ACG 203 CENGAGE CHAP 10, chap 11
Operations are able to respond quickly to customers and changes in the environment in a decentralized organization because
there are fewer managers that must be consulted before
When setting direct labor standards ______
time and motion studies may be used the production manager should be consulted it is best to use "tight but attainable" standards
If the actual level of activity is greater than the planned level of activity, the activity variances will be
unfavorable
The variable overhead efficiency variance compares the ____ hours times the standard rate with the standard hours allowed for the actual output times the _____ rate
Actual ; Standard
The amount of direct-labor hours that should be used to produce one unit of finished goods is the _____ hours per unit.
Standard
differences in skill and seniority
The actual hourly rate may vary between individuals due to skill and seniority differences.
When the standard purchase price is less than the actual price paid for materials, the material price variance is
unfavorable
The difference between the actual level of activity and the standard activity allowed for the actual output x the variable part of the predetermined overhead rate is the variable overhead
efficiency
The difference between the actual hours used and the standard hours allowed for the actual output is used in the calculation of the labor
efficiency variance
Quantity standards refer to the price to be paid for each unit of the input
false
The standard hours or quantity allowed for an input is the amount of the input that should have been used to produce the standard output for the period.
false
When less hours are worked than the standard hours allows, the labor efficiency variance is
favorable
When the actual hourly rate is lower than the standard hourly rate, the labor rate variance is
favorable
When the standard cost allowed for the actual output is less than the standard cost allowed for the planned output the activity variance is labeled as ______.
favorable
When the standard price is higher than the actual price, the materials price variance is
favorable
How much should be paid for each unit of an input is specified by a(n)___ standard
price
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 variance
The materials quantity variance is generally the responsibility of the
production or manufacturing department manager
The manager of a(n) ________center has control over both costs and revenues, but not over the use of ______funds.
profit investment
If poor-quality materials results in excessive labor processing time, the ______ manager will probably be held responsible for the labor efficiency variance
purchasing
The materials price variance is generally the responsibility of the ____ department manager.
purchasing
The difference between the amount of an input used and the amount that should have been used, all evaluated at the standard price for the input, is called a(n)
quantity , efficiency, or usage variance
The difference between the actual materials used in production and the standard amount allowed for the actual output is reflected in the materials
quantity variance
AH(AR - SR) is the formula for the variable overhead
rate variance
A materials price variance is equivalent to a labor _____ variance and a materials quantity variance is equivalent to a labor ______ variance.
rate; efficiency
The standard labor rate per hour
reflects the expected mix of workers
Which of the following evaluation measures are used for investment center managers only—not for cost or profit center managers?
residual income return on investment
Which of the following business segments would not be considered a cost center
retail outlet
The calculation of a standard price per unit of direct materials includes ______.
shipping costs purchase price of the materials purchase discounts
The difference between actual results and the flexible budget amount is a(n) _____ variance
spending variance
In decentralized organizations, decision-making authority is
spread throughout the organization
The amount of an input that should have been used to produce the actual output is known as the _____ quantity or hours allowed.
standard
The labor efficiency variance is the difference between actual hours used and standard hours allowed multiplied by the ______ hourly rate.
standard
Standard quantities and the cost of the inputs to make a single product are accumulated on a(n) _____ card.
standard cost
An unfavorable materials quantity variance occurs when ______.
the actual amount of material used is grater than the standard amount of material allowed for the actual output
The standard rate per hour includes ______.
the direct labor rate per hour employment taxes fringe benefits
A planning budget called for 500 units to be produced and total direct labor cost of $7,500. Actual production was 600 units and actual direct labor cost was $9,300. The activity variance is ______.
$1,500 U $7,500 ÷ 500 = $15 standard rate per hour × 600 = $9,000 flexible budget - $7,500 planning budget = $1,500 U
Given the following, the standard cost of this item is ___per unit. Direct materials per unit: 2 pounds Direct material cost: $2.50 per pound Direct labor per unit: .75 hours Direct labor rate: $16.00 per hour Variable overhead rate: $8.00 per hour
$23 (16*0.75) + 2.5 + 8
Based on the following information, calculate the variable overhead rate variance. Actual variable overhead cost $15,500; Actual hours used 4,200; Standard hours allowed 4,000; and Standard variable overhead rate $3.75 per hour.
$250 F $15,750 (4,200 actual hours × $3.75) - $15,500 of actual overhead = $250 favorable.
Given the following, compute the standard cost per widget. Direct materials per unit: 4 pounds Direct material cost: $1.25 per pound Direct labor per unit: 1.5 hours Direct labor rate: $10.00 per hour Variable overhead rate: $4.00 per hour
$26.00 Reason: Materials (4 pounds × $1.25) + Labor (1.5 hours × $10.00) + Overhead (1.5 hours × $4.00) = $26.00
A planning budget called for 500 units to be produced and total direct labor cost of $7,500. Actual production was 600 units and actual direct labor cost was $9,300. The spending variance is
$300 U $7,500 ÷ 500 = $15 standard rate per unit × 600 = $9,000 flexible budget - $9,300 actual = $300 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 Unfavorable when actual hours are greater than standard hours, the variable overhead efficiency variance is unfavorable. (1,350 - 1,500) x $3.50 = $525 Unfavorable
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 6,000 × ($4.00 - $4.10) = $600 F
Using the information provided, calculate the 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 SP(AQ-SQ) = $3.00(5,200 - 5,000) = $600 U
Which of the following are disadvantages of decentralization??
