Accounting Chapter 22 – Performance Evaluation Using Variances from Standard Costs – Flashcards
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Standards that can be attained with reasonable effort are called __________ standards. normal ideal adjusted theoretical
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normal Feedback: Currently attainable or normal standards allow for normal production difficulties and mistakes and are attainable with reasonable effort.
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A standard that does not allow for machine breakdowns, scrap, or breaks is called a __________ standard. normal unattainable theoretical attainable
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theoretical Feedback: Standards that can be achieved only under perfect operating conditions are known as theoretical or ideal standards. Objective Association
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Standards are set by accountants. other management personnel. manufacturing engineers. All of these choices are involved in the setting of standards.
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All of these choices are involved in the setting of standards. Feedback: The standard setting process normally requires the joint efforts of accountants, engineers, and other management personnel.
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The standards for direct materials, direct labor, and factory overhead are separated into two components: yards and hours. actual and budget. price and quantity. past and present.
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price and quantity. Feedback: The standards for direct materials, direct labor, and factory overhead are separated into two components: (1) a price standard and (2) a quantity standard.
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Standard amounts budgeted are determined by multiplying the standard costs per unit by the __________ production. planned actual theoretical last year's
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planned Feedback: The standard amounts budgeted for material purchases, direct labor, and factory overhead are determined by multiplying the standard costs per unit by the planned production level.
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Standards are used in the control function to compare actual performance with other competitors. actual performance with past performance. past performance against the budget. actual performance against the budget.
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actual performance against the budget. Feedback: Standards are used in the control function, or budgetary performance evaluation, which compares the actual performance against the budget.
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An income statement reporting variances from standard costs is for internal use only. external use only. either internal or external use. follows GAAP.
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internal use only. Feedback: An income statement reporting variances from standard costs is for internal use only.
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The Strawberry Mansion Company reported the following: Standard quantity per unit 3 lbs Standard price per pound $2.75 Actual pounds used 15,000 lbs Actual price per pound $3.00 Number of units produced 4,900 Determine the direct materials quantity variance. $825 unfavorable $825 favorable $900 favorable $900 unfavorable
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$825 unfavorable Feedback: [15,000 - (3 × 4,900)] × $2.75 = $825 unfavorable.
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The Strawberry Mansion Company reported the following: Standard quantity per unit 3 lbs Standard price per pound $2.75 Actual pounds used 15,000 lbs Actual price per pound $3.00 Number of units produced 4,900 Determine the direct materials price variance. $3,675 unfavorable $3,750 favorable $3,675 favorable $3,750 unfavorable
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$3,750 unfavorable Feedback: ($3 - $2.75) × 15,000 = $3,750 unfavorable
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The Peking Palace reported the following: Standard quantity per unit 3 lbs Standard price per pound $2.75 Actual pounds used 15,000 lbs Actual price per pound $2.90 Number of units produced 5,070 Determine the total direct materials cost variance. $1,672.50 unfavorable $1,672.50 favorable $2,859.00 favorable $2,859.00 unfavorable
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$1,672.50 unfavorable Feedback: Standard price is higher than actual price.
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An unfavorable direct labor rate variance may be caused by all of the following except shortage of skilled employees. improper scheduling of employees. improper use of employees. None of these choices are correct.
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shortage of skilled employees. Feedback: An unfavorable direct labor time variance may be caused by a shortage of skilled employees.
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ordan Industries produced 6,000 units of product that required 1.5 standard hours per unit. The standard variable overhead cost per unit is $2.75 per hour. The actual variable factory overhead was $29,000. Determine the variable factory overhead controllable variance. $20,000 favorable $20,000 unfavorable $4,250 favorable $4,250 unfavorable
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$4,250 unfavorable Feedback: $29,000 - [(6,000 units × 1.5 hours) × $2.75] = $4,250 unfavorable.
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Jordan Industries produced 6,000 units of product that required 1.5 standard hours per unit. The standard fixed overhead cost per unit is $2.05 per hour at 9,500 hours, which is 100% of normal capacity. Determine the fixed factory overhead volume variance. $7,175 favorable $7,175 unfavorable $1,025 favorable $1,025 unfavorable
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$1,025 unfavorable Feedback: Actual hours should be multiplied by standard hours per unit to determine the fixed factory overhead volume variance.
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Douglas Industries produced 5,500 units of product that required 2.5 standard hours per unit. The standard fixed overhead cost per unit is $2.20 per hour at 13,500 hours, which is 100% of normal capacity. Determine the fixed factory overhead volume variance. $250 favorable $250 unfavorable $550 favorable $550 unfavorable
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$550 favorable Feedback: [13,500 hrs. - (5,500 units × 2.5 hours)] × $2.20 = $550 favorable.
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The difference between the actual overhead incurred and the budgeted overhead is the volume variance. total factory overhead cost variance. direct labor rate variance. controllable variance.
