Managerial Accounting Variances Review

Questions and Answers

What is the Material Price Variance?

The amount of raw materials used

The difference between actual and budgeted cost for materials multiplied by the actual quantity used (correct)

The standard cost of materials

The total budget for materials

What is the formula for Material Price Variance?

(Actual Price - Standard Price) * Actual Quantity

What is the Material Quantity Variance?

The difference between actual materials used and budgeted materials (correct)

All the materials expected to be used

The sales price of materials

The standard cost of all materials

What is the formula for Material Quantity Variance?

(Actual Usage - Standard Usage) * Standard Cost Signup and view all the answers

What does the Labor Rate Variance represent?

The difference between actual and expected cost of labor Signup and view all the answers

What is the formula for Labor Rate Variance?

(Actual Rate - Standard Rate) * Actual Hours Worked Signup and view all the answers

What is the Labor Efficiency Variance?

The difference between standard and actual hours worked Signup and view all the answers

What is the formula for Labor Efficiency Variance?

(Actual Hours - Standard Hours) * Standard Rate Signup and view all the answers

What is the Variable Overhead Spending Variance?

The difference between actual and budgeted rates of variable overhead Signup and view all the answers

What is the formula for Variable Overhead Spending Variance?

(Actual Ovh. Rate - Standard Ovh. Rate) * Actual Hours Signup and view all the answers

What does the Variable Overhead Efficiency Variance assess?

The efficiency of overhead application based on hours worked Signup and view all the answers

What is the formula for Variable Overhead Efficiency Variance?

(Actual Hours - Standard Hours) * Standard Ovh. Rate Signup and view all the answers

What is the Standard Quantity Allowed?

(Actual Output * Standard Allowed) Signup and view all the answers

Study Notes

Material Variances

Material Price Variance: Measures cost differences for materials; calculated by the difference between actual and budgeted material costs multiplied by actual quantity used.
Material Price Variance Formula: (Actual Price - Standard Price) * Actual Quantity.
Material Quantity Variance: Evaluates the discrepancy between actual and expected material usage, multiplied by the standard cost.
Material Quantity Variance Formula: (Actual Usage - Standard Usage) * Standard Cost.

Labor Variances

Labor Rate Variance: Represents the difference between actual labor costs and expected labor costs, calculated based on actual hours worked.
Labor Rate Variance Formula: (Actual Rate - Standard Rate) * Actual Hours Worked.
Labor Efficiency Variance: Assesses efficiency by comparing actual hours worked with standard hours expected for production, multiplied by the standard labor rate.
Labor Efficiency Variance Formula: (Actual Hours - Standard Hours) * Standard Rate.

Variable Overhead Variances

Variable Overhead Spending Variance: Indicates the difference between actual and budgeted variable overhead rates, multiplied by actual hours worked.
Variable Overhead Spending Variance Formula: (Actual Ovh. Rate - Standard Ovh. Rate) * Actual Hours.
Variable Overhead Efficiency Variance: Examines efficiency by comparing actual hours to budgeted hours worked, multiplied by the standard overhead rate.
Variable Overhead Efficiency Variance Formula: (Actual Hours - Standard Hours) * Standard Ovh. Rate.

Standard Quantity Allowance

Standard Quantity Allowed: Calculated as Actual Output multiplied by Standard Allowed, providing a benchmark for expected resource usage.

Description

This quiz covers key concepts related to variances in managerial accounting, focusing on material price and quantity variances. Get familiar with definitions and formulas used to calculate these variances. Ideal for accounting students looking to reinforce their understanding of the subject.