Question

2. Variable Manufacturing Cost BRIEF EXERCISES Variances LO4. 5,6 Companies incur a variety of variable manufacturing costs, including those related to direct materials and direct labor. The following statements relate to vari- able manufacturing cost variances. a. Computing a price variance involves multiplying the difference in the actual quantity used and the standard quantity allowed by the actual price per unit. b. Usage, or efficiency, variances are appropriately calculated for direct materials, but not for direct labor. c. Traditional variance analysis is less informative than variance analysis conducted in an environment in which a company uses activity-based costing. d. The price variance for direct materials is calcu- lated as the difference between the actual price and the standard price, times the actual volume purchased. e. Potential causes for an unfavorable direct labor variance include the use of higher paid workers than budgeted and unexpected increases in wage rates due to union negotiations. 1. Standard Costing LO Review the following incomplete statements about standard costing and related issues a. A(n) efficient operations and takes into consideration typical production problems. b. A budget for a single unit of a product is referred to as a(n) c. Managers must compare actual and budgeted results to control operations. This comparison process is generally called d. The should generally pay for the materials, labor, or overhead for a single unit of product. standard allows for normal and indicates how much a company is often the key to effective variance e. analysis. Required Complete the preceding incomplete statements with the correct term from the following list of terms provided (note that not all terms will be used): variance analysis, ideal standard, practical standard standard cost, standard price, management by exception, task analysis. Required Indicate whether each of the preceding statements is true or false.

Answer 1

Only Question 1 has been answered

Answers to Question 1

a. An ideal standard allows for normal and efficient operations and takes into consideration typical production problems.

b. A budget for a single unit of a product is referred to as a Standard cost.

c. Managers must compare actual and budgeted results to control operations. This comparison process is generally called Variance Analysis.

d. The Task Analysis indicates how much a company should pay for the materials, labor, or overhead for the single unit of the product.

e. Management by exception is often the key to effective variance analysis.