Managerial ACC ch 10

Favorable variances ______ retained earnings and unfavorable variances ______ retained earnings

increase; decrease

The accounting equation is: Assets = ___ + ___ ___

labilities + stockholders' equity

When demand for a product is insufficient to keep all of the production workers busy and no layoffs occur, an unfavorable ___ ___ variance may occur

labor efficiency

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

labor rate

Standard costs are a key element in the ___ by ___ approach utilized by some companies

management; exception

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

materials; labor

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

purchased; used

If poor-quality materials results in excessive labor processing time, the ___ manager will probably be held responsible for the labor efficiency variance

purchasing/purchase

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

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

quantity/efficiency/usage

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

rate; hours

The difference between actual results and the flexible budget amount is a(n) ___ variance

spending

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

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

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

standard/norm/metric

In a standard cost system, overhead is applied on the basis of the ___ hours allowed for the ___ output of the period

standard; actual

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

variable portion of the predetermined overhead rate

Budgeted fixed overhead - Fixed overhead applied to work in process is the calculation of the ___ variance

volume

Graphic analysis of fixed overhead offers insight into the fixed overhead ______

budget and volume variances

The volume variance is the difference between ______ fixed overhead

budgeted and applied

A quantity variance is ______

calculated using the standard price of the input

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 ___ variance

efficiency

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/usage/quantity

In a standard cost system, ______

every unit of output is charged with the same amount of overhead cost

T/F - The labor rate variance measures the productivity of direct labor

false

When using Excel to record transactions, all ___ variances are recorded without parentheses and all ___ variances are recorded with parentheses

favorable; unfavorable

The volume variance = the ___ component of the predetermined overhead rate x (Denominator hours - the ___ hours allowed for the actual output)

fixed; standard

An unfavorable labor efficiency variance can result from ______

- poorly motivated workers - insufficient product demand - faulty equipment

Advantages to using a standard cost system include ______

- standards can provide benchmarks for individuals to judge their own performance - standard costs can simplify bookkeeping

When using a standard cost system, ______

- the information in the variance reports may be too old to be useful - an undue emphasis on labor efficiency variances can create pressure to build excess inventory

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 variable overhead ___ variance measures activity differences and the variable overhead ___ variance measures cost differences

efficiency; rate

T/F - The standard hours per unit includes both direct and indirect labor hours

false

If overhead is overapplied, the total of the standard cost overhead variances is ___

favorable

When budgeted fixed overhead cost is less than fixed overhead applied to work in process, the volume variance is labeled ___

favorable

When denominator hours are less than the standard hours allowed for actual output, the budget variance is labeled ___

favorable

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

standard

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

standard; actual

The labor efficiency variance is generally the responsibility of the ______ manager

production

A company's fixed component of the predetermined overhead rate was $4.50 per machine hour based 40,000 denominator hours. A total of 38,000 actual hours used and 43,000 standard hours were allowed for the actual output. The volume variance is $ ______

$13,500 F ( $4.50 × (40,000 - 43,000) = $13,500 F )

Use the following information to calculate the 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

$4,125 Unfavorable

Calculate the predetermined overhead rate using machine-hours as the allocation base Budgeted overhead $ 350,000 Budgeted production 28,000 units Total budgeted machine-hours 70,000 hours Actual production 20,000 units Standard machine-hours allowed for actual production 50,000 hours Actual machine-hours used for production 52,000 hours

$5 per machine hour ( The predetermined overhead rate is total estimated overhead cost ($350,000) divided by the estimated total of the allocation base (70,000 hours) )

Using the information provided, calculate the materials quantity variance: Standard price: $3.00 per pound Actual price: $3.20 per pound Actual quantity used: 5,200 pounds Standard quantity allowed: 5,000 pounds

$600 U ( SP(AQ-SQ) = $3.00(5,200 - 5,000) = $600 U ) (When actual quantity is greater than standard quantity, the variance is unfavorable)

The spending variance is ______

(AQ × AP) - (SQ × SP)

Which of the following are used to calculate the standard quantity per unit of direct materials?

