Accounting Class - Chapter 9 SmartBook
If actual direct labor hours worked are higher than standard hours allowed but the actual labor rate paid is lower than the standard rate allowed, the direct labor rate variance will be
favorable
When making standard cost journal entries, ______ variances are always recorded as credits.
favorable
Managers are able to separate variances that are due to the volume of output (called volume variances) from variances that are due to the amount spent on the various inputs (called spending variances) when using a
flexible budget only
Standard cost systems
help maintain consistency and quality help managers budget and control costs are based on what managers think costs should be
Using practical capacity as the denominator when calculating fixed overhead rates
highlights the cost of unused capacity prevents rates from changing due to demand fluctuations
Responsibility for the direct labor rate variance falls on the ______ managers
hiring production
A fixed overhead volume variance
is interpreted based on the measure used in the denominator of the fixed overhead rate reflects the accuracy of the denominator used to compute the fixed overhead rate
If actual direct labor hours worked are higher than standard hours allowed but the actual labor rate paid is lower than the standard rate allowed, the direct labor efficiency variance will be
unfavorable
If the actual cost is greater than budgeted cost, the variance is labeled as
unfavorable
When recording standard cost journal entries, a debit indicates that the variance is
unfavorable
A flexible budget variance is calculated by comparing the master budget to the flexible budget.
volume
If a master budget was based on 15,000 units and 18,000 units are actually produced, the volume variances for variable costs
will be unfavorable
An unfavorable labor efficiency variance can result from
worker skill level
The formula for the unexpected capacity variance is the same as the formula for the ______ variance.
volume
Creating the flexible budget allows managers to identify both and variances.
volume spending
When a company bases fixed overhead on a practical capacity of 15,000 units, the company will have a fixed overhead capacity variance
whenever it produces anything other than 15,000 units
Company standards call for a labor rate of $22 per hour and 1/2 hours per unit produced. If 1,000 units are produced using 450 hours at a total labor cost of $10,800,
Direct labor rate variance will be debited for $900 Wages payable will be credited for $10,800
Using the information provided, calculate the direct materials price variance. Using the information provided, calculate the direct materials price variance. Standard price: $3.00 per pound Actual price: $3.20 per pound Actual quantity used: 5,200 pounds Standard quantity allowed: 5,000 pounds
$1,040 U
Given the following information, calculate the variable overhead efficiency variance. Actual hours 1,500 Standard hours allowed 1,350 Actual variable overhead rate $3.00 per hour Standard variable overhead rate $3.50 per hour
$525 U
Using the information provided, calculate the direct materials quantity variance. Standard price $3.00 per pound Actual price: $3.20 per pound Actual quantity used: 5,200 pounds Standard quantity allowed: 5,000 pounds
$600 U
Using the information provided, calculate the direct materials price variance. Standard price: $2.30 per pound Actual price: $2.10 per pound Actual quantity used: 4,400 pounds Standard quantity allowed: 4,500 pounds
$880 F
Which of the following statements is true?
A material quantity variance could be related to the quality of materials.
The formula for a price variance is
AQ × (SP - AP)
Which of the following are common causes of favorable variances?
Using less direct materials than expected Using less of a variable resource than expected Taking less time to produce a unit than expected
Which of the following formulas for the fixed overhead volume variance is correct?
Applied Fixed Overhead - Budgeted Fixed Overhead
Company standards call for a labor rate of $22 per hour and 1/2 hours per unit produced. If 1,000 units are produced using 450 hours at a total labor cost of $10,800
Direct labor rate variance will be debited for $900 Wages payable will be credited for $10,800
Which of the following statements about the fixed overhead capacity are true?
The fixed overhead capacity variance helps managers understand how fixed resources are being used. The fixed overhead capacity variance highlights the cost of any unused capacity.
A company's practical capacity is 15,000 units. The budget calls for 10,000 units to be produced and 13,000 units are actually produced. Which of the following statements about the planned and unplanned fixed overhead capacity variances is correct?
The planned variance is unfavorable and the unplanned variance is favorable.
A company's budgeted fixed overhead is $7,000 based on 4,000 units. If the company actually produces 3,500 units, which of the following statements are true?
The total fixed overhead applied to production will be less than $7,000. The fixed overhead volume variance will be unfavorable.
Which statement regarding variable overhead variance analysis is true?
The variable overhead efficiency variance depends on the efficiency of the cost driver.
The variable overhead rate variance may not explain all the differences between actual spending and standard variable overhead.
True
The price variance is calculated using the ______ quantity of the input purchased.
actual
A variance is labeled as favorable when the
actual cost is less than the standard or budgeted cost
Practical capacity
allows for some downtime
Direct labor variances
are computed using the same basic framework as direct material variances
Quantity and price standards
are developed for both direct materials and direct labor
Direct labor standards
are stated in terms of quantity and price use the time it should take to produce a single unit
The fixed overhead spending variance is also called the fixed overhead variance.
budget
The total overapplied or underapplied fixed overhead is the sum of the fixed overhead spending variance and the fixed overhead volume variance when fixed overhead rates are based on ______ production volume
budgeted
Unplanned Fixed Overhead Capacity variances are based on the difference between
budgeted and actual volume
The volume variance is the difference between ______ fixed overhead.
