Chapter 10

Most companies compute the material price variance when materials are Blank______ and the material quantity variance when materials are

purchased, used

The difference between the amount of an input used and the amount that should have been used, all evaluated at the standard price for the input, is called a Blank______ variance.

quantity

An unfavorable materials quantity variance occurs when

the actual amount of material used is greater than the standard amount of material allowed for the actual output

If managers consider it unwise to adjust the workforce in response to changes in workload Blank_

the direct labor workforce is really fixed in the short run

When setting direct labor standards

the production manager should be consulted time and motion studies may be used it is best to use "tight but attainable" standards

The same basic formulas used for materials and labor are used to analyze the

variable

The standard rate per unit that a company expects to pay for variable overhead equals the

variable portion of the predetermined overhead rate

Which of the following are used to calculate the standard quantity per unit of direct materials

Allowance for normal scrap and spoilage. Direct materials requirements per unit of finished product

Which of the following statements are true

How production supervisors use direct labor workers can lead to labor rate variances. Overtime premiums can cause an unfavorable labor rate variance.

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

Standards are

benchmarks for measuring performance set for each major production input or task compared to the actual quantities and costs of inputs

The standard cost for Blank______ manufacturing overhead is computed the same way as the standard cost for direct labor.

Variable

Which of the following statements are true

When actual results depart significantly from the standard, the reasons why should be investigated. Standards provide information for measuring performance.

true statements

When the workforce is fixed, managers must be cautious about how labor efficiency variances are used. Excessive inventories contribute to inefficient operations.

A price variance is the difference between the Blank

actual price and the standard price multiplied by the actual amount of the input

The standard hours per unit of an output include

an allowance for cleanup and downtime the estimated time to complete the unit

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

eason: The variable overhead efficiency variance uses the standard, not the actual rate. When actual hours are greater than standard, the variance is unfavorable. (1,350 - 1,500) x $3.50 = $525 U.

The difference between the actual level of activity and the standard activity allowed for the actual output x the variable part of the predetermined overhead rate is the variable overhead Blank______ variance

efficiency

When using a standard cost system, Blank

employees may take unfavorable actions to ensure favorable variances an undue emphasis on labor efficiency can create pressure to build excess inventory

An unfavorable labor efficiency variance can result from Blank

faulty equipment poor quality materials unmotivated workers

Unfavorable labor rate variances may occur as a result of

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

Advantages to using a standard cost system include Blank

standards provide benchmarks to evaluate and improve performance standard costs can simplify bookkeeping

The quantity variance is

(AQ x SP) - (SQ x SP)

The spending variance is

(AQ × AP) − (SQ × SP)

The standard price of materials is $4.10 per pound and the standard quantity allowed for actual output is 5,800 pounds. If the actual quantity purchased and used was 6,000 pounds, and the actual price per pound was $4.00, the materials price variance is Blank___

6,000 × ($4.00 - $4.10) = $600 F

Which of the following statements is true?

A labor efficiency variance is a quantity variance.

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 Blank______.

AH(AR-SR): 5,500 × ($14.75 - $14.00) = $4,125 U

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

Actual

The standard hours per unit includes both direct and indirect labor hours

F .The standard hours per unit only includes direct labor hours.

When less hours are worked than the standard hours allows, the labor efficiency variance is

FAV

When the actual hourly rate is lower than the standard hourly rate, the labor rate variance is

FAV

(Actual cost per unit - standard cost per unit) × actual quantity = the materials

PRICE

The labor efficiency variance is generally the responsibility of the Blank______ manager.

Production

How much input should be used to produce a product or provide a service is a(n)

Quantity

Material requirements plus an allowance for normal inefficiencies are added together to determine the xx per unit of output for direct materials

Quantity standard

The difference between the standard and the actual direct labor wages per hour is reflected in the labor

Rate

The material variance terms price and quantity are replaced with the terms

Rate and hours

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 efficiency variance is Blank______. Multiple choice question.

Reason: $14.00 × (5,800 - 5,500) = $4,200 F. This is the labor rate variance.

Which statement regarding variable overhead variance analysis is true?

The variable overhead efficiency variance depends on the efficiency of direct labor.

When the actual cost incurred exceeds the standard cost allowed for the actual level of output, the spending variance is

U

When the standard purchase price is less than the actual price paid for materials, the material price variance is Blank

UN

A planning budget called for 500 units to be produced and total direct labor cost of $7,500. Actual production was 600 units and actual direct labor cost was $9,300. The spending variance is Blank_____

$7,500 ÷ 500 = $15 standard rate per unit × 600 = $9,000 flexible budget - $9,300 actual = $300 U

Standard costs are a key element in the xx approach utilized by some companies.

management exception

Material quantity variances Blank_

may be caused by faulty machinery or poor supervision resulting from inferior materials are the responsibility of purchasing department manager are usually the responsibility of the production manager

When the standard price is higher than the actual price, the materials price variance is

favorable

The materials price variance is Blank

impacted by the delivery method chosen generally the responsibility of the purchasing manager

Excessive inventory on hand, especially in the work in process inventory account, may lead to

inefficient operations high defect rates obsolete goods

When direct labor is used as the overhead allocation base, the variable overhead efficiency variance

is favorable when the direct labor efficiency variance is favorable

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

The labor efficiency variance is the difference between actual hours used and standard hours allowed multiplied by the Blank______ hourly rate.

standard

Given on the following information, calculate the variable overhead rate variance. Actual variable overhead cost $15,500; Actual hours used 4,200; Standard hours allowed 4,000; and Standard variable overhead rate $3.75 per hour.

Applied variable overhead cost is based on the actual hours so, applied overhead of $15,750 (4,200 actual hours × $3.75) - $15,500 of actual overhead = $250 F.

Cost per widget

Reason: Materials (4 pounds × $1.25) + Labor (1.5 hours × $10.00) + Overhead (1.5 hours × $4.00) = $26.00

Direct material quantity variance

Reason: SP(AQ - SQ) = $3.00(5,200 - 5,000) = $600 U

Which of the following statements are true?

Standard cost reports may be too outdated to be useful. Managers should not use standards to assign blame.