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controllable variance. Feedback: The difference between the actual overhead incurred and the budgeted overhead is the controllable variance.
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At the end of the period, the balance left in the factory overhead account is called variable factory overhead controllable variance. fixed factory overhead volume variance. factory overhead adjustment variance. total factory overhead cost variance.
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total factory overhead cost variance Feedback: The end-of-period balance in the factory overhead account, which represents the difference between actual incurred overhead and applied overhead, is the total factory overhead cost variance for the period.
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If a company uses standard costs to record their inventory in the general ledger, what would the journal entry be if the direct materials price variance is unfavorable? Materials Dr. (actual), Accounts Payable Cr. Materials Dr. (at standard), Direct Materials Price Variance Dr., Accounts Payable Cr. Materials Dr. (at standard), Accounts Payable Cr. Materials Dr. (at standard), Direct Materials Price Variance Cr., Accounts Payable Cr.
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Materials Dr. (at standard), Direct Materials Price Variance Dr., Accounts Payable Cr Feedback: The effect of the direct materials price variance is unfavorable.
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The Beach Shack Company produced 5,500 cakes that require 3 standard pounds per unit at $3.00 standard price per pound. The company actually used 16,650 pounds in production. Journalize the entry to record the standard direct materials used in production. Materials Dr., 49,950; Work in Process Cr., 49,500; Direct Materials Quantity Variance Dr., 450. Work in Process Dr., 49,500; Direct Materials Quantity Variance Dr., 450; Materials Cr., 49,950. Work in Process Dr., 49,500; Materials Cr., 49,500. Materials Dr., 49,950; Work in Process Cr., 49,950.
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Work in Process Dr., 49,500; Direct Materials Quantity Variance Dr., 450; Materials Cr., 49,950. Feedback: Work in Process* 49,500 Direct Materials Quantity Variance 450 Materials** 49,950 *5,500 x 3 lbs x $3 = $49,500 ** 16,650 x $3 = $49,950
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Which of the following would not be used to measure quality? number of rejects number of warranty claims on-time delivery time to develop new products
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time to develop new products Feedback: Research and development times do not measure quality of products
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Which of the following is an output to a video rental store? customer wait time to rent a video number of cashiers available number of products available cashier training
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customer wait time to rent a video Feedback: Input measures determines how the activity will impact favorably or unfavorably on an output. Line wait for a customer is considered an output.
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Which of the following nonfinancial performance measures could be used by equipment suppliers? charges to the warranty accrual an increase in overtime pay the elapsed time between a customer order and product delivery a decrease in profit margin
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the elapsed time between a customer order and product delivery Feedback: A non-financial performance measure is a performance measure expressed in units other than dollars.
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A standard is a(n) historical cost. estimate of acceptable production efficiency. goal set by upper management to reduce costs. actual cost.
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estimate of acceptable production efficiency. Feedback: A budget could include a goal set by upper management to reduce costs.
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When actual costs are lower than standard costs, it is said to be a(n) __________ variance. favorable cost unfavorable bad
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favorable Feedback: A favorable variance occurs when the actual cost are less than the standard cost at actual volumes.
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The Peking Palace reported the following: Standard quantity per unit 3 lbs Standard price per pound $2.75 Actual pounds used 15,000 lbs Actual price per pound $2.90 Number of units produced 5,070 Determine the direct materials quantity variance $577.50 favorable $609.00 unfavorable $609.00 favorable $577.50 unfavorable
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$577.50 favorable Feedback: Actual price is not used in this variance. Standard quantity is higher than actual quantity.
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An unfavorable direct labor rate variance may be caused by all of the following except improper use of employees. shortage of skilled employees. improper scheduling of employees. None of these choices are correct.
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shortage of skilled employees. Feedback: An unfavorable direct labor rate variance may be caused by improper scheduling of employees.
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Dixon Company produced 6,000 units of product that required 1.5 standard hours per unit. The standard fixed overhead cost per unit is $0.50 per hour at 10,000 hours, which is 100% of normal capacity. Determine the fixed factory overhead volume variance. $500 unfavorable $2,000 unfavorable $2,000 favorable $500 favorable
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$500 unfavorable Feedback: Actual hours should be multiplied by standard hours per unit to determine the fixed factory overhead volume variance.
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Surfer Sam Company produced 4,000 units of product that required 2.5 standard hours per unit. The standard fixed overhead cost per unit is $0.80 per hour at 10,500 hours, which is 100% of normal capacity. Determine the fixed factory overhead volume variance. $400 favorable $500 unfavorable $500 favorable $400 unfavorable
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$400 unfavorable Feedback: Standard hours are greater than actual hours. This calculation is missing the standard fixed overhead cost per unit component.
