Chapter 10: Standard Costs and Variances
When the standard cost allowed for the actual output is less than the standard cost allowed for the planned output the activity variance is labeled as ______.
favorable
When the standard price is higher than the actual price, the materials price variance is ______.
favorable
SP(AQ-SQ) is the formula for the materials variance.
quantity
The difference between actual results and the flexible budget amount is a(n) variance
spending
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 materials price variance is calculated using the ______.
standard price of the input actual price of the input actual quantity of the input purchased
How much should be paid for an input is indicated by a price____
standards
An unfavorable materials quantity variance occurs when ______.
the actual amount of material used is grater than the standard amount of material allowed for the actual output
When the actual cost incurred exceeds the standard cost allowed for the actual level of output, the spending variance is ______.
unfavorable
When the standard purchase price is less than the actual price paid for materials, the material price variance is
unfavorable, unfavourable , or U
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 materials quantity variance is generally the responsibility of the_______department manager
production
The purchasing manager is generally responsible for the material variance, and the production manager is generally responsible for the material variance.
price,variance
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
The materials price variance is generally the responsibility of the department manager.
purchasing, procurement, or purchase
How much input should be used to produce a product or provide a service is a(n) standard
quantity
The standard labor rate per hour ______.
reflects the expected mix of 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
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
The same basic formulas used for materials and labor are used to analyze the portion of manufacturing overhead
variable
How much should be paid for each unit of an input is specified by a(n) ______standard.
price
The same basic formulas used for materials and labor are used to analyze ______ portion of manufacturing overhead.
the variable
When the standard purchase price is less than the actual price paid for materials, the material price variance is
rate, efficiency
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 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 quantity variance, multiply the quantity times the standard price and compare it to the standard quantity allowed times the
actual,standard
Poor supervision is one possible cause of an unfavorable ______ variance.
labor efficiency
True or false: Managers reluctance to constantly adjust the workforce in response to decreases in the amount of work that needs to be done often leads to an unfavorable labor efficiency variance.
true
If the actual level of activity is greater than the planned level of activity, the activity variances will be ______.
unfavorable
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
True or false: A favorable labor rate variance is always favorable for a company.
false
True or false: All materials variances are generally the responsibility of the production manager.
false
True or false: The standard hours or quantity allowed for an input is the amount of the input that should have been used to produce the standard output for the period.
false
True or false: The standard hours per unit includes both direct and indirect labor hours.
false
Based 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 Standard variable overhead rate $3.75 per hour
$250 Favorable
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
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
Using the information provided, calculate the materials quantity variance.
$600 U
The spending variance is ______.
(AQ × AP) - (SQ × SP)
Which of the following statements are true?
-The production manager is usually responsible for the materials quantity variance. -Material quantity variances due to inferior materials are the responsibility of the purchasing department.
The materials price variance is calculated using the ______.
-actual price of the input -standard price of the input -actual quantity of the input purchased
The standard rate per hour includes ______.
-employment taxes -the direct labor rate per hour -fringe benefits
The materials price variance is ______.
-generally the responsibility of the purchasing -manager impacted by the delivery method chosen -charged to the production manager when production problems occur
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, favorable
Which of the following statements is true?
A labor efficiency variance is a quantity variance.
Which of the following statements are correct?
Building inventories can reduce unfavorable labor efficiency variances. Excessive inventories contribute to inefficient operations.
Which of the following statements are correct?
Excessive inventories contribute to inefficient operations. Building inventories can reduce unfavorable labor efficiency variances.
All materials variances are generally the responsibility of the production manager.
False
Quantity standards refer to the price to be paid for each unit of the input.
False
True or false: The labor rate variance measures the productivity of direct labor.
False
Material requirements plus an allowance for normal inefficiencies are added together to determine the_________ of a direct material per unit of output.
Quantity Standard
When the standard hourly rate is lower than the actual rate, the labor rate variance is ______.
U
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 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 input
The standard quantity or hours and the standard price or rate required to produce a unit of a specific product is shown on a standard
cost card
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
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
When the actual hourly rate is lower than the standard hourly rate, the labor rate variance is
favorable
When the actual quantity of materials used is less than the standard quantity allowed, the material quantity variance is labeled as
favorable
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
Excessive inventory on hand, especially in the work in process inventory account, may lead to ______.
obsolete goods high defect rates inefficient operations
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)
quantity
AH(AR - SR) is the formula for the variable overhead variance.
rate
If managers consider it unwise to adjust the workforce in response to changes in workload ______.
the direct labor workforce is really fixed in the short run
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?
-How production supervisors use direct labor workers can lead to labor rate variances. -Overtime premiums can cause an unfavorable labor rate variance.
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 statements are true?
-Standards provide information for measuring performance. -When actual results depart significantly from the standard, the reasons why should be investigated.
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 $
1050, favorable
Using the information provided, calculate the materials quantity variance.
600 U
The labor efficiency variance is generally the responsibility of the ______ manager.
production
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
The standard rate per unit that a company expects to pay for variable overhead equals the ______.
variable portion of the predetermined overhead rate
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
price
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
The material variance terms price and quantity are replaced with the terms and when computing direct labor variances.
rate,hours
Standard costs fit naturally into an integrated system of accounting.
responsibility
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 Favorable
The materials price variance is ______.
-impacted by the delivery method chosen -charged to the production manager when production problems occur -generally the responsibility of the purchasing manager
The calculation of a standard price per unit of direct materials includes ______.
-purchase discounts -purchase price of the materials -shipping costs
Standards are ______.
-set for each major production input or task -benchmarks for measuring performance -compared to the actual quantities and costs of inputs
The standard hours per unit of an output includes ______.
-the estimated time to complete the unit -an allowance for cleanup and downtime
When setting direct labor standards ______.
-the production manager should be consulted -it is best to use "tight but attainable" standards -time and motion studies may be used
A materials price variance is equivalent to a labo______ variance and a materials quantity variance is equivalent to a labor_____ variance
rate, efiiciency
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:
$300 U
SR(AH - SH) is the formula for the ______ variance.
labor efficiency
