ACCT 102 final exam study!
Price Variance
(AP - SP) X ATQU or ATHU = Variance (F or U)
Computation of sales price variance
(ASP - PSP) X AUS = Variance (F or U)
Usage variance
(ATQU or ATHU - STQA or STHA) X SP = Variance (F or U)
Computation of Sales volume variance
(AUS - PUS) X PSP
Budget slacks
(Costs) Overstate budget costs on purpose so that when compared to actual results have a better chance of getting a favorable variance.
Low Balling
(Revenue) Understate budget revenue on purpose so that when compared to actual results have a better chance of getting a favorable variance.
AUC, SUC and AUM are known as
- Actual Unit Cost (Actual Quantity Per Unit or Actual Hours Per Unit X Actual Unit Price) - Standard Unit Cost (Standard Quantity Per Unit or Standard Hours Allowed Per Unit X Standard Unit Price) -Actual Units Made
3 common levels of strandards
- Ideal standards -practical standards -lax standards
AP, SP and ATQU or ATHU is known as
-Actual Price Per Unit -Standard Price Per Unit -Actual Total Quantity Used or Actual Total Hours Used
ATQU or ATHU and STQA or STHA are known as
-Actual Total Quantity Used or Actual Total Hours Used -Standard Total Quantity Allowed or Standard Total Hours Allowed
Shimano Company makes a product that is expected to require 2 hours of labor per unit of product. The standard cost of labor is $5.20. Shimano actually used 1.9 hours of labor per unit of product. The actual cost of labor was $5.10 per hour. Shimano made 1,000 units of product during the period. Based on this information alone, the labor price variance is A. $190 favorable. B. $190 unfavorable. C. $510 favorable. D. $510 unfavorable
A. $190 favorable. ($5.10 - $5.20) X 1,900(a) = $190 favorable (a)1,000 units made X 1.9 hours per unit = 1,900
MO standards
Flexible budget at actual volume - actual results at actual volume = flexible budget variance
Material standards
Specifications for materials including price and usage
Cost Standards
Standards are what should be the price/cost or quantity needed to produce 1 unit
computation of sales variances
Total sale variance (AS - PS) = Variance (F or U)
Static Budget
based on only one level of activity
Lax Standards
easily attainable- Can be achieved with minimal effort
flexible budget
expected revenues and costs over a variety of volume levels
Ideal standard
perfect performance under best possible conditions- Most companies cannot achieve ideal standards- use as a starting point to develop standards.
PUS is known as
planned units sold
Most companies use...
practical standards
Practical Standards
reasonable efforts attainable by most companies- Allows for normal levels of inefficiency such as: -Waste -Spoilage -Labor inefficiencies (employees gets sick, downtime, etc.) -External factors - snowstorms, hurricanes, etc.
major differences
total fixed costs remain the same; total variable costs will change as volume changes
A flexible budget is used when...
volume levels might change during the budget period.
Standard cost systems facilitate the management practice known as A. management development. B. management by exception. C. just-in-time management. D. managing by the numbers.
B. management by exception.
A budget prepared at a single volume of activity is referred to as a A. strategic budget. B. static budget. C. standard budget. D. flexible budget.
B. static budget.
Assuming actual sales volume is 11,000 units and planned sales volume is 10,000 units, the sales volume variance in units A. is 1,000 units favorable. B. is 1,000 units unfavorable. C. cannot be determined without additional information. D. None of these
A. is 1,000 units favorable.
Total Flexible Budget Variance
AUC - SUC) X AUM = Variance (F or U)
AS is known as
Actual Sales (Actual Units Sold X Actual Sales Price per unit)
ASP is known as
Actual Sales Price per unit
AUS is known as
Actual Units Sold
Select the incorrect statement regarding flexible budgets. A. Standard prices and costs are used in preparing a flexible budget. B. A flexible budget is also known as a static budget. C. Flexible budgets show the estimated revenues and costs at multiple volume levels. D. A master budget can be prepared using flexible budgeting.
B. A flexible budget is also known as a static budget.
Sometimes employees will deliberately overstate the amount of materials and/or labor costs that should be required to complete a job. The difference between inflated and realistic cost standards is known as A. lowballing. B. budget slack. C. cooking the books. D. making the numbers.
B. budget slack.
Gonzalez Company makes a product that is expected to use 1.2 pounds of material per unit of product. The material has a standard cost of $2 per pound. Gonzalez actually used 1.1 pounds of material per unit of product made in January. The actual cost of material was $2.10 per pound. Based on this information alone, the condition of the variances for the January production would be A. unfavorable for price and unfavorable for usage. B. unfavorable for price and favorable for usage. C. favorable for price and unfavorable for usage. D. favorable for price and favorable for usage.
B. unfavorable for price and favorable for usage.
Difficulty Levels of Standards
Budgets are developed based on standards (what is expected for the next period)
Keiko Company makes a product that is expected to require 2 hours of labor per unit of product. The standard cost of labor is $6.00. Keiko actually used 1.9 hours of labor per unit of product. The actual cost of labor was $6.25 per hour. Keiko made 1,100 units of product during the period. Based on this information alone, the labor usage variance is A. $190 favorable. B. $600 favorable. C. $660 favorable D. $660 unfavorable
C. $660 favorable
Which range of difficulty should normally be used to develop standards? A. Ideal standards B. Lax standards C. Practical standards D. None of these
C. Practical standards
Static and flexible budgets are similar in that A. they both are prepared for multiple activity levels. B. they both concentrate solely on costs. C. they both are based on the same per unit variable amounts and the same total fixed costs. D. none of these.
C. they both are based on the same per unit variable amounts and the same total fixed costs.
sales variances
Comparing actual revenue (sales) to planned (also referred to as budgeted, projected or standard) revenue
Which of the following equations can be used to compute the total materials variance? (A = Actual; S = Standard; Q = Quantity; P = Price) A. (SQ SP) (SQ SP) B. (AQ SP) (SQ SP) C. (AQ AP) (AQ SP) D. (AQ AP) (SQ SP)
D. (AQ AP) (SQ SP)
When would a variance be labeled as favorable? A. When standard costs are equal to actual costs B. When standard costs are less than actual costs C. When expected sales are greater than actual sales D. When actual costs are less than standard costs
D. When actual costs are less than standard costs
PS is known as
Planned Sales (Planned Units to Be Sold X Planned Sales Price per unit)
PSP is known as
Planned Sales Price per unit
A static budget is used when...
a company does not expect that volume levels will change for the budget period.