Managerial Accounting Flashcards

A company purchased 5,000 lbs of material at $4.20 per lb; the standard price is $4.00 per lb. What is the materials price variance (computed at purchase)?

Answer: $1,000 unfavorable

Price variance = 5,000 x ($4.20 - $4.00) = $1,000, unfavorable because actual price exceeded standard.

Standard hours allowed for actual output were 2,000, actual hours worked were 2,100, and the standard labor rate is $15 per hour. What is the labor efficiency variance?

Answer: $1,500 unfavorable

Efficiency variance = (2,100 - 2,000) x $15 = $1,500 unfavorable since more hours were used than allowed.

The fixed overhead volume variance is best described as the difference between:

Answer: Budgeted fixed overhead and fixed overhead applied to production

The volume variance arises when actual output differs from the denominator activity used to set the fixed overhead rate.

A flexible budget is most useful for performance evaluation because it:

Answer: Adjusts budgeted costs to the actual level of activity achieved

Comparing actual costs to a budget at the same activity level isolates spending and efficiency differences.

The sales volume variance measures the difference between:

Answer: The flexible budget and the static (master) budget

Sales volume variance captures the profit effect of selling a different quantity than originally planned.

Which manager is generally held most responsible for an unfavorable materials price variance?

Answer: Purchasing manager

The purchasing function controls the price paid for materials.

Actual variable overhead was $22,000 for 4,000 actual direct labor hours; the standard variable overhead rate is $5 per hour. What is the variable overhead spending variance?

Answer: $2,000 unfavorable

Spending variance = $22,000 - (4,000 x $5) = $2,000 unfavorable.