Chapter 9 Smartbook: flexible budgets, standard costs, and variance analysis

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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

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 b/c A planning budget is prepared using a static level of activity. A flexible budget takes into account what costs should have been at the actual level of activity.

When the standard hours allowed are lower than the actual hours used, the labor efficiency variance is Blank______.

unfavorable

The variance analysis cycle ______ .

begins with the preparation of performance reports

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

variable portion of the predetermined overhead rate

The standard price of the material is used in the calculation of the material quantity variance because _______.

using actual prices would hold the production manager responsible for the inefficiencies of the purchasing manager

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

planning

Variances are more accurate when using ________ .

multiple cost drivers

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

rate hour

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 or sales

Which of the following statements is true?

A labor efficiency variance is a quantity variance.

Companies use the ______ _________ cycle to evaluate and improve performance.

variance analysis

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. b/c 6,000 × ($4.00 - $4.10) = $600 F

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 waste and spoilage

The materials price variance is calculated using the ______ .

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

Standards are _______ .

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

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 ________ .

- variable cost - revenue

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

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

flexible or flex

When preparing a flexible budget, the level of activity ______.

affects variable costs only

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 _______ .

- 28,000 revenue - 7500 for supplies b/c $24,000 ÷ 1,000 = $24 per unit × 1,200 = $28,800 b/c $6,250 ÷ 1,000 = $6.25 per unit × 1,200 = $7,500

Which of the following statements are true?

- Material quantity variances due to inferior materials are the responsibility of the purchasing department. - The production manager is usually responsible for the materials quantity variance.

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

$108,000 b/c $120,000 ÷ 5,000 = $24 per unit × 4,500 = $108,000

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

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

standard, norm, metric

An unchanged planning budget is known as a(n) ______ planning budget.

static

An unchanged planning budget is known as a(n) _______ planning budget.

static

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 materials price variance is calculated using the ______ quantity of the input purchased.

Actual

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

Variable

The variance analysis cycle _______ .

begins with the preparation of performance reports

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, or quantity

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

increase accuracy

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

material(s) labor

The labor rate variance measures the productivity of direct labor.

False

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

A price variance is the difference between the ______.

actual price and the standard price multiplied by the actual amount of the input

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

A quantity variance is ______ .

calculated using the standard price of the input

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

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

False

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 or usage

A _____ __________ is 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.

quantity variance

A _______ _________ is 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.

quantity variance

A materials price variance is equivalent to a labor ______ variance and a materials quantity variance is equivalent to a labor _______ variance

rate efficiency


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