Chapter 10
Most companies compute the material price variance when materials are Blank______ and the material quantity variance when materials are
purchased, used
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 Blank______ variance.
quantity
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
If managers consider it unwise to adjust the workforce in response to changes in workload Blank_
the direct labor workforce is really fixed in the short run
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
The same basic formulas used for materials and labor are used to analyze the
variable
The standard rate per unit that a company expects to pay for variable overhead equals the
variable portion of the predetermined overhead rate
Which of the following are used to calculate the standard quantity per unit of direct materials
Allowance for normal scrap and spoilage. Direct materials requirements per unit of finished product
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.
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
Standards are
benchmarks for measuring performance set for each major production input or task compared to the actual quantities and costs of inputs
The standard cost for Blank______ manufacturing overhead is computed the same way as the standard cost for direct labor.
Variable
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.
true statements
When the workforce is fixed, managers must be cautious about how labor efficiency variances are used. Excessive inventories contribute to inefficient operations.
A price variance is the difference between the Blank
actual price and the standard price multiplied by the actual amount of the input
The standard hours per unit of an output include
an allowance for cleanup and downtime the estimated time to complete the unit
Given the following information, calculate the variable overhead efficiency variance. Actual hours 1,500 Standard hours allowed 1,350 Actual variable overhead rate $3.00 per hour Standard variable overhead rate $3.50 per hour
eason: The variable overhead efficiency variance uses the standard, not the actual rate. When actual hours are greater than standard, the variance is unfavorable. (1,350 - 1,500) x $3.50 = $525 U.
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 Blank______ variance
efficiency
When using a standard cost system, Blank
employees may take unfavorable actions to ensure favorable variances an undue emphasis on labor efficiency can create pressure to build excess inventory
An unfavorable labor efficiency variance can result from Blank
faulty equipment poor quality materials unmotivated workers
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
Advantages to using a standard cost system include Blank
standards provide benchmarks to evaluate and improve performance standard costs can simplify bookkeeping
The quantity variance is
(AQ x SP) - (SQ x SP)
The spending variance is
(AQ × AP) − (SQ × SP)
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 materials price variance is Blank___
6,000 × ($4.00 - $4.10) = $600 F
Which of the following statements is true?
A labor efficiency variance is a quantity variance.
Actual hours used 5,500; Standard hours allowed 5,800; Actual labor rate $14.75 per hour; and Standard labor rate $14.00 per hour. The labor rate variance is Blank______.
AH(AR-SR): 5,500 × ($14.75 - $14.00) = $4,125 U
The materials price variance is calculated using the Blank______ quantity of the input purchased.
Actual
The standard hours per unit includes both direct and indirect labor hours
F .The standard hours per unit only includes direct labor hours.
When less hours are worked than the standard hours allows, the labor efficiency variance is
FAV
When the actual hourly rate is lower than the standard hourly rate, the labor rate variance is
FAV
(Actual cost per unit - standard cost per unit) × actual quantity = the materials
PRICE
The labor efficiency variance is generally the responsibility of the Blank______ manager.
Production
How much input should be used to produce a product or provide a service is a(n)
Quantity
Material requirements plus an allowance for normal inefficiencies are added together to determine the xx per unit of output for direct materials
Quantity standard
The difference between the standard and the actual direct labor wages per hour is reflected in the labor
Rate
The material variance terms price and quantity are replaced with the terms
Rate and hours
Actual hours used 5,500; Standard hours allowed 5,800; Actual labor rate $14.75 per hour; and Standard labor rate $14.00 per hour. The labor efficiency variance is Blank______. Multiple choice question.
Reason: $14.00 × (5,800 - 5,500) = $4,200 F. This is the labor rate variance.
Which statement regarding variable overhead variance analysis is true?
The variable overhead efficiency variance depends on the efficiency of direct labor.
When the actual cost incurred exceeds the standard cost allowed for the actual level of output, the spending variance is
U
When the standard purchase price is less than the actual price paid for materials, the material price variance is Blank
UN
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 Blank_____
$7,500 ÷ 500 = $15 standard rate per unit × 600 = $9,000 flexible budget - $9,300 actual = $300 U
Standard costs are a key element in the xx approach utilized by some companies.
management exception
Material quantity variances Blank_
may be caused by faulty machinery or poor supervision resulting from inferior materials are the responsibility of purchasing department manager are usually the responsibility of the production manager
When the standard price is higher than the actual price, the materials price variance is
favorable
The materials price variance is Blank
impacted by the delivery method chosen generally the responsibility of the purchasing manager
Excessive inventory on hand, especially in the work in process inventory account, may lead to
inefficient operations high defect rates obsolete goods
When direct labor is used as the overhead allocation base, the variable overhead efficiency variance
is favorable when the direct labor efficiency variance is favorable
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 management can generate more timely variance reports it simplifies bookkeeping
The labor efficiency variance is the difference between actual hours used and standard hours allowed multiplied by the Blank______ hourly rate.
standard
Given 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; and Standard variable overhead rate $3.75 per hour.
Applied variable overhead cost is based on the actual hours so, applied overhead of $15,750 (4,200 actual hours × $3.75) - $15,500 of actual overhead = $250 F.
Cost per widget
Reason: Materials (4 pounds × $1.25) + Labor (1.5 hours × $10.00) + Overhead (1.5 hours × $4.00) = $26.00
Direct material quantity variance
Reason: SP(AQ - SQ) = $3.00(5,200 - 5,000) = $600 U
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.
