________________ is expressed as a unit amount, whereas a _________________ is
expressed as a total amount.
230. Standards which represent optimum
performance under perfect operating conditions are called _______________
standards, but most companies use _________________ standards which are
rigorous but attainable.
231. In developing a standard cost for direct
materials used in making a product, consideration should be given to two
factors: (1) __________________ per unit
of direct materials and (2) the __________________ of direct materials to
produce one unit of product.
232. The difference between actual hours times
the actual pay rate and actual hours times the standard pay rate is the labor
233. The standard number of hours allowed times
the predetermined overhead rate is the amount of ________________ to the
234. The difference between actual quantity of
materials times the standard price and standard quantity times the standard
price is the materials ________________ variance.
235. If the actual direct labor hours worked is
greater than the standard hours, the labor quantity variance will be
___________________, and the labor rate variance will be ____________________
if the standard rate of pay is greater than the actual rate of pay.
236. In using variance reports, top management
normally looks for _________________ variances.
a237. A two-variance approach to analyzing
overhead variances requires the calculation of the overhead _________________
variance and the overhead ________________ variance.
a238. The overhead ______________ variance is the
difference between normal capacity hours and standard hours allowed times the
fixed overhead rate.
239. Match the items in the two columns below by
entering the appropriate code letter in the space provided.
A. Variances F. Materials price variance
B. Standard costs G. Labor quantity variance
C. Standard cost accounting system aH. Overhead controllable variance
D. Normal standards aI. Overhead volume variance
E. Ideal standards J. Standard hours allowed
____ 1. The difference between actual overhead
incurred and overhead budgeted for the standard hours allowed.
____ 2. The hours that should have been worked for the
____ 3. The difference between the actual quantity
times the actual price and the actual quantity times the standard price.
____ 4. The difference between total actual costs and
total standard costs.
____ 5. The difference between actual hours times the
standard rate and standard hours times the standard rate.
____ 6. Predetermined unit costs that are measures of
____ 7. The difference between normal capacity hours
and standard hours allowed times the fixed overhead rate.
____ 8. Standards based on an efficient level of
performance that are attainable under expected operating conditions.
____ 9. Standards based on the optimum level of
performance under perfect operating conditions.
____ 10. A double-entry system of accounting in which
standard costs are used in making entries and variances are recognized in the
SHORT-ANSWER ESSAY QUESTIONS
S-A E 240
(a) Explain the similarities and differences
between standards and budgets.
(b) Contrast the accounting for standard and budgets.
S-A E 241
Star Industries computes variances as a basis for
evaluating the performance of managers responsible for controlling costs. For
several months, the labor quantity variance has been unfavorable. Briefly
explain what could be causing the unfavorable labor quantity variance and
indicate what type of corrective action, if any, might be taken.
S-A E 242
In reviewing the activities of the Mixing
Department for the month of June, the manager of the department notices that
there was an unfavorable materials price variance for the month and there was an unfavorable materials quantity
variance. Under what circumstances, if any, can the responsibility for each
variance be placed on (a) the purchasing department and (b) the production
S-A E 243
What are the four perspectives used in the
balanced scorecard? Discuss the nature of each, and how the perspectives are
S-A E 244 (Ethics)
Manufacturing Co. is the manufacturer of miniature models, especially of
automobiles with historical interest. The company is developing new standard
costs. Patrick Webb suggests that the new standards for materials should not
include any waste for liquid plastics that spill out of the molds. “After
all,” he says, “we’re trying to be a world class company. When we
build in waste, we tell the workers it’s okay to waste some.” Sharon Berry,
another manager, disagrees. “If we don’t allow for some normal human
error,” she says, “we’ll have a mighty unhappy work force. Also, I
think that these kinds of perfection standards exploit the workers. I certainly
wouldn’t want to be held up to perfection every dayâ€”what could I do but
S-A E 244 (Cont.)
continued. Finally, the standards were prepared. All standards were prepared
according to normal expected performance, except that for materials, an ideal
standard was used.Sharon, still maintaining the unfairness of the system, refused to hold her
workers accountable for materials quantity variances.
ideal standards unethical? Explain
it unethical forSharon to refuse to support the standards? Explain.
S-A E 245 (Communication)
has come to the accounting department for help in interpreting his variance
report. He says that he understands that last month was not a very good one for
output, but he really thought everyone put forth good effort, so he is confused
about the existence of an unfavorable labor efficiency variance. He cites as an
example of the workers’ effort their willingness to work extra hours to get
full output, even when a whole week’s worth of production had to be scrapped.
He knew that his materials costs would be higher, and that overtime would make
his rate variance unfavorable, but he certainly didn’t think his workers had
Write a short note toVincent explaining the probable cause of the unfavorable
labor efficiency variance.