229. A ________________ 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 _________________ variance.
233. The standard number of hours allowed times the predetermined overhead rate is the amount of ________________ to the products produced.
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 units produced.
____ 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 performance.
____ 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 accounts.
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 department?
S-A E 243
What are the four perspectives used in the balanced scorecard? Discuss the nature of each, and how the perspectives are linked.
S-A E 244 (Ethics)
Fulmar 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 day—what could I do but fail?”
S-A E 244 (Cont.)
The argument 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.
1. Are ideal standards unethical? Explain briefly.
2. Is it unethical forSharon to refuse to support the standards? Explain.
S-A E 245 (Communication)
Vincent Bassani 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 been inefficient.
Write a short note toVincent explaining the probable cause of the unfavorable labor efficiency variance.