Chapter 9 Smartbook: flexible budgets, standard costs, and variance analysis
When 100% peak effort from the most skilled and efficient workers is assumed, the direct labor hours required per unit is being set using ________ standards.
Ideal
The _____ _______ per unit defines the amount of direct materials that should be used for each unit of finished product, including an allowance for normal inefficiencies, such as scrap and spoilage.
standard quantity
Planning budgets are sometimes called _____ budgets.
static b/c A planning budget is prepared using a static level of activity. A flexible budget takes into account what costs should have been at the actual level of activity.
When the standard hours allowed are lower than the actual hours used, the labor efficiency variance is Blank______.
unfavorable
The variance analysis cycle ______ .
begins with the preparation of performance reports
The standard rate per unit that a company expects to pay for variable overhead equals the Blank______.
variable portion of the predetermined overhead rate
The standard price of the material is used in the calculation of the material quantity variance because _______.
using actual prices would hold the production manager responsible for the inefficiencies of the purchasing manager
A budget that is prepared at the beginning of the period for a specific level of activity is called a ______ budget.
planning
Variances are more accurate when using ________ .
multiple cost drivers
The material variance terms price and quantity are replaced with the terms ________ and __________ when computing direct labor variances.
rate hour
The difference between the actual total revenue and what the total revenue should have been, given the actual level of activity for the period is called a(n) _______ variance.
revenue or sales
Which of the following statements is true?
A labor efficiency variance is a quantity variance.
Companies use the ______ _________ cycle to evaluate and improve performance.
variance analysis
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. b/c 6,000 × ($4.00 - $4.10) = $600 F
Which of the following are used to calculate the standard quantity per unit of direct materials?
- Direct materials requirements per unit of finished product - Allowance for waste and spoilage
The materials price variance is calculated using the ______ .
- actual price of the input - standard price of the input - actual quantity of the input purchased
Standards are _______ .
- compared to the actual quantities and costs of inputs - set for each major production input or task - benchmarks for measuring performance
A flexible budget shows what budgeted amounts should have been at the actual level of activity. As a result of this change in activity, the flexible budget will show a change in total ________ .
- variable cost - revenue
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
Estimates of what revenues and costs should have been based on the actual level of activity are shown on the _______ budget.
flexible or flex
When preparing a flexible budget, the level of activity ______.
affects variable costs only
The planning budget, based on 1,000 units, shows revenue of $24,000 and $6,250 for supplies. A total of 1,200 units were actually produced and sold. The flexible budget will show _______ .
- 28,000 revenue - 7500 for supplies b/c $24,000 ÷ 1,000 = $24 per unit × 1,200 = $28,800 b/c $6,250 ÷ 1,000 = $6.25 per unit × 1,200 = $7,500
Which of the following statements are true?
- 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.
If the planned budget revenue for 5,000 units is $120,000, the flexible budget revenue for 4,500 units is _______ .
$108,000 b/c $120,000 ÷ 5,000 = $24 per unit × 4,500 = $108,000
The difference between how much a cost should have been, given the actual level of activity, and the actual amount of the cost is a(n) ______ variance.
spending
A benchmark used in measuring performance is called a(n) ________.
standard, norm, metric
An unchanged planning budget is known as a(n) ______ planning budget.
static
An unchanged planning budget is known as a(n) _______ planning budget.
static
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
The materials price variance is calculated using the ______ quantity of the input purchased.
Actual
The standard cost for _______ manufacturing overhead is computed the same way as the standard cost for direct labor.
Variable
The variance analysis cycle _______ .
begins with the preparation of performance reports
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, usage, or quantity
Using multiple cost drivers on a flexible budget report will generally _______ .
increase accuracy
The terms price and quantity are used when computing direct ______ variance, while the terms rate and hours are used when computing direct ______ variances.
material(s) labor
The labor rate variance measures the productivity of direct labor.
False
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
A price variance is the difference between the ______.
actual price and the standard price multiplied by the actual amount of the input
The material quantity variance measures the difference between the __________ quantity of materials used in production and the ___________ quantity of materials allowed for the actual output, multiplied by the standard price per unit of materials.
actual standard
A quantity variance is ______ .
calculated using the standard price of the input
A spending variance is the _______.
difference between the actual amount of the cost and how much a cost should have been, given the actual level of activity
A revenue variance is the ______.
difference between the actual total revenue and what the total revenue should have been, given the actual level of activity for the period
The standard hours per unit includes both direct and indirect labor hours.
False
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 or usage
A _____ __________ is the difference between how much of an input was actually used and how much should have been used and is stated in dollar terms using the standard price of the input.
quantity variance
A _______ _________ is the difference between how much of an input was actually used and how much should have been used and is stated in dollar terms using the standard price of the input.
quantity variance
A materials price variance is equivalent to a labor ______ variance and a materials quantity variance is equivalent to a labor _______ variance
rate efficiency
