Performance Evaluations Using Variances

The formula to compute direct labor rate variance is to calculate the difference between a. Actual costs - standard cost. b. (actual hours * standard rate) - standard costs. c. Actual costs - (actual hours * standard rate). d. Actual costs + (actual hours * standard rate).

c. Actual costs - (actual hours * standard rate).

The formula to compute direct materials price variance is to calculate the difference between a. Actual cost + standard costs. b. Actual cost - standard costs. c. Actual costs - (actual quantity * standard price). d. (actual quantity * standard price) -standard costs.

c. Actual costs - (actual quantity * standard price)

Check My Work Which of the following conditions normally would not indicate that standard costs should be revised? a. The company has signed a new union contract which increases the factory wages on average by $5.00 an hour. b. The engineering department has revised product specifications in responding to customer suggestions. c. Actual costs differed from standard costs for the preceding week. d. The world price of raw materials increased.

c. Actual costs differed from standard costs for the preceding week.

Periodic comparisons between planned objectives and actual performance are reported in: a. Master budgets. b. Zero-base reports. c. Budget performance reports. d. Budgets.

c. Budget performance reports

Standards that represent levels of operation that can be attained with reasonable effort are called: a. Ideal standards. b. Theoretical standards. c. Normal standards. d. Variable standards.

c. Normal standards.

A favorable cost variance occurs when a. Standard costs are less than actual costs. b. Actual costs are more than standard costs. c. Standard costs are more than actual costs. d. None of these choices are correct.

c. Standard costs are more than actual costs.

Standard costs are used in companies for a variety of reasons. Which of the following is not one of the benefits for using standard costs? a. Used to identify inventory b. Used to control costs. c. Used to indicate where changes in technology and machinery need to be made. d. Used to plan direct materials, direct labor, and factory factory overhead.

c. Used to indicate where changes in technology and machinery need to be made.

The formula to compute direct material quantity variance is to calculate the difference between a. (actual quantity * standard price) - standard costs. b. Actual costs - (standard price * standard costs). c. Actual costs - standard costs. d. Standard costs - actual costs.

a. (actual quantity * standard price) - standard costs.

The total manufacturing cost variance consists of: a. Direct materials cost variance, direct labor cost variance, factory overhead cost variance b. Direct materials cost variance, direct labor rate variance, and factory overhead cost variance c. Direct materials cost variance, direct labor cost variance, variable factory overhead controllable variance d. Direct materials price variance, direct labor cost variance, and fixed factory overhead volume variance

a. Direct materials cost variance, direct labor cost variance, factory overhead cost variance

The standard price and quantity of direct materials are separated because: a. Direct materials prices are controlled by the purchasing department, and quantity used is controlled by the production department. b. GAAP reporting requires this separation. c. Standard prices change more frequently than standard quantities. d. Standard quantities are more difficult to estimate than standard prices.

a. Direct materials prices are controlled by the purchasing department, and quantity used is controlled by the production department.

The formula to compute direct labor time variance is to calculate the difference between a. Actual costs - (actual hours * standard rate). b. (actual hours * standard rate) - standard costs. c. Actual costs - standard costs. d. Actual costs + standard costs.

b. (actual hours * standard rate) - standard costs.

Standard costs are divided into which of the following components? a. Quality Standard and Quantity Standard b. Price Standard and Quantity Standard c. Variance Standard and Quantity Standard d. Materials Standard and Labor Standard

b. Price Standard and Quantity Standard

Check My Work The principle of exceptions allows managers to: a. Focus on correcting variances between competitor's costs and actual costs. b. Focus on correcting variances between competitor's costs and standard costs. c. Focus on correcting variances between variable costs and actual costs. d. Focus on correcting variances between standard costs and actual costs

d. Focus on correcting variances between standard costs and actual costs

If the actual direct labor hours spent producing a commodity differs from the standard hours, the variance is termed a: a. Price variance. b. quantity variance. c. Rate variance. d. Time variance

d. Time variance