Smartbook 10

True or false: A favorable labor rate variance is always favorable for a company.

False

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

False

A materials price variance is ________ when the standard price is higher than the actual price.

favorable

The materials price variance is generally the responsibility of the ___ department manager.

purchasing

The spending variance is:

(AQ x AP) - (SQ x SP)

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

If poor-quality materials results in excessive labor processing time, the ___ manager will probably be held responsible for the labor efficiency variance.

purchasing

The labor efficiency variance is generally the responsibility of the ______ manager.

production

The materials quantity variance is generally the responsibility of the ___ department manager.

production

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

A price variance is the difference between the:

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

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

standard

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

standard

The materials price variance is calculated using the:

standard price of the input actual quantity of the input purchased actual price of the input

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

rate efficiency

Poor supervision is one possible cause of an unfavorable _________ variance.

labor efficiency

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

rate hours

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) ___.

quantity

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 planning budget called for 500 units to be produced and total direct labor cost of $7,500. Actual production was 600 units and actual direct labor cost was $9,300. The activity variance is:

$1,500 U

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

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

A planning budget called for 500 units to be produced and total direct labor cost of $7,500. Actual production was 600 units and actual direct labor cost was $9,300. The spending variance is:

300 U

Which of the following statements is true?

A labor efficiency variance is a quantity variance.

Which of the following statements are correct?

Building inventories can reduce unfavorable labor efficiency variances. Excessive inventories contribute to inefficient operations.

True or false: All materials variances are generally the responsibility of the production manager.

False

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

Which of the following statements are true?

How production supervisors use direct labor workers can lead to labor rate variances. Overtime premiums can cause an unfavorable labor rate variance.

Which of the following statements are true?

The production manager is usually responsible for the materials quantity variance. Material quantity variances due to inferior materials are the responsibility of the purchasing department.

Which statement regarding variable overhead variance analysis is true?

The variable overhead efficiency variance may depend on the efficiency of direct labor.

Which of the following statements is true?

The variable part of manufacturing overhead is analyzed using the same basic formulas used for materials and labor.

Which of the following statements are true?

When actual results depart significantly from the standard, the reasons why should be investigated. Standards provide information for measuring performance.

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

actual

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

To calculate a quantity variance, multiply the ___ quantity times the standard price and compare it to the standard quantity allowed times the ___ price.

actual standard

A quantity variance is:

calculated using the standard price of the input

Standards are:

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

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

The difference between the actual level of activity and the standard activity allowed for the actual output x the variable part of the predetermined overhead rate is the variable overhead ___ variance.

efficiency

The variable overhead ___ variance measures activity differences and the variable overhead ___ variance measures cost differences.

efficiency rate

The materials price variance is:

impacted by the delivery method chosen generally the responsibility of the purchasing manager charged to the production manager when production problems occur

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 efficency

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

labor rate

Excessive inventory on hand, especially in the work in process inventory account, may lead to:

obsolete goods inefficient operations high defect rates

Unfavorable labor rate variances may occur as a result of:

overtime premiums being charged to the direct labor account. skilled workers being assigned to jobs requiring little skill.

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 purchasing manager is generally responsible for the material ___ variance, and the production manager is generally responsible for the material ___ variance

price quantity

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

quantity

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

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

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

unfavorable

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

The difference between the standard and the actual variable overhead cost is reflected in the

variable overhead rate variance

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

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 cost allowed for the actual output is less than the standard cost allowed for the planned output the activity variance is labeled as:

favorable