Chapter 10 - Standard Costs and Variances Flashcards
What are benchmarks or “norms” for measuring performance?
Standards
What are the two types of standards that are commonly used in managerial accounting?
- Price standards
2. Quantity standards
What specify how much should be paid for each unit of the input?
Price standards
What specify how much of an input should be used to make a product or provide a service?
Quantity standards
What shows the standard quantity and the standard price of the inputs required to produce a unit of a specific product?
The standard cost card
What is the difference between the actual budget and the flexible budget?
Spending variances
How do spending variances become more useful?
By breaking them down into price and quantity variances
What is the difference between actual price and standard price?
Price Variance
What is the difference between actual quantity and standard quantity?
Quantity Variance
Fill in the Blanks:
The ________ manager is responsible for raw
material purchase prices and the ________ manager is responsible for the quantity of raw material used
- The purchasing manager
2. The production manager
What is the amount of direct materials and direct labor actually used?
Actual quantity
What is the formula to find the standard quantity?
of units produced x standard quantity
What is the amount actually paid for the input used?
Actual price
What is the amount that should have been paid for the input used?
Standard price
What is the formula to find the standard hours?
of units produced x standard hours per unit
What is the formula to find the material price variance?
Actual Quantity Produced (Actual Price - Standard Price)
What is the formula to find the material quantity variance?
Standard Price (Actual Quantity Used - Standard Quantity)
What is the formula to find the labor rate variance?
Actual Hours(Actual Rate - Standard Rate)
What is the formula to find the labor efficiency variance?
Standard Rate(Actual Hours - Standard Hours)
What is the actual quantity used in this scenario?
Glacier Peak Outfitters has the following direct materials standard for the fiberfill in its mountain parka. 0.1 kg. of fiberfill per parka at $5.00 per kg. Last month 210 kgs. of fiberfill were purchased and used to make 2,000 parkas. The materials cost a total of $1,029.
210 kgs.
What is the standard price in this scenario?
Glacier Peak Outfitters has the following direct materials standard for the fiberfill in its mountain parka. 0.1 kg. of fiberfill per parka at $5.00 per kg. Last month 210 kgs. of fiberfill were purchased and used to make 2,000 parkas. The materials cost a total of $1,029.
$5
Who is responsible for the Materials Price Variance?
The Purchasing Manager
Who is responsible for the Materials Quantity Variance?
The Production Manager
Fill in the Blank:
The quantity variance is computed only on the quantity _____
Used
Fill in the Blank:
The price variance is computed on the entire quantity _________
Purchased
Who is accountable for labor variances?
Production managers
If the number you calculated for the material and labor variances is negative is it favorable or unfavorable?
Favorable
If the number you calculated for the material and labor variances is positive is it favorable or unfavorable?
Unfavorable
Hanson Inc. has the following direct materials standard to manufacture one Zippy:
1.5 pounds per Zippy at $4.00 per pound
Last week, 1,700 pounds of materials were purchased and used to make 1,000 Zippies. The materials cost a total of $6,630.
How many pounds of materials should Hanson have used to make 1,000 Zippies (What's the standard quantity)? A. 1,700 pounds. B. 1,500 pounds. C. 1,200 pounds. D. 1,000 pounds.
B. 1,500 pounds.
SQ = # of units produced x standard quantity SQ = 1,000 × 1.5 pounds per Zippy SQ = 1,500 pounds
Hanson Inc. has the following direct materials standard to manufacture one Zippy:
1.5 pounds per Zippy at $4.00 per pound
Last week, 1,700 pounds of materials were purchased and used to make 1,000 Zippies. The materials cost a total of $6,630.
Hanson’s materials quantity variance (MQV) for the week was: A. $170 unfavorable. B. $170 favorable. C. $800 unfavorable. D. $800 favorable.
C. $800 unfavorable.
MQV = SP(AQ - SQ) MQV = $4.00(1,700 lbs - 1,500 lbs) MQV = $800 unfavorable
Hanson Inc. has the following direct materials standard to manufacture one Zippy:
1.5 pounds per Zippy at $4.00 per pound
Last week, 1,700 pounds of materials were purchased and used to make 1,000 Zippies. The materials cost a total of $6,630.
Hanson’s materials price variance (MPV) for the week was: A. $170 unfavorable. B. $170 favorable. C. $800 unfavorable. D. $800 favorable.
B. $170 favorable.
MPV = AQ(AP - SP) MPV = 1,700 lbs. × ($3.90 - 4.00) MPV = $170 Favorable
What is the actual rate equal to?
The direct labor cost per hour
What is the actual price equal to?
The direct material cost per unit
What is the formula to find the actual rate if it isn’t given?
Total direct labor cost / Total hours worked
What is the formula to find the actual price if it isn’t given?
Total material cost / Total materials used
