Class 18

Which of the following could cause a labor efficiency variance?

- due to machine break-downs production is experiencing significant "down-time" by workers - due to lay-offs around the country, the company is able to hire more efficient workers at the budgeted wage rate

Actual output is used for variance calculations because

- it focuses on the direct materials cost and direct labor cost that should have been incurred for the level of output produced - budgeted output although useful for planning is outdated for analyzing performance - performance should be evaluated based upon what costs should be given the output produced

The use of historical data in standard cost setting should be adjusted

- price levels - the production process - product requirements

The direct materials quantity standard includes

- quantity of direct materials required to produce one unit of finished product - an allowance for normal waste/inefficiency of materials

The direct labor standard includes

- the amount of time it normally takes to make one unit of product - the hourly cost of direct labor, including fringe benefits

The standard direct material price is the total

delivered cost, after subtracting any purchase discounts, of one direct material unit

An allowance for waste/inefficiencies is part of the

direct materials quantity standard

The labor efficiency variance is most similar to the

direct materials quantity variance

The two direct labor variances are called direct labor rate and direct labor ___ variances

efficiency

When a company expects to spend more than it actually spends there will be a ___ variance

favorable

When a company has higher wage rates than anticipated, but uses less materials in the manufacturing of a product than allowed by the standard, the company will have a(n) ___ materials quantify variance

favorable

When a company is able to negotiate a long term contract for materials at a price less than projected, what is the likely variance?

favorable materials price variance

Which of the following would most likely result in a favorable labor rate variance?

hiring unskilled workers at a rate lower than the standard rate per hour

A standard that can only be attained under the best of circumstances is called a(n) ___ standard

ideal

The process of following up on only significant cost variances is called ___ ___ ___

management by exception

An unfavorable variance occurs if

more labor hours are used than allowed by the standard

A standard that assumes a production process under normal operating conditions is referred to as a(n) ___ standard

practical

The direct materials price variance is

the difference between the actual cost of direct material and the standard cost of quantity purchased or consumed