Test 3 Chapter 9 and 10 Learnsmart Questions
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
Commission expense is budgeted to be $16,000 at a planned sales level of 4,000 units. If only 2,900 units are sold, how much commission expense will appear on the flexible budget, and is the activity variance favorable or unfavorable?
$11,600 and favorable
Variable Overhead Rate Variance
The difference between the actual variable overhead cost incurred during a period and the standard cost that should have been incurred based on the actual activity of the period.
Graphic analysis of fixed overhead offers insight into the fixed overhead ______.
budget and volume variances
The volume variance is the difference between ______ fixed overhead.
budgeted and applied
A revenue variance is the ______.
difference between what revenue should have been at the actual level of activity and the actual revenue
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
When the activity level increases by 15%, net operating income in the flexible budget will ordinarily increase by ______ 15%
more. because an increase in activity level by 15% does not affect fixed cost
Options to generate a favorable revenue and spending variance include ______.
protecting the selling price, reduce the price of inputs, increase operating efficiency
Most companies compute the material price variance when materials are ______ and the material quantity variance when materials are ______.
purchased, used
Nonprofit organizations ______.
- may have revenue sources that are fixed - usually have significant funding sources other than sales
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.
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 difference between the actual materials used in production and the standard amount allowed for the actual output is reflected in the
materials quantity variance
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
In a standard costing system, variable and fixed overhead are applied to production using the ______ hours allowed for the ______ production. Multiple choice question.
standard, actual
The difference between the actual hours used and the standard hours allowed for the actual output is used in the calculation of
the labor efficiency variance
The variance analysis cycle begins with _________.
the preparation of performance reports
The materials price variance is generally calculated at the time materials are purchased because ______.
- it allows materials to be carried in the inventory accounts at standard cost management can generate more timely variance reports - it simplifies bookkeeping
Budgeted fixed overhead - Fixed overhead applied to work in process is the calculation of the ______ variance.
volume
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
Which of the following statements are true? Multiple select question.
- Managers should not use standards to assign blame. - Standard cost reports may be too outdated to be useful.
Which of the following statements are true?
- Treating fixed costs as variable is necessary for product costing. - Fixed costs are applied to work in process like they are variable costs.
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.
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 unfavorable
Which of the following statements is true? A. Fixed costs are often more controllable than variable costs. B. A cost is fixed if it is proportional to activity. C. It is easier to significantly reduce variable costs than to reduce fixed costs.
A. Fixed costs are often more controllable than variable costs.
Performance reports for cost centers ______.
do not include revenues or net income
In a standard cost system, ______.
every unit of output is charged with the same amount of overhead cost
True or false: The standard hours per unit includes both direct and indirect labor hours.
false
If overhead is overapplied, the total of the standard cost overhead variances is
favorable
The percentage change in net income in the flexible budget is greater than the percentage change in activity due to ______ costs.
fixed
Planning budgets are sometimes called ______ budgets.
Static
Variable Overhead Efficiency Variance
The difference between the actual level of activity (direct labor-hours, machine-hours, or some other base) and the standard activity allowed, multiplied by the variable part of the predetermined overhead rate.
The calculation of the budget variance uses ______.
- budgeted fixed overhead - actual fixed overhead
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.
The labor rate variance is: AH(AR-SR): 5,500 × ($14.75 - $14.00) = $4,125 Unfavorable
