Questions and Answers
An unfavorable materials quantity variance occurs when the actual quantity used in production is less than the standard quantity allowed for the actual output of the period.
False
In general, the production manager is responsible for the materials price variance.
False
Waste on the production line will result in an unfavorable materials price variance.
False
A quantity standard indicates how much of an input should be used to make a unit of product or provide a unit of service.
Signup and view all the answers
The labor efficiency variance is labeled favorable (F) if the actual hours used is less than the standard hours allowed for the actual output.
Signup and view all the answers
If skilled workers with high hourly rates of pay are given duties that require little skill and call for lower hourly rates of pay, this will result in a favorable labor rate variance.
Signup and view all the answers
If the actual hourly rate is greater than the standard hourly rate, the labor rate variance is labeled unfavorable (U).
Signup and view all the answers
What does a favorable labor rate variance indicate?
Signup and view all the answers
If variable manufacturing overhead is applied on the basis of direct labor-hours and the variable overhead rate variance is favorable, what does that imply?
Signup and view all the answers
Study Notes
Materials Variances
- An unfavorable materials quantity variance arises when actual quantity used exceeds the standard quantity allowed for production during the period.
- The production manager is not typically responsible for the materials price variance.
Waste and Price Variance
- Waste on the production line does not result in an unfavorable materials price variance; it is unrelated to pricing.
Quantity Standards
- A quantity standard specifies the expected input amount required to produce one unit of product or service.
Labor Variances
- The labor efficiency variance is deemed favorable when actual hours used fall below the standard hours allowed for the actual output.
- Assigning skilled workers high hourly rate tasks that require lower skills does not generate a favorable labor rate variance.
Rate Variance
- An unfavorable labor rate variance is indicated when the actual hourly rate surpasses the standard hourly rate.
- A favorable labor rate variance occurs when the standard hourly rate exceeds the actual hourly rate.
Variable Manufacturing Overhead
- A favorable variable overhead rate variance means the standard rate for variable overhead was higher than the actual rate applied, typically based on direct labor-hours.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Test your understanding of key concepts in Managerial Accounting with these flashcards focused on Chapter 10. This chapter covers important variances, including materials quantity and price variances, and their implications in production management. Challenge yourself and reinforce your learning today!
