Accounting Chapter 9
If the planned budget revenue for 5,000 units is $120,000, the flexible budget revenue for 4,500 units is_____?
$108,000 = 120000/5000 = 24 x 4500 = 108,000
Based on the following information, calculate the amount of overhead applied when using a standard costing system. Budgeted variable overhead $200,000 Budgeted fixed overhead $150,000 Estimated total machine-hours 25,000 Standard machine-hours for actual production 20,000 Actual machine-hours used 20,500
$280,000=(200,000+150,000)/25,000x20,000
The materials price variance is calculated using the ______ quantity of the input purchased.
actual
A price variance is the difference between the ______.
actual price and the standard price multiplied by the actual amount of the input
When preparing a flexible budget, the level of activity_______?
affects variable costs only
The variance analysis cycle ______.
begins with the preparation of performance reports
The difference between the actual fixed overhead and the planned fixed overhead is called the____ variance
budget
Graphic analysis of fixed overhead offers insight into the fixed overhead ______.
budget and volume variances
The volume variance is the difference between ______ fixed overhead.
budgeted and applied
Volume variance = ______.
budgeted fixed overhead - fixed overhead applied to work in process
Fancy Nail's monthly rent is $2,500. The company's static budget for March was based on the activity level of 2,000 manicures. Total sales was budgeted at $40,000 and nail technician wages (a variable cost based on the number of manicures) was budgeted at $20,000. Actual manicures in March totaled 2,200. Assuming no other expenses, Fancy Nails' flexible budget will show ______.
sales of $44,000 = $20 per manicure($40,000/2,000)x2,200=44000 Net operating Income of $19,500=44,000-22,000-2,500
The difference between how much a cost should have been, given the actual level of activity, and the actual amount of the cost is a(n)_______ variance
spending
In a standard costing system, variable and fixed overhead are applied to production using the ______ hours allowed for the ______ production.
standard, actual
The standard rate per unit that a company expects to pay for variable overhead equals the ______.
variable portion of the predetermined overhead rate
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
In absorption costing, fixed manufacturing costs are applied to production in large chunks, rather than on a per unit basis. Reason: Fixed costs occur in large chunks, but are applied to production on a per unit basis. A fixed overhead volume variance results from treating fixed manufacturing costs as if they are variable. Treating fixed costs as if they are variable can lead to bad decisions. Changes in activity have no impact on actual fixed costs within the relevant range.
-A fixed overhead volume variance results from treating fixed manufacturing costs as if they are variable. -Treating fixed costs as if they are variable can lead to bad decisions. -Changes in activity have no impact on actual fixed costs within the relevant range.
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
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
Which of the following statements are true? Multiple select question. Fixed costs are applied to work in process like they are variable costs. Treating fixed costs as variable is necessary for product costing. Fixed costs are proportional to activity. Within the relevant range of activity, increases or decreases in activity change fixed costs.
-Fixed costs are applied to work in process like they are variable costs. -Treating fixed costs as variable is necessary for product costing.
When Flexing a Budget
-Total variable costs change in direct proportion to changes in activity -Total fixed costs remain unchanged within the relevant range
Standards are ______.
-compared to the actual quantities and costs of inputs -set for each major production input or task -benchmarks for measuring performance
The materials price variance is generally calculated at the time materials are purchased because ______.
-management can generate more timely variance reports -it allows materials to be carried in the inventory accounts at standard cost -it simplifies bookkeeping
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
The material variance terms price and quantity are replaced with the terms _____and_____ when computing direct labor variances.
-rate -hours
The accounts impacted by closing standard cost variance clearing accounts are ______. Multiple select question. retained earnings raw materials inventory cost of goods sold cash
-retained earnings -cost of goods sold
T/F: The labor rate variance measures the productivity of direct labor.
Flase
Estimates of what revenues and costs should have been based on the actual level of activity are shown on the_______ budget
Flexible
When 100% peak effort from the most skilled and efficient workers is assumed, the direct labor hours required per unit is being set using ______standards.
Ideal
The difference between the actual materials used in production and the standard amount allowed for the actual output is reflected in the materials _____ variance
Quantity
Material requirements plus an allowance for normal inefficiencies are added together to determine____ _____ the per unit of output for direct materials.
Quantity Standard
The difference between what the total sales should have been, given the actual level of activity for the period, and the actual total sales is a(n)______variance.
Revenue
An unchanged planning budget is known as a(n) _______ planning budget.
Static
Which statement regarding variable overhead variance analysis is true? Multiple choice question. The variable overhead efficiency variance uses exactly the same inputs as the direct labor efficiency variance. Efficient use of variable overhead results in a favorable variable overhead efficiency variance. The variable overhead efficiency variance may depend on the efficiency of direct labor. Variable overhead variances are easy to interpret.
The variable overhead efficiency variance may depend on the efficiency of direct labor.
T/F: In an standard cost system overhead is applied using the standard hours allowed for the actual production.
True
Companies use the________ cycle to evaluate and improve performance
Variance Analysis
U=Unfavorable Variance
When actual costs are greater than budgeted costs
F=Favorable Variance
When actual revenue is greater than budgeted revenue
A revenue variance is the ______.
difference between what revenue should have been at the actual level of activity and the actual revenue
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
If overhead is overapplied, the total of the standard cost overhead variances is____
favorable
Quantity standards specify
how much of an input should be used to make a product or provide a service
Price standards specify
how much should be paid for each unit of the input.
Using multiple cost drivers on a flexible budget report will generally ______.
increase accuracy
Variances are more accurate when using ______.
multiple cost drivers
Graphic analysis of fixed overhead ______.
offers insight into overhead variances
A budget that is prepared at the beginning of the period for a specific level of activity is called a ______ budget.
planning
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
Most companies compute the material price variance when materials are ______ and the material quantity variance when materials are ______.
purchased, used
The difference between the standard and the actual direct labor wages per hour is reflected in the labor____variance
rate
