Chapter 9: Flexible Budgets, Standard Costs, and Variance Analysis Smart Book

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

planning

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.

price

The standard labor rate per hour ______.

reflects the expected mix of workers

The difference between what the total sales should have been, given the actual level of activity for the period, and the actual total sales is a(n) ______ variance.

revenue

Select all that apply 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 ______. revenue variable cost fixed cost

revenue variable cost

When the standard hours allowed are lower than the actual hours used, the labor efficiency variance is ______.

unfavorable

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

unfavorable, unfavourable , or U

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

actual

A budget that takes into account how costs are affected by changes in level of activity is a(n) ________ budget.

flexible

Estimates of what revenues and costs should have been based on the actual level of activity are shown on the _______ budget.

flexible

What costs and revenues should have been for the actual level of activity is shown on a (n) _______ budget.

flexible

The spending variance is labeled as favorable when the ______.

actual cost is less than what the cost should have been at the actual level of activity

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

favorable

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

favorable

When the actual quantity of materials used is less than the standard quantity allowed, the material quantity variance is labeled as _______.

favorable

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

favorable

Select all that apply The standard rate per hour includes ______. employee-paid union dues fringe benefits the direct labor rate per hour employment taxes

fringe benefits the direct labor rate per hour employment taxes

The concept that focuses on important variances and ignores trivial ones is ______.

management by exception

The system that compares actual results to a budget so that significant deviations can be flagged and investigated further is called _______ _______ _______.

management by exception

The amount of an input that should have been used to produce the actual output is known as the ________ quantity or hours allowed.

standard

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

standard

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

standard

A benchmark used in measuring performance is called a(n) ________.

standard, norm, or metric

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

the variable

Use the following information to calculate the labor rate variance for Adkinson Company. 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.

$4,125 Unfavorable

Select all that apply If the activity level for the month is 4,000 units, actual revenue is $6,000, actual variable costs are $0.20 unit, and actual fixed costs total $500, which of the following are true? $4,700 net income $4,200 net income $1,300 in total costs $800 in total costs

$4,700 net income $1,300 in total costs

The standard price of materials is $3.50 per pound and the standard quantity allowed for actual output is 7,000 pounds. If the actual quantity purchased and used was 6,700 pounds, and the actual price per pound was $3.40, the direct materials quantity variance is $_____ ___

1050 F

Unfavorable variance

Actual revenue is less than budgeted revenue.

Favorable variance

Actual revenue is more than budgeted revenue.

Select all that apply Which of the following are used to calculate the standard quantity per unit of direct materials? Freight and transportation costs Allowance for waste and spoilage Direct materials requirements per unit of finished product

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

True or false: A static budget is being compared to actual activity. The variance is F for net income but U for most expenses. This suggests that actual activity was lower than budgeted.

False

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

Unfavorable

A price variance is the difference between the ______.

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

The material quantity variance reflects the difference between the _______ quantity of materials used in production and the ______ quantity allowed for the actual output.

actual; standard

A spending variance is the ______.

difference between what a cost should have been at the actual level of activity and the actual amount of the cost

A revenue variance is the ______.

difference between what revenue should have been at the actual level of activity and the actual revenue

The difference between the actual hours used and the standard hours allowed for the actual output is used in the calculation of the labor ______ variance.

efficiency, usage, or quantity

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.

ideal

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.

spending

True or false: The labor rate variance measures the productivity of direct labor.

False

Select all that apply Fancy Nail's monthly rent is $2,500. The company's static budget for March was based on the activity level of 2,000 manicures. Total sales was budgeted at $40,000 and nail technician wages (a variable cost based on the number of manicures) was budgeted at $20,000. Actual manicures in March totaled 2,200. Assuming no other expenses, Fancy Nails' flexible budget will show ______. rent expense of $2,750 net operating income of $19,500 sales of $44,000 wages of $20,000

net operating income of $19,500 sales of $44,000

Select all that apply The calculation of a standard price per unit of direct materials includes ______. allowance for unavoidable waste purchase price of the materials purchase discounts shipping costs

purchase price of the materials purchase discounts shipping costs

Planning budgets are sometimes called ______ budgets.

static

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 direct materials price variance is ______.

$600 F

If the actual cost is greater than what the cost should have been, the variance is labeled as ______.

unfavorable

Companies use the _______ _______ cycle to evaluate and improve performance.

variance analysis

The difference between the standard and the actual direct labor hourly rates is reflected in the ______ _________ variance.

labor rate

True or false: The standard hours or quantity allowed for an input is the amount of the input that should have been used to produce the standard output for the period.

False

True or false: The standard hours per unit includes both direct and indirect labor hours.

False

SP(AQ-SQ) is the formula for the materials ______ variance.

quantity

A materials price variance is equivalent to a labor _____ variance and a materials quantity variance is equivalent to a labor _____ variance.

rate; efficiency

The material variance terms price and quantity are replaced with the terms _______ and _______ when computing direct labor variances.

rate; hours

The final, delivered price that should be paid for each unit of direct materials is the ______ price per unit of materials.

standard or budgeted

Which of the following statements is true?

A labor efficiency variance is a quantity 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

The variance analysis cycle ______.

begins with the preparation of performance reports

A quantity variance is ______.

calculated using the standard price of the input

Select all that apply Standards are ______. compared to the actual quantities and costs of inputs rarely used outside of management accounting set for each major production input or task benchmarks for measuring performance

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

When actual revenue ______ what the revenue should have been, the variance is labeled favorable.

exceeds

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

material; labor

When comparing the static planning budget to actual activity, a problem that arises when actual activity is higher than budgeted activity is that ______.

net income is higher than expected but all or most expense variances are unfavorable

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(n) _______ variance.

quantity , efficiency, or usage

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

quantity or usage

Material requirements plus an allowance for normal inefficiencies are added together to determine the ________ ________ of a direct material per unit of output.

standard 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

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

variable

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

variable portion of the predetermined overhead rate

The standard price of materials is $3.50 per pound and the standard quantity allowed for actual output is 7,000 pounds. If the actual quantity purchased and used was 6,700 pounds, and the actual price per pound was $3.40, the direct materials price variance is $______ ___

670 F