*Lower-level managers may make decisions without understanding the big picture. *Coordination among departments may be lacking. *Lower-level managers may have objectives that differ from the objectives of the entire organization.
The standard price per unit for direct materials ______.
- can change based on a change in the delivery method
The materials price variance is
-impacted by the delivery method chosen -charged to the production manager when production problems occur -generally the responsibility of the purchasing manager
The standard hours per unit of an output includes
-the estimated time to complete the unit -an allowance for cleanup and downtime.
The variable overhead ____ variance measures activity differences and the variable overhead _____ variance measures cost differences.
Efficiency; Rate
The labor rate variance measures the productivity of direct labor.
False
When demand for a product is insufficient to keep all of the production workers busy and no layoffs occur, an unfavorable variance ______ may occur.
Labor Efficiency
How much should be paid for an input is indicated by a
Price standard
The labor efficiency variance is generally the responsibility of the ______ manager.
Production
Material requirements plus an allowance for normal inefficiencies are added together to determine the ____ of a direct material per unit of output
Quantity Standard
How much input should be used to produce a product or provide a service is a(n
Quantity standards
using time and motion studies
This is true for the standard hours per unit.
A labor efficiency variance is a quantity variance.
True
Quantity standards are the amount of each input needed to produce a product. Price standards specify the price to be paid.
True
The materials price variance is calculated using the ______ quantity of the input purchased.
actual
When calculating the labor rate variance, multiply the actual hours worked times the ____ labor rate and compare it to the actual hours worked times the ____ labor rate.
actual ; standard
Standard direct labor-hours include
an allowance for breaks. Vacation days are a fringe benefit that is included in the standard rate per direct labor-hour.
The standard hours per unit of an output includes ______.
an allowance for cleanup and downtime the estimated time to complete the unit
Standard hours include
an allowance for rejects.
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
A quantity variance is ______.
calculated using the standard price of the input
Decision-making authority lies mostly with higher-level managers in strongly ______ organizations
centralized organizations
Decision-making authority lies mostly with higher-level managers in strongly_____ organizations
centralized organizations
Standards are ______.
compared to the actual quantities and costs of inputs set for each major production input or task benchmarks for measuring performance
Lower-level management goals that are inconsistent with company goals are a possible disadvantage of
decentralization
Poor supervision is one possible cause of an unfavorable ______ variance.
labor efficiency
SR(AH - SH) is the formula for the ______ variance.
labor efficiency
The difference between the standard and the actual direct labor hourly rates is reflected in the _____ variance.
labor rate
Use the following information to calculate the labor rate variance for Adkinson Company. Actual hours used 5,500; Standard hours allowed 5,800; Actual labor rate $14.75 per hour; and Standard labor rate $14.00 per hour. Also calculate the labor efficiency variance
labor rate : $4,125 Unfavorable The labor rate variance is: AH(AR-SR): 5,500 × ($14.75 - $14.00) = $4,125 Unfavorable labor efficiency: $4,200 Favorable $14.00 × (5,800 - 5,500) = $4,200 Favorable. The labor efficiency variance is calculated using the standard, not the actual, labor rate.
AH(SR-AR) is the formula for the ______ variance.
labor rate variance
The terms price and quantity are used when computing direct _____ variance, while the terms rate and hours are used when computing direct _____ variances.
material ,labor
Spoilage and waste allowances relate to
materials only, not labor.
SP(AQ-SQ) is the formula for the materials _____ variance.
materials quantity variance
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 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
The standard rate per unit that a company expects to pay for variable overhead equals the ______
variable portion of the predetermined overhead rate
When the standard hourly rate is lower than the actual rate, the labor rate variance is
unfavorable
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 standard hours per unit includes both direct and indirect labor hours.
false
When the actual quantity of materials used is less than the standard quantity allowed, the material quantity variance is labeled as
favorable
The material variance terms price and quantity are replaced with the terms ____ and ____ when computing direct labor variances.
rate; hours
Which of the following statements is incorrect regarding responsibility accounting
Responsibility accounting refers to the process of evaluating top management on the decisions made
When the actual cost incurred exceeds the standard cost allowed for the actual level of output, the spending variance is
Unfavorable
Which of the following statements are true?
When actual results depart significantly from the standard, the reasons why should be investigated. Standards provide information for measuring performance.
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
Lower-level managers are empowered to make decisions in a ______ organization, which can ________ motivation and job satisfaction
decentralized, increase
Any part of an organization whose manager has control over and is accountable for cost, profit, or investments is a(n)
responsibility center
The standard quantity or hours and the standard price or rate required to produce a unit of a specific product is shown on a:
standard cost card
The same basic formulas used for materials and labor are used to analyze ______ portion of manufacturing overhead.
the variable
The final, delivered price that should be paid for each unit of direct materials is the ____ price per unit of materials.
Standard
An organization in which decision-making authority is spread throughout the organization is ______.
decentralized
A price variance is the difference between the
actual price and the standard price multiplied by the actual amount of the input
The materials price variance is calculated using the ______.
actual price of the input actual quantity of the input purchased standard price of the input
