Chapter 10 and 11

Question 1

direct material quantity variance

Answer 1

a measure of the effect on cost of using a different quantity of material in production, compared with the standard quantity that should have been used for the actual production output

Question 2

Direct material price variance

Answer 2

a measure of the effect on cost of purchasing inventory at a price different from standard

Question 3

direct labour efficiency rate

Answer 3

a measure of the effect of using a different number of direct labour hours compared with the number of standard hours that should be used for the actual production output

Question 4

Interaction between variances

Answer 4

Change in one variance may have inverse relationship

quality vs cost example

Question 5

Static budget

Answer 5

a detailed budget that relates to one specific planned level of activity

Question 6

flexible budget

Answer 6

a detailed budget that is prepared for a range of levels of activities

Question 7

formula flexible budget

Answer 7

indicates total overhead costs at various levels of activity using the formula: (budgeted variable overhead cost per unit * level of activity) + fixed costs

Question 8

Variable overhead spending variance

Answer 8

a measure of the difference between the actual variable overhead and the standard variable overhead rate multiplied by actual activity

Question 9

variable overhead efficiency rate

Answer 9

measure of the difference between actual activity and the standard activity allowed, given the actual output, multiplied by the standard variable overhead rate

Question 10

Fixed overhead budget variance

Answer 10

a measure of the difference between actual fixed overhead and budgeted fixed overhead

Question 11

fixed overhead volume variance

Answer 11

a measure of the difference between budget fixed overhead and fixed overhead applied to production