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

A revenue variance is the ______.

difference between the actual total revenue and what the total revenue should have been, given the actual level of activity for the period

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

in a standard cost system, ____

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

The labor rate variance measures the productivity of direct labor.

false

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

flexible

The standard hours per unit includes both direct and indirect labor hours.

false

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

revenue

If the planned budget revenue for 5,000 units is $120,000, the flexible budget revenue for 4,500 units is ___.

$108,000 ($120,000 ÷ 5,000 = $24 per unit × 4,500 = $108,000)

The material quantity variance measures the difference between the ___ quantity of materials used in production and the ___ quantity of materials allowed for the actual output, multiplied by the standard price per unit of materials.

- actual - standard

Which statement regarding variable overhead variance analysis is true?

The variable overhead efficiency is calculated by multiplying the variance in the labor hours with the variable portion of the predetermined overhead rate.

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 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

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

increase accuracy

When direct labor is used as the overhead allocation base, the variable overhead efficiency variance ___

is favorable when the direct labor efficiency variance is favorable

When direct labor is used as the overhead allocation base, the variable overhead efficiency variance ___.

is favorable when the direct labor efficiency variance is favorable

Variances are more accurate when using ______.

multiple cost drivers

graphic analysis of fixed overhead ___

offers insight into overhead variances

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

planning

(Actual cost per unit - standard cost per unit) × actual quantity = the materials ___ variance

price

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

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

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

standard

the ___ ___ per unit defines 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.

standard quantity

planning budgets are sometimes called ___ budgets

static

In a 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

The planning budget, based on 1,000 units, shows revenue of $24,000 and $6,250 for supplies. A total of 1,200 units were actually produced and sold. The flexible budget will show ___.

$28,800 revenue ($24,000 ÷ 1,000 = $24 per unit × 1,200 = $28,800) $7,500 for supplies ($6,250 ÷ 1,000 = $6.25 per unit × 1,200 = $7,500)

Based on the following information, calculate the amount of overhead applied when using a standard costing system. Budgeted variable overhead $200,000 Budgeted fixed overhead $150,000 Estimated total machine-hours 25,000 Standard machine-hours for actual production 20,000 Actual machine-hours used 20,500

$280,000 applied = ($200,000 + $150,000) ÷ 25,000 × 20,000 standard hours allowed

the variance analysis cycle ___.

begins with the preparation of performance reports

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

favorable

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

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 accounting equation is: ___ = ___ + stockholders' Equity

- assets - liabilities

The calculation of the budget variance uses ___ overhead

- budgeted fixed - actual fixed

Which of the following statements are true?

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

standards are ___

- compared to the actual quantities and costs of inputs - benchmarks for measuring performance - set for each major production input or task

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

The difference between the actual amount of materials used in production and the standard amount of materials allowed for the actual output, multiplied by the standard price per unit of materials is 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 standard rate per unit that a company expects to pay for variable overhead equals the ___.

variable portion of the predetermined overhead rate

companies use the ___ ___ cycle to evaluate and improve performance

variance analysis

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

volume

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

zero

Favorable variances ___ retained earnings and unfavorable variances ___ retained earnings

- increase - decrease

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 normal scrap and spoilage

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

- favorable - unfavorable

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 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

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

- rate - hours

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

- retained earnings - cost of goods sold

A flexible budget shows what budgeted amounts should have been at the actual level of activity. As a result of this change in activity, the flexible budget will show a change in total ______.

- revenue - variable cost

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

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 spending variance is the ______.

difference between the actual amount of the cost and how much a cost should have been, given the actual level of activity