Managerial Accounting CH 10 Test

Materials Usage Variance

is the difference between the actual and standard quantity of inputs multiplied by the standard price. It is based on the quantity of materials used in production. the difference between actual and standard input multiplied by standard price

Unfavorable Variance

positive number when actual is greater then standard

The _____ shows the quantity of each input that should be used to produce one unit of output.

standard cost sheet

All of the following are true

A favorable labor efficiency variance could result from using higher quality materials that result in fewer inspections. b. A favorable materials price variance could result from purchasing identical materials from another supplier at a lower price. An unfavorable materials usage variance could result from not efficiently utilizing raw materials, thus causing waste. e. An unfavorable labor efficiency variance can be caused by machine downtime, and poor quality materials.

Standard Hours

A manager should compute standard hours allowed (SH) for actual output.

Which of the following account balances increases when there is an unfavorable labor efficiency variance

Accrued Payroll The entry to record both types of labor variances is made simultaneously. The general form of this entry when there is an unfavorable labor efficiency variance follows: Work in Process SR × SH Labor Efficiency Variance (AH - SH) × SR Accrued Payroll AR × AH

Which of the following is true of labor variances

An unfavorable labor rate variance is credited to Accrued Payroll. The entry to record both types of labor variances is made simultaneously.

When the variances are not material in amount, the variances for materials and labor are closed to:

Cost of Goods sold

Materials Variance Info

The purchasing department is responsible for acquiring quality materials. b. The production manager is generally responsible for materials usage. c. The purchasing agent has the responsibility for controlling the materials price variance. d. The production manager is concerned with minimizing scrap, waste, and rework.

Variable Overhead Spending Variance

The variable overhead spending variance measures the aggregate effect of differences between the actual variable overhead and the standard variable overhead rate (SVOR) multiplied by the actual direct labor hours worked.

Total Budget Variance

Total budget variance is the difference between the actual cost of the input and its planned cost.

Favorable Variance

When negative When actual is less than standard

A favorable material usage variance is

debited to Work in Process When materials are issued for production, the work-in-process account is debited and the materials account is credited. The materials usage variance account is also affected by this journal entry.

In a standard costing system, costs are assigned to products using quantity and price standards

for all three manufacturing costs: direct materials, direct labor, and overhead.

The sources of quantitative standards include

historical experience, engineering studies, and input from operating personnel.

The variable overhead efficiency variance is directly related to

the direct labor usage variance. measures the change in the actual variable overhead cost (VOH) that occurs because of efficient (or inefficient) use of direct labor.

Standard cost systems are adopted

to improve planning and control, and to facilitate product costing

Inefficient usage of labor implies a(n)

unfavorable variable overhead efficiency variance.

Control Limits

used as a means to tell managers when variances fall outside an acceptable range and thus should be investigated so that corrective action can be taken.

In a standard cost system, variable overhead is applied

using standard direct labor hours.

Variance Investigation

variances are not investigated unless they are large enough to be of a concern the investigation should be undertaken only if the anticipated benefits are greater than the expected costs. d. it is difficult to assess the costs and benefits of variance analysis on a case-by-case basis. e. managers must consider whether a variance will recur. Only material variances are investigated.