Question

The standard quantity per unit defines the ________.

• price that should be paid for each unit of direct materials.

• total cost of direct materials that should be used for each unit of finished product.

• amount of direct materials that should be used for each unit of finished product including an
  allowance for normal inefficiencies, such as scrap and spoilage.

• amount of direct labor-hours that should be used to produce one unit of finished goods.

A flexible budget performance report for variable manufacturing costs shows _______.

• only the activity variances.

• both the activity variances and the spending variances.

• both the revenue variances and the spending variances.

• both the quantity variances and the price variances.

The standard quantity allowed is _______.

• the amount of an input that should have been used to complete the planned output for the period.

• the actual amount of input that was used to complete the planned output for the period.

• the amount of an input that should have been used to complete the actual output for the period.

• the actual amount of input that was used to complete the actual output for the period.

The standard hours allowed is ________.

• the direct labor-hours that should have been used to complete the planned output for the period.

• the direct labor-hours that should have been used to complete the actual output for the period.

• computed by multiplying the standard labor-hours allowed per unit by the planned output for the period.

• computed by multiplying the actual labor-hours per unit by the planned output for the period.

Knowledge Check 01

When computing variable manufacturing overhead variances, the standard rate represents the ________.

• predetermined overhead rate.

• variable portion of the predetermined overhead rate.

• standard hourly pay rate for direct laborers.

• the amount of hours allowed for the actual output.

Assume that direct labor-hours are used as the overhead allocation base. If the direct labor efficiency variance is unfavorable, the variable overhead efficiency variance ________.

• will be favorable.

• will be unfavorable.

• cannot be determined without additional information.convert materials into the finished product.

• will be equal to zero.

Answer 1

The standard quantity per unit defines the amount of direct materials that should be used for each unit of finished product including an allowance for normal inefficiencies, such as scrap and spoilage.

Other answers are incorrect because the standard qty does not define any kind of costs or labor hours. It is the quantity of direct materials.

A flexible budget performance report for variable manufacturing costs shows both the activity variances and the spending variances.

Flexible budget performance reports shows the TOTAL VARIANCE which consists of activity variance plus spending variance.

The standard quantity allowed is the amount of an input that should have been used to complete the actual output for the period

Standard quantity is the standard input that would have produced the actual output.
Suppose 1kg of material X can produce 3 units of Product A [Standard]. 450 units were produced with 145 kg. Here actual input is 145kg which should have been 150 kg. 150 kg is the standard qty allowed

The standard hours allowed is the direct labor-hours that should have been used to complete the actual output for the period.

The logic is similar to standard quantity allowed.

When computing variable manufacturing overhead variances, the standard rate represents the variable portion of the predetermined overhead rate

Assume that direct labor-hours are used as the overhead allocation base. If the direct labor efficiency variance is unfavorable, the variable overhead efficiency variance will be unfavorable

This is because the number of actual hours are more than the budgeted hours for actual output. It will always be unfavorable.