CHAPTER 9 SMARTBOOK

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

materials labor

The difference between the standard and the actual direct labor wages per hour is reflected in the labor _________ variance.

rate

When the standard hourly rate is lower than the actual rate, the labor rate variance is

unfavorable Reason: The variance is favorable when the actual rate is lower than standard.

The same basic formulas used to analyze direct materials and direct labor are used to analyze the__________ portion of manufacturing overhead.

variable

When direct labor is used as the overhead allocation base, the variable overhead efficiency variance ______.

will be favorable when the direct labor efficiency variance is favorable

The labor rate variance measures the productivity of direct labor.

False Reason: The labor rate variance reflects the difference between the actual and standard direct labor rates.

The labor efficiency variance is generally the responsibility of the _________ manager

production

Most companies compute the material price variance when materials are ______ and the material quantity variance when materials are ______.

purchased used

Fill in the blank question. Generally speaking, the ___________ manager has control over the price paid for goods and is therefore responsible for the materials price variance.

purchasing

SP(AQ-SQ) is the formula for the materials ________ variance.

quantity

The labor efficiency variance is the difference between actual hours used and standard hours allowed multiplied by the ______ hourly rate.

standard

When calculating the labor rate variance, multiply the actual hours worked with the _________ labor rate and subtract this figure from the product of the actual hours worked and the _________ labor rate.

standard actual

The same basic formulas used for materials and labor are used to analyze ______ portion of manufacturing overhead.

the variable

AH(AR - SR) is the formula for the variable overhead _______ variance

rate

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

rate hours

An unfavorable labor efficiency variance can result from ______.

- poorly motivated workers - faulty equipment - insufficient product demand

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

RATE EFFICIENCY

Which statement regarding variable overhead variance analysis is true?

The variable overhead efficiency is calculated by multiplying the variance in the labor hours with the variable portion of the predetermined overhead rate.

Given 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 Reason: Applied variable overhead cost is based on the actual hours so, applied overhead of $15,750 (4,200 actual hours × $3.75) - $15,500 of actual overhead = $250 overapplied. When the actual cost is less than the applied cost, the variance is favorable.

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. The labor rate variance is ______.

$4,125 U This is the labor efficiency variance. The labor rate variance is: AH(AR-SR): 5,500 × ($14.75 - $14.00) = $4,125 U

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. The labor efficiency variance is

$4200 F Reason: $14.00 × (5,800 - 5,500) = $4,200 F. The labor efficiency variance is calculated using the standard, not the actual, labor rate.

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 Reason: When actual hours are greater than standard hours, the variable overhead efficiency variance is unfavorable. (1,350 - 1,500) × $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 Reason: The variance is favorable because the actual price is less than the standard price.

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 statements are correct?

- Excessive inventory contributes to inefficient operations. - When the workforce is basically fixed in the short term, managers must be cautious about how labor efficiency variances are used.

Which of the following statements are true?

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

The materials price variance is ______.

- generally the responsibility of the purchasing manager - charged to the production manager when production problems occur - impacted by the delivery method chosen

The materials price variance is generally calculated at the time materials are purchased because __________

- it simplifies bookkeeping - management can generate more timely variance reports - it allows materials to be carried in the inventory accounts at standard cost

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

A quantity variance is _____.

calculated using the standard price of the input

Fill in the blank question. 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 fewer 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

SR(AH - SH) is the formula for the ______ variance.

labor efficiency

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

If poor-quality materials results in excessive labor processing time, the _________ manager will probably be held responsible for the labor efficiency variance.

purchasing

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

rate hours

Excessive inventory on hand, especially in the work in process inventory account, may lead to Blank______.

- obsolete goods - high defect rates - inefficient operations

The materials price variance is calculated using the _________

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