Chapter 07: Standard Costing and Variance Analysis IM 17
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publicly accessible website, in whole or in part.
a. One worker may oversee a large number of machines and deal mainly with trouble-shooting
machinery malfunctions.
2. Many companies have responded to overhead costs being so much larger than direct labor costs
material and conversion.
a. Conversion costs are likely to be separated into their variable and fixed components.
3. Variance analysis for conversion cost in automated plants usually focuses on:
a. Spending variances for overhead costs;
c. Volume variance for production.
variances but also the volume variance.
5. The analysis is similar to the traditional three-variance overhead approach.
a. See text Exhibit 7.10 (p. 269) for an illustration of variance analysis under a conversion cost
approach.
LO.6: (Appendix) How are variances affected by multiple material and labor categories?
L. Mix and Yield Variances
1. Mix and Yield Variances
discussed in the text narrative.
2. Material Price, Mix, and Yield Variances
a. A material price variance shows the dollar effect of paying prices that differ from the raw
material standard.
quantity × standard price).
Chapter 07: Standard Costing and Variance Analysis IM 18
©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a
publicly accessible website, in whole or in part.
c. The material yield variance is the difference between the actual total quantity of input and
the standard total quantity allowed based on output and uses standard mix and standard
prices to determine variance; (standard mix × actual quantity × standard price) minus
(standard mix × standard quantity × standard price).
d. Text Exhibit 7.12 (p. 272) presents the computations for the material variances.
3. Labor Rate, Mix, And Yield Variances
b. The labor yield variance shows the monetary impact of using more or fewer total hours than
standard hours × standard rate).
c. Text Exhibit 7.13 (p. 273) presents the computations for the labor variances.
4. Because there are trade-offs in mix and yield when component qualities and quantities are
cost efficiency and output quality.
b. If mix and yield can be increased by substituting less expensive resources while maintaining
quality, then the standards and proportions of components should be changed.
market share.
Chapter 07: Standard Costing and Variance Analysis IM 19
Multiple Choice Questions
1. (LO.2) Select the correct statement regarding standards.
d. All of the above
2. (LO.2) The document that summarizes the expected quantities and costs needed to produce a
unit is called a
a. bill of materials.
3. (LO.3) This month R Company planned to produce 3,000 units of its product. The standard cost
a. more materials were purchased than were used.
4. (LO.3) An unfavorable direct labor efficiency variance could be caused by a (n):
a. unfavorable variable overhead spending variance.
5. (LO.3) The flexible budget for the month of August was for 9,000 units with direct material at $15
per unit. Direct labor was budgeted at 45 minutes per unit for a total of $81,000. Actual output for
show:
a. a favorable direct labor efficiency variance of $1,275.
b. an unfavorable direct labor efficiency variance of $1,275.
d. none of the above.
6. (LO.3) The total fixed overhead variance is the:
d. measure of production inefficiency.
7. (LO.3) Variable overhead is applied on the basis of standard direct labor hours. If the direct labor
efficiency variance is favorable, the variable overhead efficiency variance will be:
a. unfavorable.
b. favorable.
c. zero.
Chapter 07: Standard Costing and Variance Analysis IM 20
8. (LO.3) Y Company’s product has a labor standard of 2 hours per unit. For 2011, it estimates its
production will be 200,000 units (400,000 DLHs). It budgets total overhead at $900,000, which
a. $66,000 unfavorable.
b. $35,520 favorable.
9. (LO.1) Standard cost systems should be used for all of the following reasons except:
a. motivation.
b. decision-making.
d. For proper performance evaluation to be made, responsibility for variances should not be
traced to specific managers.
11. (LO.4) The best basis upon which cost standards should be set to measure controllable
production inefficiencies is:
a. engineering standards based on attainable performance.
12. (LO.5) Variance analysis for conversion cost in automated plants normally focuses on:
a. spending variances for overhead costs.
13. (LO.6) (Appendix) A possible combination of materials or labor is called
a. materials-time measurement.
14. (LO.6) (Appendix) A measure of the difference between the actual total quantity of input and the
a. mix variance.
b. yield variance.
15. (LO.6) (Appendix) Select the correct equation for the labor mix variance.
a. (Actual mix x Actual hours x Actual rate) – (Actual mix x Actual hours x Standard rate)
rate)
Chapter 07: Standard Costing and Variance Analysis IM 21
Multiple Choice Solutions
1. d
2. d
3. b
4. c
5. c
AP × AQ SP × AQ SP × SQ
6. b
7. b
8. d
Flexible Budget
Based on Input (Output Measure)
9. c
10. a
11. a