Question

USING VARIANCE TERMINOLOGY

Use the following terms to complete the sentences that follow; terms may be used once, more than once, or not at all.

• static
• flexible
• spending
• production manager
• variable overhead rate
• variable overhead efficiency
• fixed overhead spending
• purchasing manager
• favorable
• unfavorable
• debit
• credit
• fixed overhead budget
• fixed overhead volume

1. A_______ budget is based on a fixed estimate of sales volume.
2. A ________ variance represents the difference between actual and expected levels of activity
3. The _______ is typically responsible for the direct materials quantity variance
4. The variable overhead rate variance is _______ when the actual variable overhead rate is less than the standard variable overhead rate.
5. Unfavorable variance appear as _________ entries; favorable variances appear as ______entries
6. The ________ variance is the difference between between the number of actual direct labor hours used and the number of standard direct labor hours multiplied by the standard variable overhead rate.
7. Using less direct materials than expected results in a ____ variance.
8. The _________ is typically responsible for the direct labor efficency variance.
9. The _________ variance is sometimes also called the denominator variance
10. When recording journal entries, the actual cost is a ______ and the standard cost is a ________

Answer 1

1. A static budget is based on a fixed estimate of sales volume.

2. A volume variance represents the difference between actual and expected levels of activity.

3. The production manager is typically responsible for the direct materials quantity variance.

4. The variable overhead rate variance is favorable when the actual variable overhead rate is less than the standard variable overhead rate.

5. Unfavorable variance appears as debit entries; favorable variances appear as credit entries.

6. The variable overhead efficiency variance is the difference between the number of actual direct labor hours used and the number of standard direct labor hours multiplied by the standard variable overhead rate.

7. Using less direct materials than expected results in favorable variance.

8. The production manager is typically responsible for the direct labor efficiency variance.

9. The fixed overhead volume variance is sometimes also called the denominator variance.

10. When recording journal entries, the actual cost is a debit and the standard cost is a credit.