ACCT 201B Chp. 8 Connect Practice Problems
the direct material spending variance:
1. can be broken down into the quantity variance and the price variance 2. needs to be decomposed for analysis 3. explains what was spent on materials and what should have been spent
when a static planning budget is compared to actual results t a different activity level:
1. increases/decreases in net income are not adequately explained 2. changes in cost are expected due to changes in activity
the concept that focuses on important variances and ignores trivial ones is:
management by exception
Variances are more accurate when using:
multiple cost drivers
How much input should be used to produce a product or provide a service is a(n) _____ standard
Quantity
favorable variance
actual revenue is more than budgeted revenue
When the planned level of activity is 900 units and the actual level of activity is 1,000 units, the total variable cost for supplies on the flexible budget:
1. Could be higher/lower than the actual cost of supplies 2. Should be higher than in the planning budget
To calculate a price variance, multiply the _____ quantity times the actual price and compare it to the actual quantity times the _____ price.
Actual Standard
When calculating the labor rate variance, multiply the actual hrs worked times the ____ labor rate and compare it to the actual hrs worked times the ____ labor rate.
Actual Standard
A spending variance is the:
Diff b/w what a cost should have been at the actual level of activity and the actual amount of cost
The labor rate variance is typically the responsibility of the ____ supervisor
Production
The price variance is the diff b/w:
The actual price and the standard price multiplied by the actual amount of input
unfavorable variance
actual revenue is less than budgeted revenue
the purchasing manager is generally responsible for the material ______ variance, and the production manager is generally responsible for the material ________ variance.
price quantity
the labor efficiency variance is generally the responsibility of _________ manager
production
companies use the ________ _______ cycle to evaluate and improve performance
variance analysis
the standard quantity or hours and the standard price or rate required to produce a unit of specific product is shown on a standard _________ _________.
cost card
the standard cost for _______ manufacturing ovhd 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
SP(AQ-SQ) is the formula for the materials _____ variance.
Quantity
When setting direct labor standards:
1. It is best to use "tight but attainable" standards 2. Time and motion studies may be used 3. Production manager should be consulted
direct labor variances:
are computed in the same way as material variances
a materials price variance is _______ when the standard price is higher than the actual price.
favorable
What costs and revenues should be for the actual level of activity is shown on a(n) ___________ budget
flexible
The ________ manager is generally responsible for the materials price variance.
purchasing
the final, delivered price that should be paid for each unit of direct materials is the ______ price per unit of materials.
standard
the most difficult standard to determine is probably the :
standard hrs per unit
The difference b/w 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
a benchmark used in measuring performance is a(n)
standard
flexible budget
takes into account changes in level of activity
T/F: Actual results for a month are determined by plugging the actual number of units sold into the revenues and cost formulas developed during the budgeting process.
False
T/F: The labor rate variance measures the productivity of direct labor.
False
Labor efficiency variance formula:
SR(AH-SH)
The amount of input that should have been used to produce the actual output is known as the ____ quantity or hours allowed.
Standard
T/F: The variable ovhd rate variances uses the same basic formula as the labor rate variance except that the variable ovhd rates are used instead of the direct labor rates.
True
If the actual cost is greater than the flexible budget cost, the spending variance will be:
Unfavorable
the difference b/w the actual hrs used and the standard hrs allowed for the actual output is used in the calculation of the labor _______ variance.
efficiency
static planning budget
only considers the planned level of activity
a flexible budget:
shows what revenue & fixed/variable costs should have been at the actual level of activity
Material requirements plus an allowance for normal inefficiencies are added together to determine the ______ quantity of a material input per unit of output.
standard
a price _______ indicates how much should be paid for an input.
standard
if managers consider it unwise to adjust the workforce in response to changes in workload:
the direct labor workforce is really fixed in short run
If managers consider it unwise to adjust the workforce in response to changes in workload:
the direct labor workforce is really fixed in the short run
Materials price variance formula:
(AQ x AP) - (AQ x SP)
The standard rate per direct labor-hour includes:
The base rate per hour Fringe benefits The employer share of payroll taxes
When the actual quantity of materials used is less than the standard quantity allowed, the material quantity variance is labeled as _______.
Favorable
An unfavorable labor efficiency variance can result from:
1. Faulty equipment 2. Poorly motivated workers 3. Inaccurate standards
Excessive inventory on hand, especially in the work in process inventory account, may lead to:
1. Obsolete goods 2. High defect rates 3. Inefficient operations
The standard hrs per unit of an output includes:
1. the estimated time to complete the unit 2. an allowance for cleanup and downtime
the standard hrs per unit of an output includes:
1. the estimated time to complete the unit 2. an allowance for cleanup and downtime
The difference b/w 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
The difference b/w the amount of input used and the amount that should have been used, all evaluated at the standard price for the input, is called a(n) _______ variance.
Quantity
The most difficult standard to determine is probably the:
Standard hrs per unit
An unchanged planning budget is known as a(n) _____ planning budget
Static
the variable ovhd ______ variance measures activity differences and the variable ovhd ________ variance measures cost differences.
efficiency rate
The difference b/w the actual materials used in production and the standard amount allowed for the actual output is reflected in the materials _____ variance
Quantity
you should expect total ________ costs to be higher in the flexible budget if the activity level for a period is higher than expected.
variable
If the actual level of activity differs from the level of activity used on the planning budget:
variable costs may be lower or higher then expected
