Chapter 10

Question 1

standard

Answer 1

norm or benchmark or budget for 1 unit

Question 2

Products have

Answer 2

direct materials, direct labor, variable overhead and fixed overhead.

Question 3

Standard rate formula

Answer 3

Estimated Variable cost

———————————– Estimated activity

Question 4

COSTS Rules?

Answer 4

Left column > right column ⇒ unfavorable ⇒ actual > std
Left column < right column ⇒ favorable ⇒ actual < std

Question 5

standard quantity allowed definition

Answer 5

standard hours allowed in the case of labor and overhead) is the amount of materials, labor, or overhead that should have been used to complete the ACTUAL output of the period.

Question 6

** SQA=

Answer 6

standard quantity (or hr) for 1 unit x actual units produced.

Question 7

Note: If VOH is applied on the basis on DLH

Answer 7

then both (labor and variable overhead) efficiency variances MUST go in the same direction (both favorable or both unfavorable).

Question 8

SHA=

Answer 8

hours allowed to make 1 unit x capital units produced

Question 9

Alternative Formula

Answer 9

Beg. Inv.
					\+  Purchases  (AQP)
					Materials available
					-  End Inv	
					Materials put into production (AQU)

Question 10

Who is held responsible for unfavorable material price variances?

Answer 10

purchasing manager

Question 11

Causes of Material Price Variance Unfavorable

Answer 11

Failure to correctly forecast price increases.
• Purchasing in non-standard or uneconomical lots.
• Failure to take purchase discounts available.
• Failure to control transportation costs.
• Purchasing from suppliers other than those offering the most favorable terms

Question 12

failure to meet price standards may be caused by a rush of order changes in production schedules. In this case, the responsibility for the unfavorable material price variance should rest with the?????

Answer 12

sales manager or the manager of production planning

Question 13

what kind of external events cause material price variances?

Answer 13

strike at a supplier’s plant

Question 14

Who is held responsible for unfavorable labor efficiency variances?

Answer 14

production manager or foreman

Question 15

Causes of Labor Efficiency Variance Unfavorable

Answer 15

• Inadequate supervision.
  * Machine breakdowns from poor maintenance.
  * Poorly motivated employees/absenteeism.

Question 16

Failure to meet labor efficiency standards may also be caused by the use of……..

Answer 16

inferior materials or poor production planning

Question 17

What kinds of events cause labor efficiency variances?

Answer 17

lack s skilled workers caused by low unemployment

Question 18

DM Price Variance is based on

Answer 18

actual materials purchased

Question 19

Dm Quantity Variance

Answer 19

is based on actual materials put into production

Question 20

failure to meet price standards may be caused by a rush of order changes in production schedules???? Who is responsible?

Answer 20

sales manager or manager of production planning

Question 21

Failure to meet labor efficiency standards may also be caused by the use of

Answer 21

inferior materials or poor production planning

Question 22

You need to split the middle if……………….

Answer 22

1) purchases: does not equal: production

2) if there are beginning or ending inventories

Question 23

When should you not split the middle……

Answer 23

when using JIT

Question 24

Choosing a denominator activity level

Answer 24

…….look at notes

Question 25

If overhead is based on DLH then

Answer 25

the 2 efficiency variances MUST go in the same direction

Question 26

If based on MH then efficiency can be either

Answer 26

same or opposite directions

Question 27

If the efficiency variances are in opposite directions then

Answer 27

it must be based on MH