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Underapplied factory overhead represents a favorable total factory overhead cost variance. actual factory overhead. an unfavorable total factory overhead cost variance. None of these choices are correct
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an unfavorable total factory overhead cost variance. Feedback: Underapplied factory overhead represents an unfavorable total factory overhead cost variance.
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If a company uses standard costs to record their inventory in the general ledger, what would the journal entry be if the direct materials price variance is favorable? Materials Dr. (at standard), Accounts Payable Cr. Materials Dr. (actual), Accounts Payable Cr. Materials Dr.(at standard), Direct Materials Price Variance Dr., Accounts Payable Cr. Materials Dr. (at standard), Direct Materials Price Variance Cr., Accounts Payable Cr.
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Materials Dr. (at standard), Direct Materials Price Variance Cr., Accounts Payable Cr. Feedback: The effect of the direct materials price variance is favorable.
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If a company uses standard costs to record their inventory in the general ledger, what would the journal entry be if the direct materials price variance is unfavorable? Materials Dr. (at standard), Accounts Payable Cr. Materials Dr. (actual), Accounts Payable Cr. Materials Dr. (at standard), Direct Materials Price Variance Dr., Accounts Payable Cr. Materials Dr. (at standard), Direct Materials Price Variance Cr., Accounts Payable Cr.
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Materials Dr. (at standard), Direct Materials Price Variance Dr., Accounts Payable Cr. Feedback: The effect of the direct materials price variance is unfavorable.
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The Strawberry Mansion Company produced 5,500 cakes that require 3 standard pounds per unit at $3.00 standard price per pound. The company actually used 16,350 pounds in production. Journalize the entry to record the standard direct materials used in production. Work in Process Dr., 49,500; Materials Cr., 49,500. Materials Dr., 49,050; Work in Process Cr., 49,050. Work in Process Dr., 49,500; Direct Materials Quantity Variance Dr., 450; Materials Cr., 49,950. Work in Process Dr., 49,500; Direct Materials Quantity Variance Cr., 450; Materials Cr., 49,050.
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Work in Process Dr., 49,500; Direct Materials Quantity Variance Cr., 450; Materials Cr., 49,050. Feedback: The direct materials quantity variance is favorable.
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Which of the following measures could be used by a college to measure students' satisfaction? student evaluations increase in enrollment increase in the number of graduates All of these choices are correct
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All of these choices are correct. Feedback: Nonfinancial measures such as an increase in students (customers), evaluations, and number of graduates can be used to evaluate the customers' satisfaction.
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All but which one of the following can be used to measure customer satisfaction? number of warranty claims number of customer complaints employee satisfaction customer preference rankings compared to competitors
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employee satisfaction Feedback: Employee satisfaction is not a nonfinancial performance measure that evaluates customer satisfaction.
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Which of the following inputs can be used to increase customer satisfaction in a computer store? adequate number of sales representatives product availability trained personnel All of these choices are correct.
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All of these choices are correct. Feedback: Customer satisfaction can be increased by a number of actions including improving inputs such as product availability, available service personnel, and employee training
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One major objective in setting standards is to set them high to push employees to work harder and faster. set them low so employees will not be stressed or pressured. set them to actual costs. motivate employees to achieve efficient operations.
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motivate employees to achieve efficient operations Feedback: One of the major objectives in setting standards is to motivate workers to achieve efficient operations.
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The Strawberry Mansion Company reported the following: Standard quantity per unit 3 lbs Standard price per pound $2.75 Actual pounds used 15,000 lbs Actual price per pound $3.00 Number of units produced 4,900 Determine the direct materials quantity variance. $900 favorable $825 unfavorable $900 unfavorable $825 favorable
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$825 unfavorable Feedback: [15,000 - (3 × 4,900)] × $2.75 = $825 unfavorable.
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When actual hours exceed standard hours, the result is an unfavorable direct labor rate variance. a favorable direct labor rate variance. an unfavorable direct labor time variance. a favorable direct labor time variance.
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an unfavorable direct labor time variance Feedback: When actual hours exceed standard hours, the result is an unfavorable direct labor time variance.
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Douglas Industries produced 5,500 units of product that required 2.5 standard hours per unit. The standard variable overhead cost per unit is $3.00 per hour. The actual variable factory overhead was $39,000. Determine the variable factory overhead controllable variance. $2,250 unfavorable $6,600 favorable $2,250 favorable $6,600 unfavorable
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$2,250 favorable Feedback: $39,000 - [(5,500 units × 2.5 hours) × $3.00] = $2,250 favorable.
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At the end of the period, the balance left in the factory overhead account is called factory overhead adjustment variance. variable factory overhead controllable variance. total factory overhead cost variance. fixed factory overhead volume variance.
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total factory overhead cost variance. Feedback: The end-of-period balance in the factory overhead account, which represents the difference between actual incurred overhead and applied overhead, is the total factory overhead cost variance for the period.
