Chapter 10

standard price per unit

defines the price that should be paid for each unit of direct materials and should reflect the final, delivered cost of those materials

standard rate per unit

equals the variable portion of the predetermined overhead rate

true/false: a negative price variance is unfavorable

false

true/false: it is assumed that labor is a fixed cost

false

the formulas for direct labor variance and variable overhead variances are the same, except for what

instead of using SR, standard rate per labor hour, use VP, variable portion of predetermined overhead rate

SH for labor variances is used in what and stands for what

labor efficiency variance standard quantity of labor hours allowed for the actual output

direct labor quantity and price standards are usually expressed in terms of

labor hours or a labor rate

AH for labor variances is used in what and stands for what

labor rate and efficiency variances actual quantity of labor hours used in production

SR for labor variances is used in what and stands for what

labor rate and efficiency variances standard rate per direct labor hour

AR for labor variances is used in what and stands for what

labor rate variance actual rate per direct labor hour

direct labor spending variance equation in words

labor rate variance - labor efficiency variance

AQ is used in what and stands for what

materials price and quantity variances actual quantity of inputs purchased and used in production

SP is used in what and stands for what

materials price and quantity variances standard price per unit of the input

AP is used in what and stands for what

materials price variance actual price per unit of the input

direct materials spending variance equation in words

materials price variance - materials quantity variance

SQ is used in what and stands for what

materials quantity variance standard quantity of inputs allowed for the actual output

standard hours per unit (for variable overhead)

measures the amount of the allocation base from a company's predetermined overhead rate that is required to produce one unit of finished goods

how is the standard hours allowed calculated

multiply the actual output by the standard hours per unit

how is the standard quantity allowed calculated

multiply the actual output by the standard quantity per unit

how do you find the standard direct labor cost per unit

multiply the standard hours per unit by the standard rate per hour

how do you find the standard variable manufacturing overhead cost per unit

multiply the standard hours per unit by the standard rate per unit

how do you find the standard direct materials cost per unit

multiply the standard quantity per unit by the standard price per unit

who is responsible for deviance from quantity standards

production manager

who is responsible for the materials quantity variance

production manager

who is responsible for deviance from price standards

purchasing manager

who is responsible for the materials price variance

purchasing manager

when the quantity of materials purchased differs from the quantity of materials used, which is used for materials price variance

quantity of materials purchased

when the quantity of materials purchased differs from the quantity of materials used, which is used for materials quantity variance

quantity of materials used

what variances indicate how well costs were controlled given the actual level of activity

revenue and spending variances

standard cost card

shows the standard quantity/hours and standard price/rate of the direct materials, direct labor, and variable manufacturing overhead require to produce a unit of product

quantity standards

specify how much of an input should be used to make a product or provide a service

price standards

specify how much should be paid for each unit of the input

standard hours allowed

the amount of input that should have been used to manufacture the actual output of finished goods produced (when computing direct labor and variable overhead variances)

standard quantity allowed

the amount of input that should have been used to manufacture the actual output of finished goods produced (when computing direct materials variances)

the impact on profit of a change in the level of activity is captured in

the overall net operating income activity variance

true/false: a positive quantity variance is unfavorable

true

true/false: standard cost variance reports are usually prepared on a monthly basis and can become outdated

true

true/false: standard costs can greatly simplify bookkeeping

true

true/false: when the direct labor efficiency variance is favorable, the variable overhead efficiency variance will always be favorable

true

what happens when the quantity of materials purchased differs from the quantity of materials used

use the quantity of materials purchased for the materials price variance and use the quantity of materials used for the materials quantity variance

the _____ portion of manufacturing overhead can be analyzed using the same basic formulas that we used for direct materials and direct labor

variable

SH for variable overhead variances is used in what and stands for what

variable overhead efficiency variance standard quantity of labor hours allowed for the actual output

VP for variable overhead variances is used in what and stands for what

variable overhead rate and efficiency variances variable portion of the predetermined overhead rate

AR for variable overhead variances is used in what and stands for what

variable overhead rate variance actual rate per labor hour

variable overhead spending variance equation in words

variable overhead rate variance - variable overhead efficiency variance

when will the standard hours per unit for variable overhead and the standard hours per unit for labor be equal

when they use the same allocation base (direct labor hours)

does the standard price per unit reflect the delivered cost of materials

yes

does the standard quantity per unit allow for scrap and spoilage

yes

does the standard rate per hour include employment taxes and fringe benefits

yes

in price, quantity, and spending variances, what means it's favorable

a negative number

in price, quantity, and spending variances, what means it's unfavorable

a positive number

how do you find the total standard cost per unit

add up the standard costs for direct materials, direct labor, and variable manufacturing overhead

standard cost variance analysis

decomposes spending variances from the flexible budget into a price variance and a quantity variance

standard hours per unit (for labor)

defines the amount of direct labor hours that should be used to produce one unit of finished goods

standard quantity per unit

defines the amount of direct materials that should be used for each unit of finished product, including an allowance for scrap and spoilage

standard rate per hour

defines the company's expected direct labor wage rate per hour, including employment taxes and fringe benefits