Managerial Accounting 2020

Substandard Material

What are some possible reasons for a material price variance?

The variable overhead efficiency variance is caused by the difference between which of the following?

actual and standard allocation base

The variable overhead rate variance is caused by the sum between which of the following?

actual and standard overhead rates

The fixed factory overhead variance is caused by the difference between which of the following?

actual fixed overhead and applied fixed overhead

Residual Income

establishes a minimum profit that all investments must earn

What are some possible reasons for a labor rate variance?

hiring of less qualified workers

Ideal Standard

this standard is set at a level that could be achieved if everything ran perfectly.

Favorable Standard

this variance is the difference involving spending less, or using less than the standard amount

Unfavorable Variance

this variance is the difference involving spending more or using more than the standard amount.

Why does a company use a standard costing system?

to identify variances from actual costs that assist them in maintaining profits

Attainable Standard

This standard is set at a level that may be reached with reasonable effort.

Accept an Order at a Special Price

if an order will make up for the variable cost and will not increase fixed cost, then the order should be accepted

When is the direct labor time variance unfavorable?

when the actual quantity used is greater than the standard quantity

When is the material quantity unfavorable?

when the actual quantity used is greater than the standard quantity.

When is the material quantity variance favorable?

when the actual quantity used is greater than the standard quantity.

Cost of Capital

what the business pays for interest and or what it requires investments to earn

When is the labor rate variance favorable?

when the actual price is less than the standard price

When is the labor rate variance unfavorable?

when the actual price paid is greater than the standard price

When is the material price variance unfavorable?

when the actual price paid is greater than the standard price

When is the material price variance favorable?

when the actual price paid is less than the standard price

Opportunity Cost

choosing one course of action, the company must give up the opportunity to benefit from some other course of action

Relevant Costs

costs that differ between alternatives

Sunk Cost

costs that have already been incurred and will not be changed or avoided by any future decision

Which of the following is a possible cause of an unfavorable material price variance?

purchasing higher-quality material

Which of the following is a possible cause of an unfavorable material quantity variance ?

purchasing substandard material

When is the direct labor time variance favorable?

when the actual quantity used is less than the standard quantity

Responsibility Accounting

involves accumulating and reporting costs (and revenues) on the basis of the manager who has authority to make the day to day decisions about the items

Responsibility Reporting System

involves the preparation of a report for each level of responsibility in the company's organization chart

What are some possible reasons for a direct labor time variance?

less qualified workers

What are some reasons for a material quantity variance?

more qualified workers

A flexible budget ______________.

predicts estimated revenues and costs at varying levels of production

Transfer Pricing

prices that they charge to other departments are called

General Rule of Sell or Process Further

process further as long as the incremental revenue from such processing exceeds the incremental costs

Incremental Analysis

process used to identify the financial data that change under alternative courses of action