- Allowance for waste and spoilage - Direct materials requirements per unit of finished product

Which of the following statements are true? - Managers should not use standards to assign blame - Favorable variances are always better than unfavorable variances - Meeting standards is sufficient to remain competitive - Standard cost reports may be too outdated to be useful

- Managers should not use standards to assign blame - Standard cost reports may be too outdated to be useful

Which of the following statements are true? - In absorption costing, fixed manufacturing costs are applied to production in large chunks, rather than on a per unit basis - Treating fixed costs as if they are variable can lead to bad decisions - A fixed overhead volume variance results from treating fixed manufacturing costs as if they are variable - Changes in activity have no impact on actual fixed costs within the relevant range

- Treating fixed costs as if they are variable can lead to bad decisions - A fixed overhead volume variance results from treating fixed manufacturing costs as if they are variable - Changes in activity have no impact on actual fixed costs within the relevant range

Which of the following statements are true? - Treating fixed costs as variable is necessary for product costing - Fixed costs are proportional to activity - Fixed costs are applied to work in process like they are variable costs - Within the relevant range of activity, increases or decreases in activity change fixed costs

- Treating fixed costs as variable is necessary for product costing - Fixed costs are applied to work in process like they are variable costs

Which of the following statements are true? - Standards are only used in managerial accounting. - When actual results depart significantly from the standard, the reasons why should be investigated. - Standards provide information for measuring performance. - The purpose of using standards is to assess blame and responsibility.

- When actual results depart significantly from the standard, the reasons why should be investigated. - Standards provide information for measuring performance.

The materials price variance is calculated using the ______

- actual quantity of the input purchased - standard price of the input - actual price of the input

The accounts impacted by closing standard cost variance clearing accounts are ______

- cost of goods sold - retained earnings

The materials price variance is generally calculated at the time materials are purchased because ______

- it simplifies bookkeeping - it allows materials to be carried in the inventory accounts at standard cost - management can generate more timely variance reports

The standard price of materials is $3.50 per pound and the standard quantity allowed for actual output is 7,000 pounds. If the actual quantity purchased and used was 6,700 pounds, and the actual price per pound was $3.40, the direct materials quantity variance is $___ ___

1,050 F

The standard price of materials is $3.50 per pound and the standard quantity allowed for actual output is 7,000 pounds. If the actual quantity purchased and used was 6,700 pounds, and the actual price per pound was $3.40, the direct materials price variance is $___ ___

670 F

To calculate a quantity variance, multiply the ___ quantity times the standard price and compare it to the standard quantity allowed times the ___ price

actual; standard/budgeted

Which statement regarding variable overhead variance analysis is true?

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

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

The budget variance is the difference between the ___ fixed overhead and the ___ fixed overhead

actual; budgeted

The material quantity variance reflects the difference between the ___ quantity of materials used in production and the ___ quantity allowed for the actual output

actual; standard

To calculate a price variance, multiply the ___ quantity times the actual price and compare it to the actual quantity times the ___ price

actual; standard

When calculating the labor rate variance, multiply the actual hours worked times the ___ labor rate and compare it to the actual hours worked times the ___ labor rate

actual; standard

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

the variable

T/F - In an standard cost system overhead is applied using the standard hours allowed for the actual production

true

STP Inc. has a variable overhead rate variance of $4,000 U, a variable overhead efficiency variance of $1,500 F, a fixed overhead budget variance of $2,000 F and a fixed overhead volume variance of $10,000 U. From the information, it can be determined that overhead was ______

underapplied

When budgeted fixed overhead cost exceeds fixed overhead applied to work in process, the volume variance is labeled ___

unfavorable

When denominator hours exceed the standard hours allowed for actual output, the volume variance is labeled ___

unfavorable

When the actual cost incurred exceeds the standard cost allowed for the actual level of output, the spending variance is ______

unfavorable

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

variable

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

variable

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

Standard cost variance accounts begin and end each accounting period with a balance of ___

zero/nothing

Use the following information to calculate the 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

$4,200 F

Graphic analysis of fixed overhead ______

offers insight into overhead variances

Dividing the estimated total manufacturing overhead cost by the estimated total amount of the allocation base is the calculation of the ___ ___ rate

predetermined overhead

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