ACC 208 - Chapter 11 LS
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 reflects the difference between the _____ quantity of materials used in production and the _____ quantity allowed for the actual output.
Actual, standard
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
One approach to developing the _____ _____ per unit is to have an industrial engineer do a time and motion study.
Standard hours
Material requirements plus an allowance for normal inefficiencies are added together to determine the _____ _____ of a direct material per unit of output.
Standard quantity
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
The direct material spending variance...
-Explains what was spent on materials and what should have been spent -Can be broken down into the quantity variance and the price variance -Needs to be decomposed for analysis
Excessive inventory on hand, especially in the work in process inventory account, may lead to...
-Obsolete goods -High defect rates -Inefficient operations
The calculation of a standard price per unit of direct materials includes...
-Purchase discounts -Shipping costs -Purchase price of the materials
Advantages to using a standard cost system include...
-Standard costs can simplify bookkeeping -Standards can provide benchmarks individuals use to judge their own performance
The standard rate per hour includes...
-The direct labor rate per hour -Employment taxes -Fringe benefits
When using a standard cost system...
-The information in the variance reports may be too old to be useful -An undue emphasis on labor efficiency variances can create pressure to build excess inventory
DL Rate (price) Variance Formula
AH (hours) x (AR [rate] -SR)
DM Price Variance Formula
AQ purchased x (AP-SP)
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 standard price per unit for direct materials...
Can change based on a change in the delivery method
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
When the standard card allowed for the actual output is less than the standard cost allowed for the planned output the activity variance is labeled as...
Favorable
The difference between the standard and the actual direct labor rates is the...
Labor rate variance
Standard costs are a key element in the _____ by _____ approach utilized by some companies.
Management by expection
The labor rate variance is typically the responsibility of the _____ supervisor.
Production
T/F: Managers should not use standards to assign blame.
True
T/F: Standard costs offer several advantages and disadvantages.
True
When the standard purchase price is less than the actual price paid for materials, the material price variance is _____.
Unfavorable
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
The standard cost for _____ manufacturing overhead is computed the same way as the standard cost for direct labor.
Variable
Most companies compute the material price variance when materials are _____ and the material quantity variance when materials are _____.
Purchased, used
DM Quantity Variance Formula
SP x (AQ used-SQ)
DL Efficiency (quantity) Variance Formula
SR x (AH-SH)
An unfavorable materials quantity variance occurs when...
The actual amount of material used is greater than the standard amount of material allowed for the actual output
