Managerial Accounting Chapters 9 and 10 (Unit 7) Concept Check
unfavorable variance
Actual revenue is less than budgeted revenue
When the standard price is higher than the actual price, the materials price variance is ______.
favorable
A budget that takes into account how costs are affected by changes in level of activity is a(n) ____________ budget.
flexible
A budget that is prepared at the beginning of the period for a specific level of activity is called a ______ budget.
planning
Material requirements plus an allowance for normal inefficiencies are added together to determine the _____________ ___________ of a direct material per unit of output.
quantity standard
SP(AQ-SQ) is the formula for the materials ______________ variance.
quantity
The difference between what the total sales should have been, given the actual level of activity for the period, and the actual total sales is a(n) ____________ variance.
revenue
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
The amount of an input that should have been used to produce the actual output is known as the _____________ quantity of hours allowed.
standard
The labor efficiency variance is the difference between actual hours used and standard hours allowed multiplied by the ______ hourly rate.
standard
How much should be paid for an input is indicated by a price ______________ .
standard.
Planning budgets are sometimes called ______ budgets.
static
When the standard purchase price is less than the actual price paid for materials, the material price variance is ____________.
unfavorable
The standard cost for ______ manufacturing overhead is computed the same way as the standard cost for direct labor.
variable
(Select all that apply) Standards are ______.
--benchmarks for measuring performance --compared to the actual quantities and costs of inputs --set for each major production input or task
Select all that apply Which of the following statements are correct? When the workforce is fixed, managers should focus on managing the labor efficiency variance. Excessive inventories contribute to inefficient operations. Building inventories can reduce unfavorable labor efficiency variances.
-Excessive inventories contribute to inefficient operations. -Building inventories can reduce unfavorable labor efficiency variances.
Which of the following statements are true?
-Standards provide information for measuring performance. -When actual results depart significantly from the standard, the reasons why should be investigated.
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
If poor-quality materials results in excessive labor processing time, the _______________ manager will probably be held responsible for the labor efficiency variance.
purchasing
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 Reason: This is the labor efficiency variance. The labor rate variance is: AH(AR-SR): 5,500 × ($14.75 - $14.00) = $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
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.
$4125; unfavorable
(Select all that apply) 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 standard rate per unit that a company expects to pay for variable overhead equals the ______.
variable portion of the predetermined overhead rate
The same basic formulas used for materials and labor are used to analyze the ___________ portion of the manufacturing overhead.
variable
Fancy Nails has an estimated cost for supplies of $0.75 per manicure. June's budget was based on 2,400 manicures and a total cost for supplies of $1,800. June's actual activity was 2,500 manicures. Total cost of supplies in June was $2,000. Calculate the spending variance for June.
$125 U Reason: Flexible budget amount for supplies: $0.75 × 2,500 manicures = $1,875. Spending variance: $1,875 - $2,000 = $125 U.
A company's cost of supplies for when 5,000 units are sold is $7,500 of fixed costs plus $1.25 variable cost per unit. What is the increase in the total cost of supplies if 350 more units are sold than expected?
$437.50
Given the following, the standard cost of this item is $ _________ per unit. 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
Given the following, the standard cost of this item is $____________________ per unit. 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
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
$26 Reason: Materials (4 pounds × $1.25) + Labor (1.5 hours × $10.00) + Overhead (1.5 hours × $4.00) = $26.00
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
$26 Reason: Materials (4 pounds × $1.25) + Labor (1.5 hours × $10.00) + Overhead (1.5 hours × $4.00) = $26.00
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
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
$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; F
The spending variance is ______.
(AQ × AP) - (SQ × SP)
(Select all that apply) Excessive inventory on hand, especially in the work in process inventory account, may lead to ______.
-high defect rates -inefficient operations -obsolete goods
Revenue on the planning budget is expected to be $380,000 for 1,900 client visits. The revenue on the flexible budget is $410,000, showing that there were actually ______ client visits.
2050
Which of the following statements is true?
