Chapter 10 Vocab
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
In a standard cost system, overhead is applied on the basis of the _________ hours allowed for the __________ output of the period.
standard actual
In a standard costing system, variable and fixed overhead are applied to production using the ______ hours allowed for the ______ production.
standard actual
Material requirements plus an allowance for normal inefficiencies are added together to determine the ______________ _______________ per unit of output for direct materials.
standard quantity
Advantages to using a standard cost system include ______.
standards can provide benchmarks for individuals to judge their own performance standard costs can simplify bookkeeping Reason: Too much emphasis on standards impeding other objectives is a potential problem with using standard costs. Reason: Standards can provide both negative and positive feedback and should be used constructively to increase moral and employee motivation.
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 rate per unit that a company expects to pay for variable overhead equals the ______.
variable portion of the predetermined overhead rate
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 Reason: $7,500 ÷ 500 = $15 standard rate per unit × 600 = $9,000 flexible budget - $9,300 actual = $300 U
Calculate the predetermined overhead rate using machine-hours as the allocation base.
$5.00 per machine-hour Reason: The predetermined overhead rate is total estimated overhead cost ($350,000) divided by the estimated total of the allocation base (70,000 hours).
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? Freight and transportation costs Allowance for waste and spoilage Direct materials requirements per unit of finished product
Allowance for waste and spoilage Direct materials requirements per unit of finished product (Freight and transportation costs are used in calculating the standard price per unit)
Which of the following statements are true? Changes in activity have no impact on actual fixed costs within the relevant range. In absorption costing, fixed manufacturing costs are applied to production in large chunks, rather than on a per unit basis. A fixed overhead volume variance results from treating fixed manufacturing costs as if they are variable. Treating fixed costs as if they are variable can lead to bad decisions.
Changes in activity have no impact on actual fixed costs within the relevant range. A fixed overhead volume variance results from treating fixed manufacturing costs as if they are variable. Treating fixed costs as if they are variable can lead to bad decisions. Reason: Fixed costs occur in large chunks, but are applied to production on a per unit basis.
The accounts impacted by closing standard cost variance clearing accounts are ______.
Cost of Goods Sold Retained Earnings
The variable overhead __________ variance measures activity differences and the variable overhead __________ variance measures cost differences.
Efficiency Rate
The labor rate variance measures the productivity of direct labor.
False Reason: The labor rate variance reflects the difference between the actual and standard direct labor rates.
True or False: The labor rate variance measures the productivity of direct labor.
False Reason: The labor rate variance reflects the difference between the actual and standard direct labor rates.
True or False: The standard hours per unit includes both direct and indirect labor hours.
False. The standard hours per unit defines the amount of direct labor-hours that should be used to produce one unit of finished goods.
When using Excel to record transactions, all _________ variances are recorded without parentheses and all _______ variances are recorded with parentheses.
Favorable Unfavorable
Favorable variances ______ retained earnings and unfavorable variances ______ retained earnings.
Increase Decrease
Standard costs are a key element in the _______ by _______ approach utilized by some companies.
Management Exception
Which of the following statements are true? Favorable variances are always better than unfavorable variances. Managers should not use standards to assign blame. Standard cost reports may be too outdated to be useful. Meeting standards is sufficient to remain competitive.
Managers should not use standards to assign blame. Standard cost reports may be too outdated to be useful. Reason: Sometimes favorable variances are worse than unfavorable variances. Reason: Just meeting standards may not be enough to survive in a competitive environment.
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
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
Most companies compute the material price variance when materials are ______ and the material quantity variance when materials are ______.
Purchased Used
The difference between actual results and the flexible budget amount is a(n) _________________ variance.
Spending
Which of the following statements are true? Standards are only used in managerial accounting. Standards provide information for measuring performance. When actual results depart significantly from the standard, the reasons why should be investigated. The purpose of using standards is to assess blame and responsibility.
Standards provide information for measuring performance. When actual results depart significantly from the standard, the reasons why should be investigated.
standard quantity per unit
The amount of direct materials that should be used for each unit of finished product, including an allowance for normal inefficiencies, such as scrap and spoilage.
The standard cost for ______ manufacturing overhead is computed the same way as the standard cost for direct labor.
Variable. As with direct labor, the quantity and price standards for variable manufacturing overhead are usually expressed in terms of hours and a rate.
Standard cost variance accounts begin and end each accounting period with a balance of ___________ .
Zero
The materials price variance is calculated using the ______ quantity of the input purchased.
actual
A normal cost system applies overhead to production on the basis of the __________ level of activity, while a standard costing system applies overhead on the basis of _________ hours allowed for the actual output.
actual standard
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
When using a standard cost system, ______.
an undue emphasis on labor efficiency variances can create pressure to build excess inventory. the information in the variance reports may be too old to be useful. Reason: Too much emphasis on meeting standards may overshadow other important objectives.
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 difference between the actual fixed overhead and the planned fixed overhead is called the _________ variance.
budget
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
The calculation of the budget variance uses ______.
budgeted fixed overhead actual fixed overhead
Volume variance = ______.
budgeted fixed overhead - fixed overhead applied to work in process
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
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 variable overhead _____________ variance measures activity differences and the variable overhead ____________ variance measures cost differences.
efficiency rate
If overhead is overapplied, the total of the standard cost overhead variances is __________.
favorable
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 it simplifies bookkeeping management can generate more timely variance reports
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.
pretermined 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
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 standard and the actual direct labor wages per hour is reflected in the labor __________ variance.
rate
The difference between the standard and the actual direct labor wages per hour is reflected in the labor ___________ variance.
rate
The material variance terms price and quantity are replaced with the terms _____________ and _____________ when computing direct labor variances.
rate(s) and hour(s)
The standard hours per unit for variable overhead measures...
the amount of allocation base from a company's predetermed overhead rate that is required to produce one unit of finished goods. The standard rate per unit that a company expects to pay for variable overhead = the variable portion of the predetermined overhead rate.
Quantity Variance
the difference between how much of an input was actually used and how much should have been used and is stated in dollar terms using the standard price of the input
The same basic formulas used for materials and labor are used to analyze ______ portion of manufacturing overhead.
the variable
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 Reason: When the total of the standard cost overhead variances is unfavorable, overhead is underapplied.
A benchmark used in measuring performance is called a(n) ______________.
Standard
Which of the following statements are true? Fixed costs are proportional to activity. Treating fixed costs as variable is necessary for product costing. 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.
True or False: In an standard cost system overhead is applied using the standard hours allowed for the actual production.
True Reason: In a standard cost system, actual hours are not used to apply overhead.
The accounting equation is: Assets = __________ + ___________ ___________ .
liabilties stockholders equity
A price variance is the difference between the ______.
actual price and the standard price multiplied by the actual amount of the input. (actual price-standard price)*actual amount of input purchased=price variance
