activity changes

mixed costs:

1. sales 2. variable expenses 3. contribution margin 4. fixed expenses 5. net operating income

order of a contribution format income statement

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. (Enter only one word per blank.)

price

The materials quantity variance is generally the responsibility of the ____________ manager. (Enter only one word per blank.)

production

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. (Enter only one word per blank.)

rate efficiency

cost behavior

refers to how total cost changes as the level of activity increases or decreases

contribution margin

sales revenue - variable costs is

cost behavior

shift from product costing to ______ is key to make most managerial decisions

Unfavorable labor rate variances may occur as a result of ______.

skilled workers being assigned to jobs requiring little skill overtime premiums being charged to the direct labor account

An unfavorable variance may be caused by ______ more than expected.

spending

Combining the direct labor rate variance with the direct labor efficiency variance is a way to compute the direct labor ___________ variance. (Enter only one word per blank.)

spending

Over- or underapplied variable manufacturing overhead is equal to the variable overhead ______ variance.

spending

A company with a $2,000 unfavorable direct labor rate variance and a $700 favorable direct labor efficiency variance has a direct labor _________ variance of $_________unfavorable. (Enter only one word per blank.)

spending 1300

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

step-variable costs

step-______ costs have a fairly narrow range and rise in multiple steps across the relevant range

contribution margin ratio

tells managers how much contribution margin is generated by every dollar of sales

the linearity assumption

the relationship between total cost and activity that can be approximated by a straight line

variable

the slope of the regression line represents the _____ cost per unit of activity

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

True or false: The variable overhead rate variance may not explain all the differences between actual spending and standard variable overhead.

true Reason: Perhaps the cost driver chosen is not the only driver of variable manufacturing overhead - others items are likely to influence spending.

absorption and variable

two general costing approaches used by manufacturing companies to value inventory and cost of goods sold are __________

scattergraph

used by an accountant to answer preliminary questions such as whether the linearity assumption is valid

after the variable cost per unit is calculated and using either the high or low level of activity

using the high-low method, the fixed costs is calculated

When a master budget is flexed, total __________costs will be different on the two budgets, but total ____________costs will be the same. (Enter only one word per blank.)

variable fixed

remain constant per unit and vary in total

variable costs:

vary in total & remain constant per unit

within relevant range of activity, variable costs:

variable

within relevant range, variable costs remain constant on a per unit basis

A favorable material price variance ______.

may be due to price fluctuations may be due to a quantity discount may be based on the quality of the goods

true

presenting fixed costs on an average per unit basis makes them look like they are variable costs

The materials price variance is generally the responsibility of the_________ manager. (Enter only one word per blank.)

purchasing

The variable overhead efficiency variance ______.

really measures the efficiency of the underlying cost driver

False

t/f nonmanufacturing costs are reported as inventory when using full absorption costing

true

t/f: when using the high-low, fixed costs after variable costs are determined

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

total mixed cost

in Y = a + bX, Y=

total fixed cost and intercept

in Y = a + bX, a =

less than

when inventory decreases, net operating income under absorption costing will be _____ cost of goods sold under variable costing

absorption costing net income is equal to variable costing net income and under both absorption costing and variable costing, all fixed overhead incurred flows t income statement.

when number of units produced equals the number of units sold

variable costing

fixed manufacturing overhead is treated as a period costs and expensed in full each period

absorption costing

fixed manufacturing overhead is treated as part of the per unit product cost and expensed as unit are sold

remain constant per unit, vary in total

while thingng get carried away

managers need to know how costs change and how much of a cost is variable and how much is fixed

why is it vital to analyze mixed costs

An unfavorable labor efficiency variance can result from ______.

poorly motivated workers

variable cost per unit of activity & slope of the line

in the equation Y = a+bX, b denotes the:

higher than

net operating income under absorption is generally ________ net operating income under varaible costing in Inventory increases

The formula for the direct materials___________ variance is (SQ - AQ) × SP. (Enter only one word per blank.)

quantity

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. (Enter only one word per blank.)

spending 1800

variable

which type of costs changes in total, in direct proportion to changes in activity level?

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

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

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

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

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

Which of the following statements are true? -Companies generally try to hold specific managers responsible for specific variances. -The variance formulas only allow one factor to change at a time. -Variances always compare actual results to budgeted or standard results. -Favorable variances are always good and unfavorable variances are always bad.

Companies generally try to hold specific managers responsible for specific variances. The variance formulas only allow one factor to change at a time. Variances always compare actual results to budgeted or standard results.

measures goodness of fit & is usually provided by least squares regression software

R square

Which of the following are common causes of favorable variances?

