standard costing and variance analysis

Question 0

General format of a performance report

Answer 0

revenue or cost 
budget amount 
actual amount 
variance 
explanation

Question 1

what is variance a account

Answer 1

difference between standard costs and and actual costs

Question 2

types of overhead

Answer 2

variable overhead and fixed overhead

Question 3

when is variance favorable

Answer 3

actual costs < budgeted costs

actual revenues > budgeted revenues

Question 4

when is variance unfavorable

Answer 4

actual costs > budgeted costs

actual revenues < budgeted revenues

Question 5

what is flexible budget

Answer 5

budget that shows revenues and expenses that should have occurred riven the actual activity level

Question 6

what do we need to know to flex a budget

Answer 6

variable costs change in direct proportion to changes in activity

fixed costs remain unchanged

Question 7

what is the basic idea of variance analysis

Answer 7

we can split up the overall difference between standard costs and actual costs in variances that are interpretable and meaningful

Question 8

types of standard cost variance

Answer 8

price variance and quantity variance

Question 9

what’s price variance

Answer 9

the difference between the actual price and the standard price

Question 10

quantity variance

Answer 10

the difference between the actual quantity and the standard quantity

Question 11

what’s standard price

Answer 11

amount that should have been paid for the resources acquired

Question 12

standard quantity

Answer 12

standard quantity is the quantity that should have been used for the output achieved

Question 13

formula for price variance

Answer 13

AQ(AP-SP)

Question 14

quantity variance

Answer 14

SP(AQ-SQ)

Question 15

what’s journal entry for recording the purchase of materials (taking into accounts variance)

Answer 15

dr direct material
cr accounts payable
cr price variance on direct materials

if more was spent than the standard

Question 16

Actual hours (SP-AP)

Answer 16

what’s rate variance

Question 17

what’s efficiency variance

Answer 17

SP(SH-AH)

Question 18

what is POHR typical based on

Answer 18

input activity measure

e.g. machine hours, direct labor hours, euros

Question 19

what’s variable overhead spending

Answer 19

AH(standard rate - actual rate)

Question 20

what’s efficiency variable

Answer 20

standard rate(SH-AH)

Question 21

what’s the journal entry to record actual variable overhead cost

Answer 21

dr variable manufacturing overhead cost

cr. accounts payable

Question 22

what’s the journal entry to record the application of variable manufacturing overhead

Answer 22

dr work in process

cr variable manufacturing overhead applied

Question 23

what’s the journal entry to isolate variable overhead variances for the period

Answer 23

dr variable manufacturing overhead applied
spending variance on bar. mnf. overhead
cr variable manufacturing overhead incurred
efficiency variable on var, mnf

Question 24

what does the variance overhead efficiency variance reveal?

Answer 24

favorable variable overhead efficiency variance indicates that we used more direct labor hours than standard given actual output
therefore, we should expect higher overhead costs

Question 25

types of fixed overhead variances

Answer 25

fixed overhead budget and volume

Question 26

what does fixed overhead budget indicate

Answer 26

how much more or less we spent on fixed overhead than budgeted

Question 27

what does fixed overhead volume variance indicate

Answer 27

difference between the budgeted overhead and the overhead allocated to products

Question 28

how do you calculate fixed overhead budget variance

Answer 28

actual fixed overhead - budgeted fixed overhead

Question 29

how do you calculate fixed overhead volume variance

Answer 29

budgeted fixed overhead - applied fixed overhead

Question 30

how do you calculate applied fixed overhead

Answer 30

POHR x standard units of activity measure given actual output

Question 31

what’s the journal entry to record actual fixed manufacturing overhead costs

Answer 31

dr fixed manufacturing overhead cost

cr cash

Question 32

what’s the journal entry to record the application of fixed manufacturing overhead to work-in process

Answer 32

dr work in process

cr. fixed manufacturing overhead applied

Question 33

what’s the journal entry to isolate fixed overhead variances for the period

Answer 33

dr fixed manufacturing overhead applied
volume variance on fixed mnf overhead
cr fixed manufacturing overhead incurred
budget variance on fixed mnf overhead

Question 34

actual overhead - applied overhead = favorable variance

Answer 34

overapplied overhead

Question 35

actual overhead minus applied overhead

Answer 35

unfavorable : under applied overhead

Question 36

what to do with unfavorable net variances cost of production

Answer 36

inefficiencies which should be recognized in current period

Question 37

what to do with insignificant net favorable variances

Answer 37

included with costs of goods sold in income statement

Question 38

what to do with significant favorable variances

Answer 38

allocate the favorable variance in inventory (WIP, FG) and costs of goods sold

Question 39

what’s segment margin

Answer 39

divisions contribution to overall operations