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Which of the following are used to calculate the standard quantity per unit of direct materials?
 
Direct materials requirements per unit of finished product
Allowance for waste and spoilage
Allowance for rejects
   
The _________________  price per unit of an input should reflect the expected cost of the raw materials less any discounts taken.
 
standard  
True or false: All variances should be investigated to determine their root cause.
 
False
   
Standards are:
 
benchmarks for measuring performance.
set for each major production input.
compared to the actual quantities and costs of inputs.
   
To calculate a price variance, multiply the _____________ quantity times the actual price and compare it to the
actual quantity times the ______________ price.
 
actual; standard  
The most difficult standard to determine is probably the:
 
standard hours per unit.
   
Insignificant variances:
 
should not be investigated.
   
The __________   _______________ application rate is calculated by dividing the estimated total
manufacturing overhead cost by the estimated total amount of the allocation base.
 
Predetermined; overhead
   
Which of the following are used in the calculation of the budget variance?
 
Budgeted fixed overhead
Actual fixed overhead
 
Use the following information to calculate the 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
   
A price _______________________ indicates how much should be paid for an input.
 
Standard
   
Which of the following are advantages to using a standard cost system?
 
Standard costs can simplify bookkeeping.
Standards can provide benchmarks that can be used by individuals to judge their own performance.
   
The materials ___________________ variance reflects the difference between the actual materials used in production
and the standard amount allowed for the actual output.
 
quantity
   
Calculate the predetermined overhead rate using machine-hours as the allocation base.
 
Budgeted overhead                                                                        $350,000
Budgeted production                                                                     28,000 units
Total budgeted machine-hours                                                  70,000 hours
Actual production                                                                            20,000 units
Standard machine-hours allowed for actual production                 50,000 hours
Actual machine-hours used for production                          52,000
 
$5.00 per machine-hour
   
Which of the following are used in calculating the materials price variance?
 
Actual quantity of the input purchased
Standard 0rice of the input
Actual price of the input
   
A normal cost system applies overhead to production on the basis of the _____________ level of activity, while a
standard costing system applies overhead on the basis of ____________ hours allowed for the actual output.
 
Actual; standard
   
When using standard cost journal entries, the entry for direct labor:
 
records both the labor rate and the labor efficiency variance
   
Ideal standards are problematic because:
 
they demand peak effort at all times.
they tend to discourage the most diligent workers.
   
When standard cost variances are closed:
 
unfavorable variances increase cost of goods sold and favorable variances decrease cost of goods sold
   
_________________ standards specify how much input should be used to produce a product or provide a service.
 
Quantity
   
When recording the standard cost journal entry for the purchase of raw materials:
 
accounts payable is credited for the actual cost of materials.
the raw materials account is debited for the standard cost of materials
   
When recording the standard cost journal entry for direct labor, unfavorable labor variances are debited
and favorable labor variances are ____________.
 
credited
   
The formula for the materials _____________ variance is SP(AQ-SQ).
 
quantity
   
Practical standards:
 
can assist in the identification of abnormal operating conditions.
allow for normal machine downtime.
   
The direct ______________ - _______________variance reflects the difference between the standard and the actual
direct labor rates.
 
Labor; rate
   
A quantity variance:
 
is calculated using the standard price of the input
   
The fixed overhead volume variance:
 
occurs because the costing system assumes fixed costs behave as if they were variable.
is the error that occurs when the level of activity is incorrectly estimated.
   
__________________ standards do not allow for any work interruptions or machine breakdowns.
 
Ideal
   
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.
   
Setting price and quantity standards:
 
may be based on input from production workers.
should be designed to encourage future efficient operations.
   
A(n) ____________ materials price variance occurs when the standard price is higher than the actual price.
The amount of an input that should have been used to produce the actual output is known as the
standard quantity or hours allowed.
 
favorable
   
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
   
In a standard cost system, overhead is applied on the basis of the _____________ hours allowed for the actual output of the period.
 
standard
   
The standard rate per direct labor-hour includes:
 
the employer share of payroll taxes
the base rate per hour
fringe benefits
   
Which of the following are reasons that the materials price variance is calculated at the time the materials are purchased?
 
Management can generate more timely variance reports.
It allows materials to be carried in the inventory accounts at standard cost.
This practice simplifies bookkeeping
   
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
   
Unfavorable labor rate variances may occur as a result of:
 
skilled workers being assigned to jobs requiring little skill.
overtime premiums being charged to the direct labor account.
   
