ACTY 2110 - Ch. 9

labor rate

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

true

True or false: The variable overhead rate variance uses the same basic formula as the labor rate variance except that the variable overhead rates are used instead of the direct labor rates.

a, c

Unfavorable labor rate variances may occur as a result of ______. a.) skilled workers being assigned to jobs requiring little skill b.) work interruptions caused by faulty equipment c.) overtime premiums being charged to the direct labor account d.) unskilled workers being assigned to a task that requires a set of skills

b

Poor supervision is one possible cause of an unfavorable ______ variance. a.) direct labor rate b.) direct labor efficiency c.) direct material price d.) fixed overhead budget

price

The actual cost is compared to what the cost should have been when calculating a(n) _____ variance.

variance analysis

The process of comparing actual and budgeted results is called _____ _____.

direct materials

The quantity and price of an input (i.e. ounces or pounds) that should be required to create a single unit of output is identified by a(n) _____ standard.

c

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 ______. a.) $580 U b.) $600 U c.) $600 F d.) $580 F

actual, normal, standard

The three types of cost systems discussed in the chapter are _____, _____, and _____.

a, d

Fancy Nails' master budget for June was based on 2,400 manicures and supplies were budgeted at a total cost of $1,800. During June, 2,500 manicures were done and the total cost for supplies was $2,000. Which of the following statements are true? a.) The spending variance is $125 U. b.) The volume variance is $125 U. c.) The spending variance is $200 U. d.) The volume variance is $75 U. e.) Actual per unit cost of supplies was less than budgeted cost.

a, d

Ideal standards are problematic because they ______. a.) tend to discourage workers b.) require stretch goals c.) can be easily achieved d.) demand peak effort at all times

efficiency

(SH - AH) × SR is the formula for the variable overhead _____ variance.

flexible

A budget that takes into account how costs are affected by changes in level of activity is a(n) _____ budget.

spending, 1,300

A company with a $2,000 unfavorable direct labor rate variance and a $700 favorable direct labor efficiency variance has a direct labor _____ variance of $_____ unfavorable.

spending, 1,300

A company with a $2,000 unfavorable direct labor rate variance and a $700 favorable direct labor efficiency variance has a direct labor variance _____ of $_____ unfavorable.

a, c, d

A favorable material price variance ______. a.) may be based on the quality of the goods b.) is always a desirable result c.) may be due to a quantity discount d.) may be due to price fluctuations

spending

A flexible budget _____ variance is calculated by comparing actual costs to the flexible budget.

a

A static budget shows variable supply cost of $6,250 based on 1,000 units. A flexible budget based on 1,200 units should show ______ for supplies. a.) $7,500 b.) $5,208 c.) $6,250

standard cost

A system that records costs based on what managers think they should be rather than using actual costs is a(n) _____ _____ system.

a, b

A variable overhead rate variance may be favorable because ______. a.) less money was spent on supplies and other variable overhead items b.) the relationship between variable overhead and direct labor may not be perfect c.) direct labor hour employees worked less than the standard hours allowed

c

An unfavorable variance may be caused by ______ more than expected. a.) selling b.) producing c.) spending

a

Based on the following information, calculate the variable overhead rate variance. Actual variable overhead cost $15,500 Actual hours used 4,200 Standard hours allowed 4,000 Standard variable overhead rate $3.75 per hour a.) $250 Favorable b.) $500 Unfavorable c.) $500 Favorable d.) $250 Unfavorable

spending

Combining the direct labor rate variance with the direct labor efficiency variance is a way to compute the direct labor _____ variance.

