unit 8

standard product costing has several advantages over normal costing and actual costing such as: a) greater capacity for control b) readily available unit. cost at any time c) no unit cost calculations d) no need to distinguish between FIFO & weighted average methods for BI e) all of the above

e) all of the above

All of the following are true regarding variance investigation except: The investigation should be undertaken only if the anticipated benefits are greater than the expected costs. Managers must consider whether a variance will recur. It is difficult to assess the costs and benefits of variance analysis on a case-by-case basis. Variances are not investigated unless they are large enough to be of a concern. Every variance is investigated.

every variance is investigated

Production managers may be tempted to engage in ______ behavior if too much emphasis is placed on the labor efficiency variance

dysfunctional

total variance =

Actual cost - planned cost

actual cost=

Actual price per unit X actual quantity of input used

Labor rates are determined by such (internal or external) forces as labor markets and union contracts

external

Ideal standards can be achieved under efficient operating conditions. True False

false

the _____ _____ _____ provides the production data needed to calculate the standard unit cost

standard cost sheet

Efficiency variance (LEV) =

(AH - SH) x SR

price variance (MPV)=

(AP-SP) X AQ

usage variance (MUV)=

(AQ-SQ) X SP

Rate Variance (LRV) =

(AR - SR) x AH

Total labor variance =

(AR x AH) - (SR x SH)

The labor rate variance is computed by: (Actual Rate x Actual Hours) - (Standard Rate x Standard Hours) (Standard Rate x Actual Rate) - (Actual Rate x Actual Hours) (Actual Rate x Standard Hours) - (Standard Rate x Actual Hours) (Actual Rate x Actual Hours) - (Standard Rate x Actual Hours) None of these

(Actual Rate x Actual Hours) - (Standard Rate x Actual Hours)

total labor variance=

(actual hourly wage rate X actual DL hours used) - (standard hourly wage rate X standard hours allowed)

total budget variance is the difference between the _____ cost of the input and its ____ cost

actual cost & planned cost

______ ________ ________ can be achieved under efficient operating conditions

currently attainable standards

One reason for adopting a standard cost system is to make product costing easier. True False

false

The benefits of operational control under a standard cost system can extend to all manufacturing environments. True False

false

The materials price variance is computed using the actual quantity of materials used, and the materials usage variance is computed using the actual quantity of materials purchased. True False

false

labor variances are subtracted from COGS if (favorable or unfavorable)

favorable

what are some examples of potential sources of quantitive standards?

historical experience, engineering studies, and input from operating personnel

total labor variance measures the difference between the actual costs of labor and the budgeted cost of ____

labor

labor rate variance (LRV) computes the difference between what was paid to direct _____ and what should have been paid

laborers

what are variances?

the difference between the actual and planned costs for the actual level of activity

what is a unit standard?

the standard cost per unit

what are ideal standards?

when you demand maximum efficiency and can be achieved only if everything operates perfectly

The materials usage variance is calculated by the equation: (Standard Price x Actual Quantity) - (Standard Price x Standard Quantity) (Standard Price x Standard Quantity) + (Standard Price x Actual Quantity) (Actual Price x Actual Quantity) - (Standard Price x Actual Quantity) (Actual Price x Standard Quantity) + (Actual Quantity x Standard Price) None of these

(Standard Price x Actual Quantity) - (Standard Price x Standard Quantity)

All of the following are true EXCEPT: A favorable labor efficiency variance could result from higher quality materials that result in fewer inspections. A favorable labor rate variance could result from lower wage workers quitting A favorable materials price variance could result from purchasing identical materials from another supplier at a lower price. An unfavorable materials usage variance could result from not efficiently utilizing raw materials, thus causing waste. An unfavorable labor efficiency variance can be caused by machine downtime, and poor quality materials.

A favorable labor rate variance could result from lower wage workers quitting

the quantity decision:

The amount of input that should be used per unit of output

the pricing decision:

The amount that should be paid for the quantity of the input to be used

Which of the following is NOT true concerning direct materials variances? The sum of the price and usage variances will add up to the total materials variances only if the materials purchased is equal to the materials used. The materials price variance uses the actual quantity of materials purchased rather than the actual quantity of materials used. The materials price variance always uses the actual quantity of materials used rather than the actual quantity of materials purchased. The materials usage variance uses the actual quantity of materials used. Separate materials variances can be computed for each type of material used. Separate materials variances can be computed for each type of material used.

The materials price variance always uses the actual quantity of materials used rather than the actual quantity of materials purchased.

Which of the following is true regarding variances? Unfavorable variances occur whenever actual prices or actual usage of inputs are greater than standard prices or standard usage. Favorable variances occur whenever actual prices or actual usage of inputs are greater than standard prices or standard usage. Unfavorable variances are always credits. Favorable variances are always debits. None of these.

Unfavorable variances occur whenever actual prices or actual usage of inputs are greater than standard prices or standard usage.

Standards based on the amount of input that should be used per unit of output are called Quantity standards Price standards Ideal standards Currently attainable standards

a) quantity standards

favorable variances occur when:

actual prices/usage < than standard prices/usage (negative amount)

unfavorable variances occur when:

actual prices/usage > than standard prices/usage (positive amount)

materials are (added or subtracted) to COGS if unfavorable

added

________ is made for normal breakdowns, interruptions, and less than perfect skill

allowance

what do control limits do?

allows Managers to determine whether variances are significant (and its cause investigated) based on an acceptable range that has top and bottom

Which of the following is NOT an advantage of standard costing over normal costing and actual costing? A greater capacity for control Ability to easily distinguish the FIFO and weighted average methods of accounting for beginning inventory costs Computing a unit cost for each equivalent unit cost category is not necessary. Providing for readily available unit cost information. All of these are advantages of standard costing

b) Ability to easily distinguish the FIFO and weighted average methods of accounting for beginning inventory costs

the materials usage variance measures the difference between....

between the direct materials actually used and the direct materials that should have been used for the actual output

the pricing decision produces ______ standards

price

overall variances can be further broken down into ______ variance and _____/____ variance

price & usage/efficiency

______ managers are responsible for the productive use of direct labor

production

The responsibility for controlling the materials usage usually belongs to the

production manager

The responsibility for controlling the materials price variance usually belongs to the

purchasing agent

the quantity decision produces ______ standards

quantity

costs are assigned to products using ______ & _____ standard for all the manufacturing costs: _____ _____, ______ _____, and ____

quantity and price; DM, DL, and OH

standard cost per unit=

quantity standard X price standard

planned cost=

standard price per unit X standard quantity of input allowed for the actual outpit

materials are (added or subtracted) to COGS if favorable

subtracted

In setting standards, historical experience should be used with caution because it can perpetuate operating inefficiencies. True False

true

The actual quantity of input at the actual price less the actual quantity of input at the standard price is the price variance. True False

true

The sum of the labor rate and labor efficiency variances will always add up to the total labor variance. True False

true

total budget variance is calculated for each separate cost T/F

true

labor variances are added to COGS if (favorable or unfavorable)

unfavorable

SH (standard hours allowed)=

unit labor standard X actual output

SH=

unit labor standard X actual output

SQ (standard quantity of materials allowed)=

unit quantity standard X actual output

SQ=

unit quantity standard X actual output

Comparing actual costs with budgeted costs identifies _____

variances

the materials price variance measures the difference between....

what should have been paid for raw materials and what was actually paid and is calculated as