Intro to Accounting Chapter 21 Smartbook

XYZ Company makes one product and has calculated the following amounts for direct labor: AH x AR = $84,000; AH x SR = $83,000; SH x SR = $85,000. Compute the total labor cost variance.

$1,000 F

A company had a standard sales price of $1.79 per unit and expected to sell 10,000 units. Due to a downturn in the economy, the product was marked down to $1.59 per unit and the company only sold 9,500 units. Calculate the sales price variance.

$1,900 U

XYZ Company makes one product and has calculated the following amounts for direct materials: AQ x AP = $150,000; AQ x SP = $145,000; SQ x SP = $152,000. Compute the total direct materials variance.

$2,000 F

ABC Company has set the following standards for one unit of product: Direct materials: 0.5 pounds @ $1.00 per pound; Direct labor: 1 hour @ $10.00 per hour. The company produced 35,000 units and had the following actual costs: Direct materials: 18,000 pounds at a total cost of $17,280; Direct labor: 36,000 hours at a total cost of $374,400. Compute the total direct materials variance.

$220 F Reason: $17,280 - (35,000 x 0.5 lb x $1/lb) = $220 F

ABC Company has set the following standards for one unit of product: Direct materials: 0.5 pounds @ $1.00 per pound; Direct labor: 1 hour @ $10.00 per hour. The company produced 35,000 units and had the following actual costs: Direct materials: 18,000 pounds at a total cost of $17,280; Direct labor: 36,000 hours at a total cost of $374,400. Compute the total labor variance.

$24,400 U Reason: $374,400 - (35,000 units x 1 hr x $10/hr) = $24,400 U

The fixed budget indicates sales of $50,000. Actual sales were $55,000. The variance is:

$5,000 favorable

Actual sales volume for a period is 5,000 units. Budgeted sales volume is 4,500. Actual selling price per unit is $15 and budgeted price per unit is $15.75. The sales price variance is $_____.

Blank 1: 3750

When compared to the budgeted amount, if the actual cost or revenue contributes to a higher income, then the variance is considered _____.

Blank 1: favorable

A(n) _____ budget is a report on predicted amounts of revenues and expenses corresponding to the actual level of output.

Blank 1: flexible or variable

A _____ variance is the difference between the actual quantity per unit and the standard quantity per unit.

Blank 1: quantity, usage, or efficiency

Budget _____ contain relevant information that compares actual results to planned activities.

Blank 1: reports

A(n) _____ variance occurs when management pays an amount different from the standard price to acquire the item.

Blank 1: spending

Preset costs for delivering a product or service under normal conditions are called _____ costs.

Blank 1: standard

At the end of the accounting period, if the net amount of the variances is immaterial, the variance accounts are closed to:

Cost of Goods Sold

Which of the following is the correct formula?

Price variance = (AQ x AP) - (AQ x SP)

Standard costs have which of the following characteristics? (Check all that apply.)

Used in preparing flexible budgets Used in preparing fixed budgets Based on past experience and data

A flexible budget has which of the following characteristics?

Useful for evaluating past performance Often based on several levels of activity Useful to compare different scenarios

Managers use budget reports to answer all of the following questions:

Why are variances unfavorable? Are we using too much direct material? Why is actual income higher than budgeted income?

Budget reports are commonly prepared for: (Select all that apply).

a quarter. a year. a month.

The standard overhead applied is based on the ______ level of activity multiplied by the predetermined overhead rate.

actual

When recording journal entries for production costs using a standard cost accounting system, the credit to Raw Materials Inventory account for the materials used in production is for the ______ amount.

actual

The overhead cost variance is the difference between:

actual overhead incurred and the standard overhead applied

A fixed budget performance report indicates a sales variance of $20,000 favorable. The reason for the variance:

cannot be determined from the fixed budget performance report

When recording journal entries for production costs using a standard cost accounting system, the favorable variances are recorded as ______ and the unfavorable variances are recorded as ______.

credits; debits

All of the following individuals work to help set standard costs:

engineers managerial accountants purchasing managers

To determine a standard overhead cost rate, the overhead costs must be classified as:

fixed and variable costs

Management uses a(n) ______ budget to establish the standard overhead rate.

flexible

The main factors that can cause a variance include the following. Select all that apply.

price variance quantity variance

The difference between the actual amount paid and the standard price paid to purchase an item is called a

spending variance

When recording journal entries for production costs using a standard cost accounting system, the debit to Work in Process Inventory account is for the ______ amount.

standard

Costs developed which identify what products should cost are called

standard costs.