b, c

Direct labor standards ______. a.) are based on actual labor wage rates b.) are stated in terms of quantity and price c.) use the time it should take to produce a single unit d.) do not include the cost of employment taxes and benefits

a

Direct labor variances ______. a.) are computed in the same way as material variances b.) can only be computed for differences in pay rates c.) are broken into two components (price and usage) d.) are generally the responsibility of the human resources manager

a

Quantity and price standards ______. a.) are developed for both direct materials and direct labor b.) are based on the actual inputs used to create a unit of output c.) are not used in the budgeting process d.) should be based on amounts that are easily attainable

b

Reasonable, efficient efforts from employees are required when standards used are ______. a.) stretch goals b.) tight but attainable c.) ideal d.) easily attainable

a

SR(SH - AH) is the formula for the direct ______ variance. a.) labor efficiency b.) material quantity c.) material price d.) labor rate

b, c, d

Standard cost systems ______. a.) are rarely used in practice in well-established businesses b.) are based on what managers think costs should be c.) help managers budget and control costs d.) help maintain consistency and quality

ideal

Standards that do not allow for any work interruptions or machine breakdowns are called _____ standards.

quantity

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

purchasing

The materials price variance is generally the responsibility of the _____ manager.

a

Use the following information to calculate the direct labor efficiency variance for Adkinson Company. Actual hours used 5,500 Standard hours allowed 5,800 Actual labor rate $14.75 per hour Standard rate $14.00 per hour a.) $4,200 Favorable b.) $4,425 Favorable c.) $4,125 Unfavorable

a

Use the following information to calculate the direct labor rate variance for Adkinson Company. Actual hours used 5,500 Standard hours allowed 5,800 Actual labor rate $14.75 per hour Standard labor rate $14.00 per hour a.) $4,125 Unfavorable b.) $4,350 Unfavorable c.) $4,200 Favorable

b, c, d

Which of the following are common causes of favorable variances? a.) Producing and selling less units than expected b.) Taking less time to produce a unit than expected c.) Using less direct materials than expected d.) Using less of a variable resource than expected

volume

A flexible budget _____ variance is calculated by comparing the master budget to the flexible budget.

a

A master budget calls for 3,000 units of production and budgeted fixed overhead of $6,000. Actual production was 3,500 units and total fixed overhead was $6,150. Which of the following statements is true? a.) The spending variance is ($150). b.) The volume variance is $850. c.) The volume variance is ($150). d.) The spending variance is $850.

b

A price variance is the difference between the ______. a.) standard quantity allowed and the actual quantity used multiplied by the actual price b.) actual price and the standard price multiplied by the actual amount of the input c.) standard quantity allowed and the actual quantity used multiplied by the standard price d.) actual price and the standard price multiplied by the standard amount allowed

c

A quantity variance is ______. a.) based only on the actual quantity of inputs b.) calculated using the actual price of the input c.) calculated using the standard price of the input d.) based only on the standard quantity of inputs

a

A variance is labeled as favorable when the ______. a.) actual cost is less than the standard or budgeted cost b.) amount spent is less than what was spent last period c.) actual cost is more than the standard or budgeted cost

a

Abba, Inc. has developed the following standards for one of its products: Direct materials - 1/2 pound at $6.00 per pound Direct labor - 1/4 hour at $20.00 per hour Variable overhead - 20% of direct labor cost Total fixed overhead is expected to be $15,000 and the company expects to produce 7,500 units. The standard cost card for this product would show a cost per unit of ______. a.) $11.00 b.) $9.00 c.) $8.00 d.) $13.00

master, flexible

An example of a static budget is the _____ budget, whereas a(n) _____ budget adjusts revenues and costs as the level of activity changes.

b, d

Fancy Nail's monthly rent is $2,500. The company's static budget is based on an activity level of 2,000 manicures per month. It shows nail technician wages (a variable cost) of $20,000. Fancy Nails' flexible budget for 2,200 manicures will show ______. a.) rent expense of $2,750 b.) wages of $22,000 c.) wages of $20,000 d.) rent expense of $2,500

price

How much should be paid for an input is specified by a(n) _____ standard.

d

To encourage continuous improvement, ______. a.) companies should never set stretch goals for employees b.) easily attainable standards should be used c.) ideal standards should be used d.) standards should increase in difficulty over time

false

True or false: Favorable variances always indicate good performance.