Using less of a variable resource than expected Taking less time to produce a unit than expected Using less direct materials than expected

separates costs into their fixed and variable components can assist with management decision making

a contribution margin income statement

equal when the number of units produced equals the number of units sold and is equal when there is no beginning and no ending inventory

absorption costing and variable costing net operating income will be:

The price variance is calculated using the ______ quantity of the input purchased.

actual

To calculate a quantity variance, multiply the____________(actual/standard) quantity times the standard price and compare it to the standard quantity allowed times the _____________ (actual/standard) price. (Enter your answers as either actual or standard.)

actual standard

A variance is labeled as favorable when the ______.

actual cost is less than the standard or budgeted cost

variable costing

best for internal decision making

Variable overhead variances are ______.

calculated using the same basic formulas as labor and material variances

A quantity variance is ______.

calculated using the standard price of the input

1. sales 2. minus total cost of goods sold 3. equals gross margin 4. minus total selling and admin. costs 5. equals net operating income

construct an income statement using absorption costing

sales revenue minus variable costs

contribution margin is:

relevant range

cost assumptions are reasonably valid within the _____________ of activity

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 Reason: Applied variable overhead cost is based on the actual hours, so applied overhead of $15,750 (4,200 actual hours × $3.75) - $15,500 of actual overhead = $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: This is the direct labor efficiency variance. The direct labor rate variance is: AH(AR - SR): 5,500 × ($14.75 - 14.00) = $4,125 Unfavorable.

Use the following information to calculate the direct 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

$4,200 Favorable Reason: $14.00 × (5,800 - 5,500) = $4,200 Favorable.

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 ______.

$600 F Reason: 6,000 × ($4.00 - $4.10) = $600 F.

Using the information provided, calculate the direct 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

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

Which of the following statements are true? -When calculating variances one or more factors change at a time. -Favorable variances are not always good and unfavorable variances are not always bad. -Variances provide information that can help managers take corrective action if needed. -Variances cause companies to hold managers responsible for things our of their control.

-Favorable variances are not always good and unfavorable variances are not always bad. -Variances provide information that can help managers take corrective action if needed.

Which of the following statements is true?

The production manager is most often responsible for the materials quantity variance.

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). Reason: The spending variance is the different between budgeted and actual fixed overhead.

Which statement regarding variable overhead variance analysis is true?

The variable overhead efficiency variance may depend on the efficiency of the cost driver.

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?

The volume variance is $75 U. Reason: Flexible budget amount for supplies = ($1,800 ÷ 2,400) = $0.75 × 2,500 manicures = $1,875 - $1,800 master budget = $75 U. The spending variance is $125 U. Reason: Flexible budget amount for supplies = ($1,800/2,400) = $0.75 x 2,500 manicures = $1,875 - $2,000 = $125 U

in total

a fixed cost remains fixed _____ withing the relevant range of activity

least squares regression

a statistical technique for finding the best fitting line

The materials price variance is calculated using the ______.

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

Direct labor variances ______.

are computed in the same way as material variances

contribution format income statement

financial statement that organizes costs by their behavior instead of their function is

it may make managers believe they can reduce costs by producing more

fixed costs should not be expressed on a per unit basis because

The process of comparing actual and budgeted results is called

variance analysis

contribution margin

whatever amount of _______ is left over after the fixed costs have been covered becomes net operating income

Which of the following statements are true? -An unfavorable variance is always an indication of a problem that needs correction. -Sometimes a favorable variance can indicate poor performance. -Favorable and unfavorable reflect a difference between actual and standard costs.

Sometimes a favorable variance can indicate poor performance. Favorable and unfavorable reflect a difference between actual and standard costs.

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. (Enter only one word per blank.)

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. (Enter only one word per blank.)

quantity

Combining the direct materials price variance with the direct materials quantity variance is a way to compute the direct materials __________variance. (Enter only one word per blank.)

spending

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 Reason: Wages is a variable cost of $10 per manicure ($20,000 ÷ 2,000) and would be $22,000 at an activity level of 2,200 manicures. rent expense of $2,500 Reason: Rent expense is a fixed cost.

variable

when using the high-low method, the slope of the line equals the __________ cost per unit of activity

mixed costs contain both fixed and variable cost elements both total cost and per-unit cost of mixed costs change with changes in level of activity equation for a straight line can be used to express the relationship between mixed and level of activity

which is true

scattergraph tare used to have Betina define if the linear assumption is reasonable and are a way to diagnose cost behavior

which is true?

high-low method

which may not represent the general trend in the data?

it only uses two data points and it calculates the line based on the most extreme activity data points

which statements about the high-low method are true

with relevant range of activity fixed costs remain constant in total relevant rang of activity is approx. by a straight line outside of the relevant range cost behavior conclusions may not be valid

which statements are true?


Conjuntos de estudio relacionados

History of Economic Thought FINAL

View Set

BUS 140 | Chapter 8 & 9 | Exam (82/90)

View Set

A+P 1: Study Guide Book Questions

View Set

Earth Science Chapter 7 Study Guide

View Set

INTRO TO PHYSCL FITNESS CH 3 NUTRITION AND WELLNESS, CH 4 BODY COMPOSITION, CH 5 WEIGHT MANAGEMENT, & CH 6 CARDIO ENDURANCE

View Set

Euro Industrialization Practice Questions

View Set

ADJUSTABLE RATE MORTGAGES (ARMs)

View Set