Ch 10 - Standard Costs and Variances

Question 1

Ideal standards

Answer 1

Standards that assume peak efficiency at all times. (p. 420)

Question 2

Labor efficiency variance

Answer 2

The difference between the actual hours taken to complete a task and the standard hours allowed for the actual output, multiplied by the standard hourly labor rate. (p. 430)

Question 3

Labor rate variance

Answer 3

The difference between the actual hourly labor rate and the standard rate, multiplied by the number of hours worked during the period. (p. 432)

Question 4

Management by exception

Answer 4

A management system in which standards are set for various activities, with actual results compared to these standards. Significant deviations from standards are flagged as exceptions. (p. 419)

Question 5

Materials price variance

Answer 5

The difference between the actual unit price paid for an item and the standard price, multiplied by the quantity purchased. (p. 429)

Question 6

Materials quantity variance

Answer 6

The difference between the actual quantity of materials used in production and the standard quantity allowed for the actual output, multiplied by the standard price per unit of materials. (p. 427)

Question 7

Practical standards

Answer 7

Standards that allow for normal machine downtime and other work interruptions and that can be attained through reasonable, though highly efficient, efforts by the average worker. (p. 421)

Question 8

Price variance

Answer 8

A variance that is computed by taking the difference between the actual price and the standard price and multiplying the result by the actual quantity of the input. (p. 424)

Question 9

Quantity variance

Answer 9

A variance that is computed by taking the difference between the actual quantity of the input used and the amount of the input that should have been used for the actual level of output and multiplying the result by the standard price of the input. (p. 424)

Question 10

Standard cost card

Answer 10

A detailed listing of the standard amounts of inputs and their costs that are required to produce one unit of a specific product. (p. 420)

Question 11

Standard cost per unit

Answer 11

The standard quantity allowed of an input per unit of a specific product, multiplied by the standard price of the input. (p. 423)

Question 12

Standard hours allowed

Answer 12

The time that should have been taken to complete the period?s output. It is computed by multiplying the actual number of units produced by the standard hours per unit. (p. 425)

Question 13

Standard hours per unit

Answer 13

The amount of direct labor time that should be required to complete a single unit of product, including allowances for breaks, machine downtime, cleanup, rejects, and other normal inefficiencies. (p. 422)

Question 14

Standard price per unit

Answer 14

The price that should be paid for an input. (p. 421)

Question 15

Standard quantity allowed

Answer 15

The amount of an input that should have been used to complete the period?s actual output. It is computed by multiplying the actual number of units produced by the standard quantity per unit. (p. 425)

Question 16

Standard quantity per unit

Answer 16

The amount of an input that should be required to complete a single unit of product, including allowances for normal waste, spoilage, rejects, and other normal inefficiencies. (p. 421)

Question 17

Standard rate per hour

Answer 17

The labor rate that should be incurred per hour of labor time, including employment taxes and fringe benefits. (p. 422)

Question 18

Variable overhead efficiency variance

Answer 18

The difference between the actual level of activity (direct labor-hours, machine-hours, or some other base) and the standard activity allowed, multiplied by the variable part of the predetermined overhead rate. (p. 433)

Question 19

Variable overhead rate variance

Answer 19

The difference between the actual variable overhead cost incurred during a period and the standard cost that should have been incurred based on the actual activity of the period. (p. 434)