budgeted and applied
Planned Fixed Overhead Capacity variances are based on the difference between
budgeted volume and practical capacity
When preparing journal entries in a standard cost system, standard costs are the and actual costs are the
debit credit
A company uses a standard cost system and purchased 1,000 pounds of material. The actual cost was $1.00 per pound. The standard cost is $.90 per pound. The entry to Direct Materials to record this purchase is a
debit for $900
A company purchases a material at a standard cost of $.10 per ounce. The purchase of 50,000 ounces at $.11 per ounce on account using a standard cost system would include a
debit to Direct Materials Price Variance for $500 credit to Accounts Payable for $5,500
Ideal standards are problematic because they
demand peak effort at all times tend to discourage workers
The framework used to analyze fixed overhead variances ______ that used to analyze variable cost variances.
differs from
Wally's Widgets' budgeted fixed overhead is $8,000. The company expects to produce 4,000 units which is 1,000 under practical capacity. The fixed overhead rate based on practical capacity is ______ per unit.
$1.60
Abba, Inc. has developed the following standards for one of its products: Direct materials - 1/2 pound at $6.00 per pound; Direct labor - 1/4 hour at $20.00 per hour; Variable overhead - 20% of direct labor cost. Total fixed overhead is expected to be $15,000 and the company expects to produce 7,500 units. The standard cost card for this product will show a cost per unit of
$11.00
A company estimated $17,500 of variable overhead for 3,500 machine hours. Actual cost was $16,240 for 2,800 hours. Calculate the variable overhead rate variance.
$2,240 U
Based on the following information, calculate the variable overhead rate variance. Actual variable overhead cost: $15,540 Actual machine hours: 4,200 Standard machine hours: 4,000 Standard variable overhead rate $3.75 per hour
$210 F
Using the information provided, calculate the direct materials quantity variance. Standard price: $2.30 per pound Actual price: $2.10 per pound Actual quantity used: 4,400 pounds Standard quantity allowed: 4,500 pounds
$230 F
A company estimated $17,500 of variable overhead for 3,500 machine hours. Actual cost was $16,240 for 2,800 hours. Calculate the variable overhead efficiency variance.
$3,500 F
Use the following information to calculate the direct labor rate variance for Adkinson Company. Actual hours used: 5,500 Standard hours allowed: 5,800 Actual labor rate: $14.75 per hour Standard labor rate: $14.00 per hour
$4,125 U
Use the following information to calculate the direct labor efficiency variance for Adkinson Company. Actual hours used: 5,500 Standard hours allowed: 5,800 Actual rate: $14.75 per hour Standard rate: $14.00 per hour
$4,200 F
The fixed overhead spending variance is calculated by comparing actual fixed overhead to applied fixed overhead.
False
A complicated production process is one possible cause of an unfavorable ______ variance.
direct labor efficiency
The total budget variance ______ provide much insight into the root cause of the variance.
doesn't
A variable overhead rate variance may be favorable because
less money was spent on supplies and other variable overhead items the wrong cost driver was used to assign overhead
The difference in actual manufacturing costs and the ______ budget is called the total budget variance.
master
A favorable material price variance
may be due to a quantity discount may be based on the quality of the goods may be due to price fluctuations
If a master budget was based on 15,000 units and 18,000 units are actually produced, the spending variances for variable costs
may be favorable or unfavorable
A fixed overhead volume variance
occurs when actual volume differs from the volume used to compute the fixed overhead rate
Unfavorable labor rate variances may occur as a result of
overtime premiums being charged to the direct labor account skilled workers being assigned to jobs requiring little skill
The volume that could be achieved under normal (not ideal) operating conditions is known as
practical capacity
The two types of standard in a standard cost system are and
price quantity
The materials quantity variance is generally the responsibility of the ______ manager.
production
The materials price variance is generally the responsibility of the ______ manager.
purchasing
How much input should be used to produce a product or provide a service is specified by standards
quantity
The price variance for direct labor is called the direct labor variance and the quantity variance for direct labor is called the direct labor variance.
rate efficiency
The variable overhead efficiency variance
really measures the efficiency of the underlying cost driver
When using a standard cost system, differences between actual and standard costs are
recorded as cost variances
When using standard cost journal entries, the entry for direct labor
records both the labor rate and the labor efficiency variance
When direct materials are placed into production, the standard cost journal entry
records the material quantity variance only
Actual costs are compared to the flexible budget when computing ______ variances.
spending
An unfavorable variance may be caused by ______ more than expected.
spending
The two types of variances for fixed overhead are FOH
spending volume
When the fixed overhead rate is based on budgeted production volume, the total overapplied or underapplied fixed overhead is the sum of the fixed overhead variance and the fixed overhead variance
spending volume
Costs are recorded based on what managers think they should be, not based on actual costs in a (n) cost system.
standard
The amount a company should spend to produce a single unit of product based on expected production and sales is shown on a(n) card.
standard cost
A company is adding materials to Work in Process for the production of 10,000 widgets. In a standard cost system, the amount debited to Work in Process Inventory for materials is based upon
the standard cost and quantity of materials allowed
Reasonable, efficient efforts from employees are required when standards used are
tight but attainable
The difference in actual manufacturing costs and the master budget is called the variance
total budget