The volume variance = the __________ component of the predetermined overhead rate x (Denominator hours
– the ________ hours allowed for the actual output).
 
Fixed; standard
   
Use the following information to calculate the labor rate variance for Adkinson Company.
 
Actual hours used                                           5,500
Standard hours used                                      5,800
Actual labor rate                                              $14.75 per hour
Standard labor rate                                         $14.00 per hour
 
$4,125 Unfavorable
   
The materials price variance is calculated using the _____________ quantity of the input purchased.
 
Actual
   
The materials price variance is computed when materials are _______________ and the materials quantity
variance is computed when materials are ________________.
 
Purchased; used
   
When direct materials are placed into production, the standard cost journal entry:
 
records the material quantity variance only
   
Which of the following formulas is correct?
 
Volume variance = Budgeted fixed overhead – Fixed overhead applied to work in process
   
Valuing inventories and cost of goods sold at _____________ costs eliminate the need to track the actual cost
of each unit.
 
standard
   
Management by exception:
 
attempts to find the causes of problems and correct them.
investigates significant discrepancies between standard and actual inputs.
   
Which of the following statements are true?
 
The production manager is most often responsible for the materials quantity variance.
Material quantity variances due to inferior materials are the responsibility of the purchasing department.
   
The ________________ supervisor is generally responsible for controlling the labor rate variance.
 
production
   
An unfavorable labor efficiency variance can result from:
 
poorly motivated workers
inaccurate standards
faulty equipment
   
Direct material standards:
 
should be based on input from production and purchasing managers.
are based on standard price and quantity.
   
The purchasing manager is generally responsible for the material price variance, and the production
manager is generally responsible for the material _____________ variance.
 
Quantity
   
Standard costs may:
 
be used to compute both flexible budget activity and spending variances
   
The standard cost for _________________ manufacturing overhead is computed the same way as the standard cost for direct labor.
 
Variable
   
Given the following standards for the production of widgets, compute the standard cost per widget.
 
Direct materials per unit:                                 4 pounds
Direct material cost:                                       $1.25 per pound
Direct labor per unit:                                         1.5 hours
Direct labor rate:                                             $10.00 per hour
Variable overhead rate:                                 $4.00 per hour
 
$26.00
   
Based on the following information, calculate the amount of overhead to be applied to production using a standard cost 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
   
The _______________ manager may be held responsible for materials price variances due to rush orders
placed to satisfy customer orders.
 
Production
   
Which of the following statements are true?
 
Managers should not use standards to assign blame.
Standard costs offer several advantages and disadvantages.
   
The direct material spending variance:
 
explains what was spent on materials and what should have been spent.
needs to be decomposed for analysis.
can be broken down into quantity variance and the price variance.
   
__________________ by ____________________ is a system in which standards re set and significant deviations from the
standards are flagged for investigation.
 
Management; exception  
When using a standard cost system, the over or under applied overhead equals the sum of the overhead
__________________ for the period.
 
Variances
   
When using a standard cost system:
 
the information in the variance reports may be too old to be useful.
an undue emphasis on labor efficiency variances can create pressure to build excess inventory.
   
Which of the following statements are true?
 
Changes in activity have no impact on actual fixed costs within the relevant range.
Treating fixed costs as if they are variable can lead to bad decisions.
A fixed overhead volume variance results from treating fixed manufacturing costs as if they are variable.
   
The __________________ manager is usually responsible for controlling the labor efficiency variance.
 
Production
   
When should variances be isolated and brought to management’s attention?
 
As soon as possible
   
Direct labor variances:
 
are computed in the same way as material variances
   
The predetermined overhead rate:
 
includes both fixed and variable overhead
   
When setting direct labor standards:
 
the production manager should be consulted
time and motion studies may be used
some companies use rates based on an expected mix of workers
   
Standard costs:
 
may be used in every type of organization
   
The _______________ _____________________ is generally responsible for the materials price variance
 
purchasing manager

Homework  1.1 1.2  2.1 2.2  3.1 3.2  4.1 4.2 5.1 5.2  6.1 6.2  7.1  7.2  8.1  8.2  9.1   9.2  10.1  10.2  11.1  11.2  12.1 12.2  13.1  13.2  14.1  14.2  15.1   15.2
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