CH 9 Pre-Work Terms
If the planned budget revenue for 5,000 units is $120,000, the flexible budget revenue for 4,500 units is ______.
$108,000 Explanation: $120,000 ÷ 5,000 = $24 per unit × 4,500 = $108,000
Given 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; and Standard variable overhead rate $3.75 per hour.
$250 F
The terms price and quantity are used when computing direct ______ variance, while the terms rate and hours are used when computing direct ______ variances.
material(s), labor
Variances are more accurate when using ______.
multiple cost drivers
The materials price variance is calculated using the ______.
standard price of the input actual price of the input actual quantity of the input purchased
The ______ ______ per unit defines the amount of direct materials that should be used for each unit of finished product, including an allowance for normal inefficiencies, such as scrap and spoilage.
standard quantity
When calculating the labor rate variance, multiply the actual hours worked with the ______ labor rate and subtract this figure from the product of the actual hours worked and the ______ labor rate.
standard; actual
An unchanged planning budget is known as a(n) ______ planning budget.
static
When the standard hours allowed are lower than the actual hours used, the labor efficiency variance is ______.
unfavorable
The standard cost for _____ manufacturing overhead is computed the same way as the standard cost for direct labor.
variable
The standard rate per unit that a company expects to pay for variable overhead equals the ______.
variable portion of the predetermined overhead rate
Companies use the ______ ______ cycle to evaluate and improve performance.
variance analysis
Which of the following statements are correct?
Excessive inventory contributes to inefficient operations. When the workforce is basically fixed in the short term, managers must be cautious about how labor efficiency variances are used.
The labor rate variance measures the productivity of direct labor.
False
The standard hours per unit includes both direct and indirect labor hours.
False
Poor supervision is one possible cause of an unfavorable ______ variance.
labor efficiency
SR(AH - SH) is the formula for the ______ variance.
labor efficiency
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 ______.
net operating income of $19,500 Explanation: $44,000 - $22,000 - $2,500 sales of $44,000 Explanation: $20 per manicure ($40,000 ÷ 2,000) × 2,200 = $44,000
Excessive inventory on hand, especially in the work in process inventory account, may lead to ______.
obsolete goods inefficient operations high defect rates
A budget that is prepared at the beginning of the period for a specific level of activity is called a ______ budget.
planning
An unfavorable labor efficiency variance can result from _____.
poorly motivated workers faulty equipment insufficient product demand
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
The labor efficiency variance is generally the responsibility of the ______ manager.
production
The materials quantity variance is generally the responsibility of the ______ department manager.
production/ manufacturing
If poor-quality materials results in excessive labor processing time, the ______ manager will probably be held responsible for the labor efficiency variance.
purchasing/ purchase
A(n) ______ ______ is the difference between how much of an input was actually used and how much should have been used and is stated in dollar terms using the standard price of the input.
quantity variance
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/ usage
AH(AR - SR) is the formula for the variable overhead ______ variance.
rate
The difference between the standard and the actual direct labor wages per hour is reflected in the labor _____ variance.
rate
The material variance terms price and quantity are replaced with the terms ______ and ______when computing direct labor variances.
rate(s), hour(s)
A materials price variance is equivalent to a labor ______ variance and a materials quantity variance is equivalent to a labor ______ variance.
rate; efficiency
The difference between the actual total revenue and what the total revenue should have been, given the actual level of activity for the period is called a(n) ______ variance.
revenue/ sales
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
The amount of direct-labor hours that should be used to produce one unit of finished goods is the ______ hours per unit.
standard
The labor efficiency variance is the difference between actual hours used and standard hours allowed multiplied by the ______ hourly rate.
standard
A benchmark used in measuring performance is called a(n) ______.
standard/ norm/ metric
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 ______.
$4,125 U Explanation: This is the labor efficiency variance. The labor rate variance is: AH(AR-SR): 5,500 × ($14.75 - $14.00) = $4,125 U
Which of the following statements is true?
A labor efficiency variance is a quantity variance.
Which of the following statements are true?
Material quantity variances due to inferior materials are the responsibility of the purchasing department. The production manager is usually responsible for the materials quantity variance.
Which statement regarding variable overhead variance analysis is true?
The variable overhead efficiency is calculated by multiplying the variance in the labor hours with the variable portion of the predetermined overhead rate.
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 ______.
$4,200 F Explanation: $14.00 × (5,800 - 5,500) = $4,200 F. The labor efficiency variance is calculated using the standard, not the actual, labor rate.
Given the following information, calculate the variable overhead efficiency variance. Actual hours: 1,500 Standard hours allowed: 1,350 Actual variable overhead rate: $3.00 per hour Standard variable overhead rate: $3.50 per hour
$525 Unfavorable
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 F/Favorable
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 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
The material quantity variance measures the difference between the ______ quantity of materials used in production and the ______ quantity of materials allowed for the actual output, multiplied by the standard price per unit of materials.
actual, standard
The variable overhead efficiency variance compares the hours times the standard rate with the ______ standard hours allowed for the ______ actual output times the rate.
actual, standard
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 variance analysis cycle ______.
begins with the preparation of performance reports
Standards are ______.
benchmarks for measuring performance set for each major production input or task compared to the actual quantities and costs of inputs
A quantity variance is ______.
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 ______ ______ variance may occur.
labor (efficiency/ usage)
A spending variance is the ______.
difference between the actual amount of the cost and how much a cost should have been, given the actual level of activity
A revenue variance is the ______.
difference between the actual total revenue and what the total revenue should have been, given the actual level of activity for the period
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/ usage/ quantity
An unfavorable labor efficiency variance can result from ______.
faulty equipment insufficient product demand poorly motivated workers
When fewer hours are worked than the standard hours allows, the labor efficiency variance is ______.
favorable/ F
Estimates of what revenues and costs should have been based on the actual level of activity are shown on the ______ budget.
flexible/ flex
Using multiple cost drivers on a flexible budget report will generally ______.
increase accuracy
The same basic formulas used for materials and labor are used to analyze ______ portion of manufacturing overhead.
variable
The same basic formulas used to analyze direct materials and direct labor are used to analyze the ______ portion of manufacturing overhead.
variable
A flexible budget shows what budgeted amounts should have been at the actual level of activity. As a result of this change in activity, the flexible budget will show a change in total ______.
variable cost revenue
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