Chapter 10: Standard Costs and Variances Flashcards
What is a standard
a benchmark for measuring performance
What is a standard quantity per unit
The amount of direct materials that should be used for each unit of finished product, including an allowance for normal inefficiencies, such as scrap and spoilage
What is the standard price unit
The price that should be paid for each unit of direct materials. It should reflect the final, delivered cost of those materials.
What is the standard hours per unit
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.
What is the standard rate per hour
The labor rate that should be incurred per hour of labor time, including employment taxes and fringe benefits
What is a price variance
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.
What is a quantity variance
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.
What is the standard quantity allowed
The amount of direct materials 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.
What is the standard hours allowed
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.
What indicates a favorable price variance
The actual price per unit (AP) is lower than the standard price per unit (SP)
What indicates an unfavorable price variance
The actual price per unit (AP) is higher than the standard price per unit (SP)
What indicates a favorable quantity variance
The actual quantity of input (AQ) was less than the standard quantity allowed (SQ)
What indicates an unfavorable quantity variance
The actual quantity of input (AQ) is greater than the standard quantity allowed (SQ)
How do you calculate Standard quantity allowed
allowed output x standard quantity per unit
How do you calculate materials price variance
AQ(AP-SP)
