Accounting Ch 10
favorable (F)
A negative number should be labeled as a ____ variance
unfavorable (U)
A positive number should be labeled as an _____ variance
Production Manager
Responsibility for Labor Variances
Purchasing Manager
Responsibility for Materials Price Variance
Production manager
Responsibility for Materials Quantity Variance
standards
"norms" or benchmarks for measuring performance
Price and quantity
2 kinds of standards
Price Variance
Difference between actual price and standard price, measure how well the acquisition prices of resources are controlled.
price and quantity variances
Spending variances can be broken down into...
Standard Hours per Unit
The amount of direct labor-hours that should be used to produce one unit of finished goods.
Standard Quantity per Unit
The amount of direct material that should be used for each unit of finished good, including an allowance for normal inefficiencies such as scrap and spoilage.
Quantity Standard
The amount of the allocation base that is required to produce one unit of finished goods.
B
If the labor spending variance is $93 unfavorable, and the rate variance is $87 favorable, then the efficiency variance must be A) $180 F B) $180 U C) $ 6 F D) $ 6 U
C
About the General Model for Variance Analysis, which of the following statements is wrong? A) A positive number should be labeled as an unfavorable variance. B) A negative number should be labeled as a favorable variance. C) Standard quantity allowed refers to the amount of an input that have been used to manufacture the planned level of activity. D) The general model can be used to compute a price variance and a quantity variance for each of the three variable cost elements - DM, DL, and VMOH.
1) Standard costs are a key element of the management by exception approach. 2) Standards can provide benchmarks that promote economy and efficiency. 3) Standards can greatly simplify bookkeeping. 4) Standards can support responsibility accounting systems.
Advantages of Standard Costs (4)
Standard Rate per Hour
Company's expected direct labor wage rate per hour.
Quantity Variance
Difference between actual quantity and standard quantity, measures how efficiently those resources are used.
C
Hanson Inc. has the following direct labor standard to manufacture one Zippy: 1.5 standard hours per Zippy at $12.00 per direct labor hour Last week, 1,550 direct labor hours were worked at a total labor cost of $18,910 to make 1,000 Zippies. Hanson's labor efficiency variance (LEV) for the week was: A) $590 unfavorable. B) $590 favorable. C) $600 unfavorable. D) $600 favorable.
A
Hanson Inc. has the following direct labor standard to manufacture one Zippy: 1.5 standard hours per Zippy at $12.00 per direct labor hour Last week, 1,550 direct labor hours were worked at a total labor cost of $18,910 to make 1,000 Zippies. Hanson's labor rate variance (LRV) for the week was: A) $310 unfavorable. B) $310 favorable. C) $300 unfavorable. D) $300 favorable.
B
Hanson Inc. has the following direct materials standard to manufacture one Zippy: 1.5 pounds per Zippy at $4.00 per pound Last week, 1,700 pounds of materials were purchased and used to make 1,000 Zippies. The materials cost a total of $6,630. Hanson's materials price variance (MPV) for the week was: A) $170 unfavorable. B) $170 favorable. C) $800 unfavorable. D) $800 favorable.
C
Hanson Inc. has the following direct materials standard to manufacture one Zippy: 1.5 pounds per Zippy at $4.00 per pound Last week, 1,700 pounds of materials were purchased and used to make 1,000 Zippies. The materials cost a total of $6,630. Hanson's materials quantity variance (MQV) for the week was: A) $170 unfavorable. B) $170 favorable. C) $800 unfavorable. D) $800 favorable.
C
Hanson Inc. has the following variable manufacturing overhead standard to manufacture one Zippy: 1.5 standard hours per Zippy at $3.00 per direct labor hour Last week, 1,550 hours were worked to make 1,000 Zippies, and $5,115 was spent for variable manufacturing overhead. Hanson's efficiency variance (VMEV) for variable manufacturing overhead for the week was: A) $435 unfavorable. B) $435 favorable. C) $150 unfavorable. D) $150 favorable.
A
Hanson Inc. has the following variable manufacturing overhead standard to manufacture one Zippy: 1.5 standard hours per Zippy at $3.00 per direct labor hour Last week, 1,550 hours were worked to make 1,000 Zippies, and $5,115 was spent for variable manufacturing overhead. Hanson's rate variance (VMRV) for variable manufacturing overhead for the week was: A) $465 unfavorable. B) $400 favorable. C) $335 unfavorable. D) $300 favorable.
C
If the material efficiency variance is favorable it means that: A) The price of the materials was cheaper than expected in our standard B) We used more materials than allowed by the standard C) We used less materials than allowed by the standard D) The price of materials is higher than expected in our standard
1) Standard cost variance reports are usually prepared on a monthly basis and may contain information that is outdated. 2) In some cases, a "favorable" variance can be as bad or worse than an unfavorable variance. 3) Just meeting standards may not be sufficient; continuous improvement may be necessary to survive in a competitive environment. 4) Excessive emphasis on meeting the standards may overshadow other important objectives such as maintaining and improving quality, on-time delivery, and customer satisfaction.
Potential Problems with Standard Costs (4)
1) Mix of skill levels assigned to work tasks. 2) Level of employee motivation. 3) Quality of production supervision. 4) Quality of training provided to employees.
Production managers can influence what 4 things?
Price Standard for VMOH
The per unit price company needs to pay for variable overhead is the variable portion of the predetermined overhead rate.
Standard Price per Unit
The price that should be paid for each unit of direct material.
