Chapter 8 LearnSmart

When the actual quantity of materials used is less than the standard quantity allowed, the material quantity variance is labeled as ________.

favorable

Estimates of what revenues and costs should have been based on the actual level of activity are shown on the ________ budget.

flexible

What costs and revenue should be for the actual level of activity is shown on a(n) ________ budget.

flexible

The concept that focuses on important variances and ignores trivial ones is:

management by exception

The difference between how much a cost should have been, given the actual amount of the cost is a ________ variance.

spending

How much should be paid for an input is indicated by a price ________.

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

standard

Standard quantities and the cost of the inputs to make a single product are accumulated on a(n) ________ ________ card.

standard cost

The most difficult standard to determine is perhaps the:

standard hours per unit

An unchanged planning budget is known as a(n) ________ planning budget.

static

If activity levels are lower than expected, total ________ costs should be lower than expected.

variable

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

To calculate the price variance multiply the ________ quantity times the actual price and compare it to the actual quantity times the ________ price.

actual standard

If the activity level for the month is 4,000 units, actual revenue if $6,000, actual variable costs are $0.20 unit, and actual fixed costs total $500, which of the following are true?

$1,300 in total costs $4,700 in net income

If the planned budget revenue for 5,000 units is $120,000, what is the flexible budget revenue if the actual activity is 4,500 units?

$108,000 $120,000/5,000 = $24 per unit x 4,500 = $108,000

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 6,000 x ($4.00 - $4.10) = $600 F

Which of the following statements are true?

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

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

The direct material spending variance:

- explains what was spent on materials and what should have been spent - can be broken down into the quantity variance and the price variance. - needs to be decomposed for analysis

When a static planning budget is compared to actual results at a different activity level:

- increases or decreases in net income are not adequately explained - changes in costs are expected due to changes in activity

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

- inefficient operations - obsolete goods - high defect rates

The materials price variance is usually 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 costs

Standards are:

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

Which of the following statements are true?

- standards provide information for measuring performance - when actual results depart significantly from the standard, the reason why should be investigated.

The standard rate per hour includes:

- the direct labor rate per hour - employment taxes - fringe benefits

Fancy Nails estimated cost for supplies is $0.75 per manicure. June's budget was based on 2,400 manicures and a total cost for supplies of $1,800. June's actual activity was 2,500 manicures. Total cost of supplies in June was $2 ,000.

125 U

Actual revenue is more than budgeted revenue (F/U)

Favorable variance

Warren, Inc. standard cost card indicates that each widget should require 2 lbs. of material. In July Warren budgeted 2,000 widgets and actually produced 1,500 widgets. Each widget produced used 2.2 of material. The standard quantity of materials allowed for July is:

Standard quantity allowed = Actual output x Standard quantity 3,000 = 1,500 x 2

Actual revenue is less than budgeted revenue (F/U)

Unfavorable variance

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 the difference between the actual price of materials:

and the standard price for materials with the difference multiplied by the actual quantity of materials

A quantity variance is:

calculated using the standard price of the unit

A revenue variance is the:

difference between what revenue should have been at the actual level of activity and the actual revenue

SR(AH-SH) is the formula for the ________ variance

labor efficiency

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

labor rate

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

How much input should be used to produce a product or provide a service is a(n) ________ standard.

quantity

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

quantity

The difference between the actual materials used in production and standard amount allowed for the actual output is reflected in the materials ________ variance.

quantity

If the actual cost is greater than the flexible budget cost, the spending variance will be:

unfavorable

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

unfavorable