Accounting Class - Chapter 9 SmartBook

If actual direct labor hours worked are higher than standard hours allowed but the actual labor rate paid is lower than the standard rate allowed, the direct labor rate variance will be

favorable

When making standard cost journal entries, ______ variances are always recorded as credits.

favorable

Managers are able to separate variances that are due to the volume of output (called volume variances) from variances that are due to the amount spent on the various inputs (called spending variances) when using a

flexible budget only

Standard cost systems

help maintain consistency and quality help managers budget and control costs are based on what managers think costs should be

Using practical capacity as the denominator when calculating fixed overhead rates

highlights the cost of unused capacity prevents rates from changing due to demand fluctuations

Responsibility for the direct labor rate variance falls on the ______ managers

hiring production

A fixed overhead volume variance

is interpreted based on the measure used in the denominator of the fixed overhead rate reflects the accuracy of the denominator used to compute the fixed overhead rate

If actual direct labor hours worked are higher than standard hours allowed but the actual labor rate paid is lower than the standard rate allowed, the direct labor efficiency variance will be

unfavorable

If the actual cost is greater than budgeted cost, the variance is labeled as

unfavorable

When recording standard cost journal entries, a debit indicates that the variance is

unfavorable

A flexible budget variance is calculated by comparing the master budget to the flexible budget.

volume

If a master budget was based on 15,000 units and 18,000 units are actually produced, the volume variances for variable costs

will be unfavorable

An unfavorable labor efficiency variance can result from

worker skill level

The formula for the unexpected capacity variance is the same as the formula for the ______ variance.

volume

Creating the flexible budget allows managers to identify both and variances.

volume spending

When a company bases fixed overhead on a practical capacity of 15,000 units, the company will have a fixed overhead capacity variance

whenever it produces anything other than 15,000 units

Company standards call for a labor rate of $22 per hour and 1/2 hours per unit produced. If 1,000 units are produced using 450 hours at a total labor cost of $10,800,

Direct labor rate variance will be debited for $900 Wages payable will be credited for $10,800

Using the information provided, calculate the direct materials price variance. Using the information provided, calculate the direct materials price 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

$1,040 U

Given the following information, calculate the variable overhead efficiency variance. Actual hours 1,500 Standard hours allowed 1,350 Actual variable overhead rate $3.00 per hour Standard variable overhead rate $3.50 per hour

$525 U

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 U

Using the information provided, calculate the direct materials price variance. Standard price: $2.30 per pound Actual price: $2.10 per pound Actual quantity used: 4,400 pounds Standard quantity allowed: 4,500 pounds

$880 F

Which of the following statements is true?

A material quantity variance could be related to the quality of materials.

The formula for a price variance is

AQ × (SP - AP)

Which of the following are common causes of favorable variances?

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

Which of the following formulas for the fixed overhead volume variance is correct?

Applied Fixed Overhead - Budgeted Fixed Overhead

Company standards call for a labor rate of $22 per hour and 1/2 hours per unit produced. If 1,000 units are produced using 450 hours at a total labor cost of $10,800

Direct labor rate variance will be debited for $900 Wages payable will be credited for $10,800

Which of the following statements about the fixed overhead capacity are true?

The fixed overhead capacity variance helps managers understand how fixed resources are being used. The fixed overhead capacity variance highlights the cost of any unused capacity.

A company's practical capacity is 15,000 units. The budget calls for 10,000 units to be produced and 13,000 units are actually produced. Which of the following statements about the planned and unplanned fixed overhead capacity variances is correct?

The planned variance is unfavorable and the unplanned variance is favorable.

A company's budgeted fixed overhead is $7,000 based on 4,000 units. If the company actually produces 3,500 units, which of the following statements are true?

The total fixed overhead applied to production will be less than $7,000. The fixed overhead volume variance will be unfavorable.

Which statement regarding variable overhead variance analysis is true?

The variable overhead efficiency variance depends on the efficiency of the cost driver.

