Accounting Chapter 10 Smartbook

When using a standard cost system:

the information in the variance reports may be too old to be useful. an undue emphasis on labor efficiency variances can create pressure to build excess inventory.

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

False

True or False: The standard hours per unit includes both direct and indirect labor hours.

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.

True or False: A favorable labor rate variance may not be favorable when lower-paid workers are less efficient than those with the proper pay rate and skills. The result could be an overall unfavorable labor variance.

True

True or False: The standard hours per unit only includes direct labor hours.

True

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 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

Standards are:

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

Unfavorable labor rate variances may occur as a result of:

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

The difference between actual results and the flexible budget amount is a(n) __________________ variance.

spending

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

standard

The amount of direct-labor hours that should be used to produce one unit of finished goods is the __________________ hours per unit.

standard

The amount of direct-labor hours that should be used to produce one unit of finished goods is the _____________________ hours per unit.

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

Material requirements plus an allowance for normal inefficiencies are added together to determine the ______________________ ___________________ of a direct material per unit of output.

standard quantity

Which of the following are used to calculate the standard quantity per unit of direct materials?

Direct materials requirements per unit of finished product Allowance for waste and spoilage

Which of the following statements are true?

Standard cost reports may be too outdated to be useful. Managers should not use standards to assign blame.

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.

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

actual

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.

actual standard

A price variance is the difference between the:

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

The materials price variance is calculated using the:

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

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

The variable overhead _______________ variance measures activity differences and the variable overhead ________________ variance measures cost differences.

efficiency rate

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

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

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

labor efficiency

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

Standard costs are a key element in the _________________ by __________________ approach utilized by some companies.

management exception

Most companies compute the material price variance when materials are ___________________ and the material quantity variance when materials are ___________________.

purchased, used

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

rate hours

Standard costs fit naturally into an integrated system of ___________________ accounting.

responsibility

When the actual cost incurred exceeds the standard cost allowed for the actual level of output, the spending variance is:

unfavorable

The standard cost for ____________________ manufacturing overhead is computed the same way as the standard cost for direct labor.

variable

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

variable overhead rate variance

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

variable portion of the predetermined overhead rate