Chapter 9: Flexible Budgets, Standard Costs, and Variance Analysis

The same basic formulas used for materials and labor are used to analyze ______ portion of manufacturing overhead.

the variable

The same basic formulas used for materials and labor are used to analyze the _____ portion of manufacturing overhead

variable

Companies use the _____ _____ cycle to evaluate and improve performance.

variance analysis

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

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

standard

The labor efficiency variance is the difference between actual hours used and standard hours allowed multiplied by the ______ hourly rate.

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

The difference between what the total sales should have been, given the actual level of activity for the period, and the actual total sales is a(n) _______ variance

revenue

The difference between how much a cost should have been, given the actual level of activity, and the actual amount of the cost is a(n) _____ variance.

spending

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

standard

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

variable

Standards are ______.

- Benchmarks for measuring performance - Compared to the actual quantities and costs of inputs - Set for each major production input or task

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

actual

A price variance is the difference between the ______.

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

When preparing a flexible budget, the level of activity ______.

affects variable costs only

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 accounting equation is: _____ = _____ + Stockholders' Equity.

assets ; liabilities

A spending variance is the ______.

difference between what a cost should have been at the actual level of activity and the actual amount of the cost

A revenue variance is the ______.

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

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

labor rate

The terms price and quantity are used when computing direct _____ variance, while the terms rate and hours are used when computing direct _____ variances.

material ; labor

Variances are more accurate when using ______.

multiple cost drivers

When comparing the static planning budget to actual activity, a problem that arises when actual activity is higher than budgeted activity is that ______.

net income is higher than expected but all or most expense variances are unfavorable

A budget that is prepared at the beginning of the period for a specific level of activity is called a ______ budget.

planning

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

production

The variance analysis cycle ______.

begins with the preparation of performance reports

Using multiple cost drivers on a flexible budget report will generally ______.

increase accuracy

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

rate ; hours

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

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

purchased, used

Planning budgets are sometimes called ______ budgets.

static

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

variable portion of the predetermined overhead rate

True or false: In an standard cost system overhead is applied using the standard hours allowed for the actual production.

True

True or false: A static budget is being compared to actual activity. The variance is F for net income but U for most expenses. This suggests that actual activity was lower than budgeted.

False

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

Flexible

Which of the following statements are true?

Material quantity variances due to inferior materials are the responsibility of the purchasing department. The production manager is usually responsible for the materials quantity variance.

Which statement regarding variable overhead variance analysis is true?

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

When 100% peak effort from the most skilled and efficient workers is assumed, the direct labor hours required per unit is being set using _____ standards.

ideal

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

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

false

In a standard costing system, variable and fixed overhead are applied to production using the ______ hours allowed for the ______ production.

standard ; actual