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

True

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

actual

A variance is labeled as favorable when the

actual cost is less than the standard or budgeted cost

Practical capacity

allows for some downtime

Direct labor variances

are computed using the same basic framework as direct material variances

Quantity and price standards

are developed for both direct materials and direct labor

Direct labor standards

are stated in terms of quantity and price use the time it should take to produce a single unit

The fixed overhead spending variance is also called the fixed overhead variance.

budget

The total overapplied or underapplied fixed overhead is the sum of the fixed overhead spending variance and the fixed overhead volume variance when fixed overhead rates are based on ______ production volume

budgeted

Unplanned Fixed Overhead Capacity variances are based on the difference between

budgeted and actual volume

The volume variance is the difference between ______ fixed overhead.

budgeted and applied

Planned Fixed Overhead Capacity variances are based on the difference between

budgeted volume and practical capacity

When preparing journal entries in a standard cost system, standard costs are the and actual costs are the

debit credit

A company uses a standard cost system and purchased 1,000 pounds of material. The actual cost was $1.00 per pound. The standard cost is $.90 per pound. The entry to Direct Materials to record this purchase is a

debit for $900

A company purchases a material at a standard cost of $.10 per ounce. The purchase of 50,000 ounces at $.11 per ounce on account using a standard cost system would include a

debit to Direct Materials Price Variance for $500 credit to Accounts Payable for $5,500

Ideal standards are problematic because they

demand peak effort at all times tend to discourage workers

The framework used to analyze fixed overhead variances ______ that used to analyze variable cost variances.

differs from

Wally's Widgets' budgeted fixed overhead is $8,000. The company expects to produce 4,000 units which is 1,000 under practical capacity. The fixed overhead rate based on practical capacity is ______ per unit.

$1.60

Abba, Inc. has developed the following standards for one of its products: Direct materials - 1/2 pound at $6.00 per pound; Direct labor - 1/4 hour at $20.00 per hour; Variable overhead - 20% of direct labor cost. Total fixed overhead is expected to be $15,000 and the company expects to produce 7,500 units. The standard cost card for this product will show a cost per unit of

$11.00

A company estimated $17,500 of variable overhead for 3,500 machine hours. Actual cost was $16,240 for 2,800 hours. Calculate the variable overhead rate variance.

$2,240 U

Based on the following information, calculate the variable overhead rate variance. Actual variable overhead cost: $15,540 Actual machine hours: 4,200 Standard machine hours: 4,000 Standard variable overhead rate $3.75 per hour

$210 F

Using the information provided, calculate the direct materials quantity variance. Standard price: $2.30 per pound Actual price: $2.10 per pound Actual quantity used: 4,400 pounds Standard quantity allowed: 4,500 pounds

$230 F

A company estimated $17,500 of variable overhead for 3,500 machine hours. Actual cost was $16,240 for 2,800 hours. Calculate the variable overhead efficiency variance.

$3,500 F

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 U

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 rate: $14.75 per hour Standard rate: $14.00 per hour

$4,200 F

The fixed overhead spending variance is calculated by comparing actual fixed overhead to applied fixed overhead.

False

A complicated production process is one possible cause of an unfavorable ______ variance.

direct labor efficiency

The total budget variance ______ provide much insight into the root cause of the variance.

doesn't

A variable overhead rate variance may be favorable because

less money was spent on supplies and other variable overhead items the wrong cost driver was used to assign overhead

The difference in actual manufacturing costs and the ______ budget is called the total budget variance.

master

A favorable material price variance

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

If a master budget was based on 15,000 units and 18,000 units are actually produced, the spending variances for variable costs

may be favorable or unfavorable

A fixed overhead volume variance

occurs when actual volume differs from the volume used to compute the fixed overhead rate

Unfavorable labor rate variances may occur as a result of

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

The volume that could be achieved under normal (not ideal) operating conditions is known as

practical capacity

The two types of standard in a standard cost system are and

price quantity

The materials quantity variance is generally the responsibility of the ______ manager.

production

The materials price variance is generally the responsibility of the ______ manager.

purchasing

How much input should be used to produce a product or provide a service is specified by standards

quantity

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.

rate efficiency

The variable overhead efficiency variance

really measures the efficiency of the underlying cost driver

When using a standard cost system, differences between actual and standard costs are

recorded as cost variances

When using standard cost journal entries, the entry for direct labor

records both the labor rate and the labor efficiency variance

When direct materials are placed into production, the standard cost journal entry

records the material quantity variance only

Actual costs are compared to the flexible budget when computing ______ variances.

spending

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

spending

The two types of variances for fixed overhead are FOH

spending volume

When the fixed overhead rate is based on budgeted production volume, the total overapplied or underapplied fixed overhead is the sum of the fixed overhead variance and the fixed overhead variance

spending volume

Costs are recorded based on what managers think they should be, not based on actual costs in a (n) cost system.

standard

The amount a company should spend to produce a single unit of product based on expected production and sales is shown on a(n) card.

standard cost

A company is adding materials to Work in Process for the production of 10,000 widgets. In a standard cost system, the amount debited to Work in Process Inventory for materials is based upon

the standard cost and quantity of materials allowed

Reasonable, efficient efforts from employees are required when standards used are

tight but attainable

The difference in actual manufacturing costs and the master budget is called the variance

total budget