ACC 208 - Chapter 11 LS

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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


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