false

True or false: In order to foster continuous improvement, standards should remain consistent over time.

false

True or false: Quantity standards refer to the price to be paid for each unit of the input.

false

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

false

True or false: The terms "standard" and "budget" have the same meaning.

production

The materials quantity variance is generally the responsibility of the _____ manager.

labor efficiency

The difference between the standard hours allowed for a job and the actual hours used is reflected in the direct _____ _____ variance.

price

The direct materials _____ variance reflects the difference between the actual cost of a material and what the cost should have been according to the standard.

unfavorable

If the actual cost is greater than budgeted cost, the variance is labeled as _____.

b

If the actual hours worked exceeds the standard hours allowed for production, the direct labor efficiency variance will be ______. a.) favorable b.) unfavorable

a

If the actual wage rate paid to employees is less than the standard rate allowed, the direct labor rate variance will be ______. a.) favorable b.) unfavorable

b

If the planned fixed overhead for 5,000 units is $120,000, what is the flexible budget fixed overhead for 4,500 units? a.) $118,000 b.) $120,000 c.) $180,000 d.) $108,000

standard cost

The amount a company should spend to produce a single unit of product based on expected production and sales is shown on a(n) _____ _____ card.

c

The difference between an actual and a normal cost system is how ______ are recorded. a.) fixed costs b.) direct materials and direct labor c.) manufacturing overhead costs d.) all manufacturing costs

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.

a

The direct materials price variance is the difference between the actual price of materials ______. a.) and the standard price for materials with the difference multiplied by the actual quantity of materials b.) times the actual quantity of materials and the standard price of materials times the standard quantity allowed for production c.) and the standard price for materials with the difference multiplied by the standard quantity of material allowed

a, b, c

The materials price variance is calculated using the ______. a.) actual quantity of the input purchased b.) standard price of the input c.) actual price of the input d.) standard quantity allowed of the input for the actual output

rate, efficiency

The price variance for direct labor is called the direct labor _____ variance and the quantity variance for direct labor is called the direct labor _____ variance.

rate, efficiency

The price variance for variable manufacturing overhead is called the variable overhead _____ variance, and the quantity variance is called the variable overhead _____ variance.

d

The process of comparing actual and budgeted results is ______. a.) standard costing b.) flexible budgeting c.) master budgeting d.) variance analysis

true

True or false: The variable overhead rate variance may not explain all the differences between actual spending and standard variable overhead.

a

Variable overhead variances are ______. a.) calculated using the same basic formulas as labor and material variances b.) broken down into variable rate and spending variances c.) calculated just like fixed overhead variances

standard, budgets

Very detailed levels to reflect the required quantity of inputs for a product or service are specified in _____, whereas _____ represent the total dollar amount expected at a given level of output.

a

When a budget is flexed, ______ is (are) based on standard costs. a.) both the master and flexible budgets b.) only the flexible budget c.) only the master budget d.) neither the master nor flexible budget

variable, fixed

When a master budget is flexed, total _____ costs will be different on the two budgets, but total _____ costs will be the same.

a, b, c

Which of the following statements are true? a.) Both the master budget and the flexible budget are based on standard costs. b.) The master budget is a static budget. c.) The flexible budget can be used as a benchmark for evaluating performance. d.) Total fixed costs will differ between the master budget and the flexible budget.

a, c

Which of the following statements are true? a.) Sometimes a favorable variance can indicate poor performance. b.) An unfavorable variance is always an indication of a problem that needs correction. c.) Favorable and unfavorable reflect a difference between actual and standard costs.

d

Which of the following statements is true? a.) A direct material quantity variance is not impacted by waste. b.) Material quantity variances are always unfavorable and can never be favorable. c.) Material quantity variances are generally the responsibility of the purchasing department. d.) The production manager is most often responsible for the materials quantity variance.