A labor efficiency variance is a quantity variance.
True or false: A static budget is being compared to actual activity. The variance is F for net income but U for most expenses. This suggests that actual activity was lower than budgeted.
False
True or false: All materials variances are generally the responsibility of the production manager.
False
True or false: Quantity standards refer to the price to be paid for each unit of the input.
False
True or false: The labor rate variance measures the productivity of direct labor.
False
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
True or false: The standard hours per unit includes both direct and indirect labor hours.
False
The labor efficiency variance is generally the responsibility of the ______ manager.
production
The materials price variance is calculated using the ______ quantity of the input purchased.
actual
To calculate a quantity variance, multiply the _____________ quantity times the standard price and compare it to the standard quantity allowed times the ____________ price.
actual standard
The spending variance is labeled as favorable when the ______.
actual cost is less than what the cost should have been at the actual level of activity
A price variance is the difference between the ______.
actual price and the standard price multiplied by the actual amount of the input
favorable variance
actual revenue is more than budgeted revenue
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
A quantity variance is ______.
calculated using the standard price of the input
A spending variance is the ______.
difference between what a cost should have been at the actual level of activity and the actual amount of the cost
A revenue variance is the ______.
difference between what revenue should have been at the actual level of activity and the actual revenue
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
When actual revenue ______ what the revenue should have been, the variance is labeled favorable.
exceeds
When less hours are worked than the standard hours allows, the labor efficiency variance is __________.
favorable
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
Comparing actual costs to what the costs should have been for the actual level of activity is done on a(n) __________ budget.
flexible
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
When comparing the static planning budget to actual activity, a problem that arises when actual activity is higher than budgeted activity is that ______.
net income is higher than expected but all or most expense variances are unfavorable
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 purchasing manager is generally responsible for the material __________ variance, and the production manager is generally responsible for the material ____________ variance.
price 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 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
Material requirements plus an allowance for normal inefficiencies are added together to determine the _________________ ______________ of a direct material per unit of output.
quantity standard
A materials price variance is equivalent to a labor _____________ variance and a materials quantity variance is equivalent to a labor ___________ variance.
rate efficiency
The standard hours per unit of an output includes ______.
the estimated time to complete the unit an allowance for cleanup and downtime
Select all that apply When setting direct labor standards ______.
the production manager should be consulted time and motion studies may be used it is best to use "tight but attainable" standards
The same basic formulas used for materials and labor are used to analyze ______ portion of manufacturing overhead.
the variable
If the actual cost is greater than what the cost should have been, the variance is labeled as ______________ .
unfavorable
The material variance terms price and quantity are replaced with the terms __________ and ___________ when computing direct labor variances.
rate; hours
The calculation of a standard price per unit of direct materials includes ______.
shipping costs purchase discounts purchase price of the materials
A benchmark used in measuring performance is called a(n) ______________.
standard
Poor supervision is one possible cause of an unfavorable ______ variance.
labor efficiency
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
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 price per unit for direct materials ______.
can change based on a change in the delivery method
Select all that apply Which of the following statements are true?
-Standards provide information for measuring performance. -When actual results depart significantly from the standard, the reasons why should be investigated.
A favorable activity variance may not indicate good performance because a favorable activity variance ______.
for a variable cost will occur simply because the actual level of activity is less than the budgeted level of activity
Unfavorable activity variances may not indicate bad performance because ______.
increased activity should result in higher variable costs
SR(AH - SH) is the formula for the ______ variance.
labor efficiency
The difference between the standard and the actual direct labor hourly rates is reflected in the ___________ __________ variance.
labor; rate
How much input should be used to produce a product or provide a service is a(n) ___________ standard.
quantity
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
An unfavorable materials quantity variance occurs when ______.
the actual amount of material used is greater than the standard amount of material allowed for the actual output
When the standard hourly rate is lower than the actual rate, the labor rate variance is ______.
unfavorable
When the standard hours allowed are lower than the actual hours used, the labor efficiency variance is ______.
unfavorable
