Accounting Chapter 9

Unfavorable labor rate variances may occur as a result of ______. unskilled workers being assigned to a task that requires a set of skills skilled workers being assigned to jobs requiring little skill overtime premiums being charged to the direct labor account work interruptions caused by faulty equipment

skilled workers being assigned to jobs requiring little skill overtime premiums being charged to the direct labor account

Fancy Nails' master budget for June was based on 2,400 manicures and supplies were budgeted at a total cost of $1,800. During June, 2,500 manicures were done and the total cost for supplies was $2,000. Which of the following statements are true?

The spending variance is $125 U. Rationale: Flexible budget amount for supplies = ($1,800/2,400) = $0.75 x 2,500 manicures = $1,875 - $2,000 = $125 U The volume variance is $75 U. Rationale: Flexible budget amount for supplies = ($1,800 ÷ 2,400) = $0.75 × 2,500 manicures = $1,875 - $1,800 master budget = $75 U.

A master budget calls for 3,000 units of production and budgeted fixed overhead of $6,000. Actual production was 3,500 units and total fixed overhead was $6,150. Which of the following statements is true?

The spending variance is $150. Rationale: The spending variance is the difference between budgeted and actual fixed overhead.

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 Standard variable overhead rate $3.75 per hour

$250 Favorable Rationale: 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.

Use the following information to calculate the direct labor efficiency variance for Adkinson Company. Actual hours used 5,500 Standard hours allowed 5,800 Actual labor rate $14.75 per hour Standard rate $14.00 per hour

$4,200 Favorable Rationale: $14.00 × (5,800 - 5,500) = $4,200 Favorable.

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 Rationale: 6,000 × ($4.00 - $4.10) = $600 F.

True or false: The labor rate variance measures the productivity of direct labor.

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

Which of the following statements are true? A.)Favorable variances are not always good and unfavorable variances are not always bad. B.)Variances cause companies to hold managers responsible for things our of their control. C.)When calculating variances at least one factor changes at a time. D.)Variances provide information that can help managers take corrective action if needed.

Favorable variances are not always good and unfavorable variances are not always bad. Variances provide information that can help managers take corrective action if needed.

True or false: The variable overhead rate variance uses the same basic formula as the labor rate variance except that the variable overhead rates are used instead of the direct labor rates.

True

When calculating the direct labor rate variance, take the actual hours worked times the ______ labor rate and compare it to the actual hours worked times the ______ labor rate.

actual standard

The direct 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

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

direct labor efficiency

The quantity and price of an input (i.e. ounces or pounds) that should be required to create a single unit of output is identified by a(n) ______ standard.

direct material

The difference between the standard and the actual direct labor hourly rates is reflected in the ______ variance.

labor rate

The difference between an actual and a normal cost system is how ______ are recorded.

manufacturing overhead costs

A favorable material price variance ______. may be due to price fluctuations may be due to a quantity discount may be based on the quality of the goods is always a desirable result

may be due to price fluctuations may be due to a quantity discount may be based on the quality of the goods

The direct materials ______ variance reflects the difference between the actual cost of a material and what the cost should have been according to the standard.

price

The variable overhead efficiency variance ______.

really measures the efficiency of the underlying cost driver

A company with a $2,500 favorable direct materials price variance and a $700 unfavorable direct materials quantity variance has a direct material ______ variance of $ ______ favorable.

spending 1800

True or false: The variable overhead rate variance may not explain all the differences between actual spending and standard variable overhead.

true

Which of the following statements are true? The variance formulas only allow one factor to change at a time. Variances always compare actual results to budgeted or standard results. Favorable variances are always good and unfavorable variances are always bad. Companies generally try to hold specific managers responsible for specific variances.

The variance formulas only allow one factor to change at a time. Variances always compare actual results to budgeted or standard results. Companies generally try to hold specific managers responsible for specific variances.

Quantity and price standards ______.

are developed for both direct materials and direct labor

Which statement regarding variable overhead variance analysis is true? The variable overhead efficiency variance is exactly the same as the direct labor rate variance. Variable overhead efficiency variances are impacted by the cost of overhead items. Efficient use of variable overhead results in a favorable variable overhead efficiency variance. The variable overhead efficiency variance may depend on the efficiency of the cost driver.

The variable overhead efficiency variance may depend on the efficiency of the cost driver.

Direct labor standards ______. do not include the cost of employment taxes and benefits use the time it should take to produce a single unit are stated in terms of quantity and price are based on actual labor wage rates

use the time it should take to produce a single unit are stated in terms of quantity and price