Chapter 9 accounting "Budgets"

Variance Analysis

Companies use the ________________ _________________ cycle to evaluate and improve performance.

$108,000

If the planned budget revenue for 5,000 units is $120,000, the flexible budget revenue for 4,500 units is ________________.

True

In an standard cost system overhead is applied using the standard hours allowed for the actual production.

purchased, used

Most companies compute the material price variance when materials are ___________ and the material quantity variance when materials are _______________.

static

Planning budgets are sometimes called __________ budgets.

1. compared to the actual quantities and costs of inputs 2. set for each major production input or task 3. benchmarks for measuring performance

Standards are

standard

The amount of direct-labor hours that should be used to produce one unit of finished goods is the ______________ hours per unit.

spending

The difference between how much a cost should have been, given the actual level of activity, and the actual amount of the cost is a(n) ________________ variance

quantity

The difference between the actual materials used in production and the standard amount allowed for the actual output is reflected in the materials _______________ variance

price

The difference between the actual price paid for the material and what should have been paid according to the standard is reflected in the direct materials ____________ variance.

rate

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

standard

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

standard

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

False

The labor rate variance measures the productivity of direct labor.

actual, standard

The material quantity variance measures the difference between the _______________ The material quantity variance measures the difference between the _________________ quantity of materials allowed for the actual output, multiplied by the standard price per unit of materials.

actual

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

1. it simplifies bookkeeping 2. management can generate more timely variance reports 3. it allows materials to be carried in the inventory accounts at standard cost

The materials price variance is generally calculated at the time materials are purchased because ______________________. ______________________. _______________________.

and the standard price for materials with the difference multiplied by the actual quantity of materials

The materials price variance is the difference between the actual price of materials __________________.

$7,500 for supplies and $28,800 revenue

The planning budget, based on 1,000 units, shows revenue of $24,000 and $6,250 for supplies. A total of 1,200 units were actually produced and sold. The flexible budget will show ___________________.

standard

A benchmark used in measuring performance is called a _________________

Planning

A budget that is prepared at the beginning of the period for a specific level of activity is called a ________________ budget.

revenue and variable cost

A flexible budget shows what budgeted amounts should have been at the actual level of activity. As a result of this change in activity, the flexible budget will show a change in total _________________.

the variable

The same basic formulas used for materials and labor are used to analyze _____________ portion of manufacturing overhead.

variable

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

False

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

variable portion of the predetermined overhead rate

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

materials, labor

The terms price and quantity are used when computing direct ______________ variance, while the terms rate and hours are used when computing direct ________________

materials, labor

The terms price and quantity are used when computing direct __________________ variance, while the terms rate and hours are used when computing direct ______________ variances

The preparation of performance reports

The variance analysis begins with __________________.

multiple cost drivers

Variances are more accurate when using __________________.

ideal

When 100% peak effort from the most skilled and efficient workers is assumed, the direct labor hours required per unit is being set using ____________ standards

will be favorable when the direct labor efficiency variance is favorable

When direct labor is used as the overhead allocation base, the variable overhead efficiency variance __________________ 1. cannot be calculated 2. explains how efficient overhead resources were used 3. will always be unfavorable 4. will be favorable when the direct labor efficiency variance is favorable

affects variable costs only

When preparing a flexible budget, the level of activity ____________________. 1. affects fixed costs only 2. affects both fixed and variable costs 3. affects variable costs only 4. has no effect on costs

Direct materials requirements per unit of finished product Allowance for waste and spoilage

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

The variable overhead efficiency is calculated by multiplying the variance in the labor hours with the variable portion of the predetermined overhead rate.

Which statement regarding variable overhead variance analysis is true? 1. The variable overhead efficiency is calculated by multiplying the variance in the labor hours with the variable portion of the predetermined overhead rate. 2. Variable overhead variances are easy to interpret. 3. The variable overhead efficiency variance uses exactly the same inputs as the direct labor efficiency variance. 4. Efficient use of variable overhead results in a favorable variable overhead efficiency variance.

standard quantity

____________________ ___________________ per unit defines the amount of direct materials that should be used for each unit of finished product, including an allowance for normal inefficiencies, such as scrap and spoilage.

revenue variance

_____________________ is the difference between the actual total revenue and what the total revenue should have been, given the actual level of activity for the period

spending variance

________________________ is the difference between the actual amount of the cost and how much a cost should have been, given the actual level of activity