ACC LS CH10

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

high defect rates, inefficient operations, obsolete goods

net operating ______ from the income statement is recorded in ______-______ on the balance sheet

income, retained earnings

the materials price variance is generally calculated at the time materials are purchased because:

it simplifies bookkeeping, management can generate more timely variance reports, it allows materials to be carried in the inventory accounts at standard cost

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

quantity

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 output is known as the _____ quantity or hours allowed

standard

the budgeted fixed overhead costs exceeds fixed overhead applied to work in process, the volume variance is labeled _____

unfavorable

when the standard purchase price is less than the actual price, the material price variance is __.

unfavorable

the standard rate per unit that a company expects to pay for variable overhead equals the:

variable portion of the predetermined overhead rate

the difference between the standard and the actual direct labor hourly rates is reflected in the __________-________ variance

labor rate

how much should be paid for each unit of an input is specified by a _____ standard

price

the purchasing manger is generally responsible for the material _______ variance, and the production manager is generally responsible for the material ______ variance

price, quantity

the labor efficiency variance is generally the responsibility of the _____ manager

production

the calculation of a standard price per unit of direct materials includes:

purchase discounts, purchase price of the materials, shipping costs

most companies compute the material price variance when materials are _____ and the materials quantity variance when materials are _____

purchased, used

the materials price variance is generally the responsibility of the ________ department manger

purchasing

How much input should be used to produce a product or provide a service is a _____ standard.

quantity

the final, delivered price that should be paid for each unit of direct materials is the ______ price per unit of materials.

standard

material requirements plus an allowance for normal inefficiencies are added together to determine the _____-______ of a direct material per unit of output

standard quantity

in a standard cost system, overhead is applied on the basis of the _______ hours allowed for the ______ output of the period

standard, actual

an unfavorable materials quantity variance occurs when:

the actual amount of material used is grater than the standard amount of material allowed for the actual output

the standard cost for ____ manufacturing overhead is computed the same way as the standard cost for direct labor

variable

the predetermined overhead rate includes

both fixed and variable overhead

Which of the following statements are correct?

excessive inventories contribute to inefficient operations, building inventories can reduce unfavorable labor efficiency variances

if overhead is over applied the total of the standard cost overhead variances is

favorable

when actual fixed overhead cost is less than budgeted fixed overhead cost, the budget variance is labeled

favorable

The standard rate per hour includes:

fringe benefits, direct labor rate per hour, employment taxes

the standard hours per unit of an output includes:

an allowance for cleanup and downtime, the estimated time to complete the unit

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

the standard price per unit for direct materials:

can change based on a change in the delivery method

the materials price variance is:

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

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

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

direct material standards:

- should be based on input from production and purchasing managers. - are based on standard price and quantity.

the variable overhead efficiency variance compares the ______ hours times the standard rate with the standard hours allowed for the actual output times the _____ rate

actual, standard

When setting direct labor standards:

the production manager should be consulted. time and motion studies may be used. It is best to use tight but attainable standards.

Which statement regarding variable overhead variance analysis is true?

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