Managerial Accounting Chapter 10 Review

The material variance terms price and quantity are replaced with the terms blank 1 and blank 2 when computing direct labor variances.

Blank 1: rate or rates Blank 2: hours or hour

The labor rate variance measures the productivity of direct labor.

False

(Actual cost per unit - standard cost per unit) × actual quantity = the materials blank variance

price

The labor efficiency variance is generally the responsibility of the Blank______ manager.

production

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

purchased, used

The materials price variance is generally the responsibility of the blank department manager.

purchasing

The difference between the actual amount of an input used and the amount that should have been used, stated in dollar terms using the standard price of the input, is called a(n) blank variance.

quantity

The standard labor rate per hour Blank______.

reflects the expected mix of workers

Material quantity variances Blank______.

resulting from inferior materials are the responsibility of purchasing department manager may be caused by faulty machinery or poor supervision are usually the responsibility of the production manager

The amount of direct-labor hours that should be used to produce one unit of finished goods is the blank hours per unit.

standard

The standard hours per unit of an output includes Blank______.

the estimated time to complete the unit an allowance for cleanup and downtime

An unfavorable materials quantity variance occurs when Blank______.

the actual amount of material used is greater than the standard amount of material allowed for the actual output

The standard rate per hour includes Blank______.

the direct labor rate per hour employment taxes fringe benefits

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

standard

The standard price of materials is $3.50 per pound and the standard quantity allowed for actual output is 7,000 pounds. If the actual quantity purchased and used was 6,700 pounds, and the actual price per pound was $3.40, the direct materials price variance is $

670, Favorable

The standard price of the material is used in the calculation of the material quantity variance because Blank______.

using actual prices would hold the production manager responsible for the inefficiencies of the purchasing manager

The materials price variance is the difference between the actual price of materials Blank______.

and the standard price for materials with the difference multiplied by the actual quantity of materials

When calculating the labor rate variance, multiply the actual hours worked times the blank 1 labor rate and compare it to the actual hours worked times the blank 2 labor rate.

Blank 1: actual Blank 2: standard

The standard price of materials is $3.50 per pound and the standard quantity allowed for actual output is 7,000 pounds. If the actual quantity purchased and used was 6,700 pounds, and the actual price per pound was $3.40, the direct materials quantity variance is $

1050, Favorable

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

unfavorable

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 Blank______.

$4,125 U Reason: 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 Blank______.

$4,200 F Reason: $14.00 × (5,800 - 5,500) = $4,200 F. This is the labor rate variance.

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

Which of the following are used to calculate the standard quantity per unit of direct materials?

Allowance for normal scrap and spoilage. Direct materials requirements per unit of finished product.

The material quantity variance reflects the difference between the blank 1 quantity of materials used in production and the blank 2 quantity of materials allowed for the actual output.

Blank 1: actual Blank 2: standard

All materials variances are generally the responsibility of the production manager.

False Reason: The production manager is generally responsible for the quantity variance and the purchasing manager is generally responsible for the price variance.

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 Reason: The standard hours or quantity allowed is the amount of the input that should have been used to produce the actual, not standard, output.

How much input should be used to produce a product or provide a service is a(n) blank standard.

Quantity

A benchmark used in measuring performance is called a(n) blank

Standard

How much should be paid for an input is indicated by a price blank

Standard

The final, delivered price that should be paid for each unit of direct materials is the blank price per unit of materials

Standard

Which of the following statements are true? When actual results depart significantly from the standard, the reasons why should be investigated. Standards are only used in managerial accounting. The purpose of using standards is to assess blame and responsibility. Standards provide information for measuring performance.

When actual results depart significantly from the standard, the reasons why should be investigated. Standards provide information for measuring performance.

Which of the following statements are correct?

When the workforce is fixed, managers must be cautious about how labor efficiency variances are used. Excessive inventories contribute to inefficient operations.

The materials price variance is calculated using the Blank______ quantity of the input purchased.

actual

The difference between the actual hours used and the standard hours allowed for the actual output is used in the calculation of the labor blank variance

efficiency

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

favorable

When the actual quantity of materials used is less than the standard quantity allowed, the material quantity variance is labeled as blank

favorable

When the standard price is higher than the actual price, the materials price variance is Blank______.

favorable

The materials price variance is Blank______.

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

Poor supervision is one possible cause of an unfavorable Blank______ variance.

labor efficiency

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

labor efficiency

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

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

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

obsolete goods high defect rates inefficient operations

Material quantity variances Blank______.

are usually the responsibility of the production manager may be caused by faulty machinery or poor supervision resulting from inferior materials are the responsibility of purchasing department manager

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

purchasing

A quantity variance is Blank______.

calculated using the standard price of the input

When demand for a product is insufficient to keep all of the production workers busy and no layoffs occur, an unfavorable blank 1 blank 2 variance may occur.

Blank 1: labor or labour Blank 2: efficiency or usage

The terms price and quantity are used when computing direct blank 1 variance, while the terms rate and hours are used when computing direct blank 2 variances.

Blank 1: material or materials Blank 2: labor or labour

A materials price variance is equivalent to a labor blank 1 variance and a materials quantity variance is equivalent to a labor blank 2 variance.

Blank 1: rate Blank 2: efficiency

The materials price variance is calculated using the Blank______.

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

The standard price per unit for direct materials Blank______.

can change based on a change in the delivery method

When setting direct labor standards Blank______.

the production manager should be consulted time and motion studies may be used it is best to use "tight but attainable" standards

The purchasing manager is generally responsible for the material blank 1 variance, and the production manager is generally responsible for the material blank 2 variance.

Blank 1: price Blank 2: quantity

A price variance is the difference between the Blank______.

actual price and the standard price multiplied by the actual amount of the input

The standard hours per unit includes both direct and indirect labor hours.

False Reason: The standard hours per unit only includes direct labor hours.

Quantity standards refer to the price to be paid for each unit of the input. True or False

False Reason: Quantity standards are the amount of each input needed to produce a product. Price standards specify the price to be paid.