Managerial Accounting SB Chapter 10
the amount of direct-labor hours that should be used to produce one unit of finished goods is the ___ hours per unit
standard
the final, delivered price that should be paid for each unit of direct materials is the ______ price per unit of materials.
standard
the labor efficiency variance is the difference between actual hours used and standard hours allowed multiplied by the ___ hourly rate
standard
when calculating the labor rate variance, multiply the actual hours worked times the ____ labor rate and compare it to the actual hours worked times the ___ labor rate
standard, actual
when the standard purchase price is less than the actual price, the material price variance is __.
unfavorable
the standard cost for ___ manufacturing overhead is computed the same way as the standard cost for direct labor
variable
t/f: the standard hours per unit includes both direct and indirect labor hours
false
poor supervision is one possible cause of an unfortunate __ variance
labor efficiency
the labor efficiency variance is generally the responsibility of the ___ manager
production
the materials price variance is generally the responsibility of the ___ department manager
purchasing
the materials price variance is the difference between the actual price of materials
and the standard price for materials times the actual quantity of materials.
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 cost allowed for the actual output is less than the standard cost allowed for the planned output the activity variance is labeled as
favorable
SP(AQ-SQ)
formula for materials quantity variance
the materials price variance is:
generally the responsibility of the purchasing manager impacted by the delivery method chosen charged to the production manager when production problems occur
the standard labor rate per hour:
reflects the expected mix of workers
the amount of an input that should have been used to produce the actual input is known as the ___ quantity or hours allowed
standard
standard rate per hour
the direct labor rate per hour fringe benefits employment taxes
if managers consider it unwise to adjust the workforce in response to changes in workload:
the direct labor workforce is really fixed in the short run
a labor efficiency variance is a quantity variance
true
building inventories can reduce unfavorable labor efficiency variances
true
excessive inventories contribute to inefficient operations
true
the standard rate per unit that a company expects to pay for variable overhead rate equals the
variable portion of the predetermined overhead rate
The materials price variance is generally calculated at the time materials are purchased because:
It simplifies bookkeeping, management can generate more timely variance reports, and it allows materials to be carried in the inventory accounts at standard cost
the materials price variance is calculated using the ____ quantity of the input purchased
actual
the standard hours per unit of an output includes
-the estimated time to complete the unit -an allowance for cleanup and downtime.
advantages to using a standard cost system include:
Standard costs can simplify bookkeeping and can provide benchmarks individuals use to judge their own performance
t/f: quantity standards refer to the price to be paid for each unit of the input
false
direct material standards
- should be based on input from production and purchasing managers. - are based on standard price and quantity.
use the following information to calculate the labor efficiency variance for Adkinson Company actual hours used 5500 standard hours allowed 5800 actual labor rate 14.75/hour standard rate 14.00/hour
$14.00 x (5,800 - 5,500) = $4,200 Favorable. This is the labor rate variance. Labor efficiency variance is calculated using the standard, not the actual, labor rate.
Based on the following information, calculate the variable overhead rate variance. actual variable overhead cost 15500 actual hours used 4200 standard hours allowed 4000 standard variable overhead rate 3.75/hr
$250 Favorable Applied overhead of $15,750 (4,200 actual hours x $3.75) - $15,500 of actual overhead = $250 overapplied When the actual cost is less than the applied cost, the variance is favorable.
given the following, the standard cost of this item is $____ per unit direct materials per unit 2 pounds direct material cost 2.5 per pound direct labor per unit 0.75 hours direct labor rate 16 per hour variable overhead rate 8 per hour
23 materials (2 pounds * 2.5) + labor (0.75 hours * 16.00) + overhead (0.75 hours * 8.00) = 23
given the following compute the standard cost per widget direct materials per unit 4 pounds direct material cost 1.25 per pound direct labor per unit 1.5 hours direct labor rate 10 per hour variable overhead rate 4 per hour
26 (1.25*4)+(1.5*10)+(1.5*4)
given the following information, calculate the variable overhead efficiency variance actual hours 1500 standard hours allowed 1350 actual variable overhead rate 3.00/hr standard variable overhead rate 3.50/hr
525 unfavorable when actual hours > standard hours, variable overhead efficiency variance is unfavorable (1350-1500)*3.5=525 unfavorable
the standard price of materials is 3.50 per pound and the standard quantity allowed for actual output is 7000 pounds. If the actual quantity purchased and used was 6700 pounds, and the actual price per pound was 3.40, the direct materials price variance is _____ favorable or unfavorable
670 F 6700(3.4-3.5) = 670
the materials price variance is calculated using the:
actual price of the input, actual quantity of the input purchased, standard price of the input
Calculate quantity variance
actual quantity * standard price compare it to standard quantity allowed * standard price
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
an unfavorable labor efficiency variance can result from
faulty equipment, insufficient product demand, poorly motivated workers
a materials price variance is _ when the standard price is higher than the actual price
favorable
excessive inventory on hand, especially in the work in process inventory account, may lead to
obsolete goods, high defect rates, inefficient operations
how much should be paid for each unit is specified by a(n) ___ standard
price
the purchasing manager is generally responsible for the material __ variance, and the production manager is generally responsible for the material __ variance
price, quantity
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
Material requirements plus an allowance for normal inefficiencies are added together to determine the ______ _______ of a direct material per unit of output.
quantity standard
A materials price variance is equivalent to a labor ____________ variance and a materials quantity variance is equivalent to a labor ____________ variance.
rate; efficiency
when setting direct labor standards
time and motion studies may be used the production manager should be consulted it is best to use "tight but attainable" standards
t/f: a labor efficiency variance is a quantity variance
true
t/f: how production supervisors use direct labor workers can lead to labor rate variances
true
t/f: managers should not use standards to assign blame
true
t/f: overtime premiums can cause an unfavorable labor rate variance
true
the standard price of the material is used in the calculation of the material quantity variance because
using actual prices would hold the production manager responsible for the inefficiencies of the purchasing manager
how much should be paid for an input is indicated by a price standard
yessir
a labor rate variance is ___ when the standard hourly rate is lower than the actual rate
unfavorable
if the actual level of activity is greater than the planned level of activity, the activity variances will be
unfavorable
when the actual cost incurred exceeds the standard cost allowed for the actual level of output, the spending variance is
unfavorable
When demand for a product is insufficient to keep all of the production workers busy and no layoffs occur, an unfavorable ______ ______ variance may occur.
labor efficiency
the difference between the standard and the actual direct labor hourly rates is reflected in the ___ ___ variance
labor rate
The material variance terms price and quantity are replaced with the terms ______ and ______ when computing direct labor variances.
rate; hours.
standard quantities and the cost of the inputs to make a single product are accumulated on a(n) ___ ___ card
standard cost
t/f: standard cost reports may be too outdated to be useful
true
t/f: standards provide information for measuring performance
true
t/f: the variable overhead rate variance uses the same basic formula as the labor rate variance except the variable overhead rates are used instead of the direct labor rates
true
t/f: when actual results depart significantly from the standard, the reasons why should be investigated
true
when direct labor is used as the overhead allocation base, the variable overhead efficiency variance
will be favorable when the direct labor efficiency variance is favorable
the variable part of manufacturing overhead is analyzed using the same basic formulas used for materials and labor
true
