Exam 22: Performance Evaluation Using Variances From Standard Costs

The variance from standard for factory overhead resulting from incurring a total amount of factory overhead cost that is greater or less than the amount budgeted for the level of operations achieved is termed controllable variance.

Standard cost variances are usually not reported in reports to stockholders.

The standard costs and actual costs for direct labor for the manufacture of 2,500 actual units of product are as follows: The amount of the direct labor rate variance is:

The fact that workers are unable to meet a properly determined direct labor standard is sufficient cause to change the standard.

Standard costs are determined by multiplying expected price by expected quantity.

Favorable volume variances may be harmful when:

Calculate the Direct Materials Price variance using the above information:

One reason not to depend solely on historical records to set standards is that there may be inefficiencies contained in past costs.

The following are inputs and outputs to the help desk. Operator training Number of calls per day Maintenance of computer equipment Number of operators Number of complaints Identify whether each is an input or an output to the help desk.

If the actual direct labor hours spent producing a commodity differs from the standard hours, the variance is termed a:

The following data is given for the Bahia Company: Overhead is applied on standard labor hours. The factory overhead volume variance is:

Standard costs serve as a device for measuring efficiency.

Standard costs are a useful management tool that can be used solely as a statistical device apart from the ledger or they can be incorporated in the accounts.

The use of standards for nonmanufacturing expenses is:

Favorable volume variances are never harmful, since achieving them encourages managers to run the factory above normal capacity.

If employees are given bonuses for exceeding normal standards, the standards may be very effective in motivating employees.

The standard factory overhead rate is $10 per direct labor hour ($8 for variable factory overhead and $2 for fixed factory overhead) based on 100% capacity of 30,000 direct labor hours. The standard cost and the actual cost of factory overhead for the production of 5,000 units during May were as follows: What is the amount of the factory overhead volume variance?

Define nonfinancial performance measures. What are they used for and what are some common examples?

Prepare an income statement (through income before income tax) for presentation to management, using the following data from the records of Greenway Manufacturing Company for November of the current year:

The following data relate to direct labor costs for the current period: What is the direct labor rate variance?