Fundamentals Of Cost Accounting (6th Edition)
6th Edition
ISBN: 9781259969478
Author: WILLIAM LANEN, Shannon Anderson, Michael Maher
Publisher: McGraw Hill Education
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Chapter 17, Problem 12CADQ
To determine
Determine the benefit of the given situation.
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If a purchasing manager is able to buy direct materials required in the manufacturing of a product at a lower than ‘standard’ cost why may this result in an overall unfavorable total variance for DM’s.
Management accounting uses variance analysis to explain what and why something happened in the cost of producing products. It is done by comparing actual outcomes to expected, or standard, costs. What is the expectation when the usage of raw materials unexpectedly decreases below the standard quantity used?
Multiple Choice
Favorable price variance
Favorable quantity variance
Unfavorable price variance
Unfavorable quantity variance
In a manufacturing environment, like the GM truck plant in Flint, who has primary responsibility for the sales volume variance?
Chapter 17 Solutions
Fundamentals Of Cost Accounting (6th Edition)
Ch. 17 - What complication arises in variance analysis when...Ch. 17 - Variance analysis can be useful in a manufacturing...Ch. 17 - How would you recommend accounting for variances...Ch. 17 - What does a manager learn by computing an industry...Ch. 17 - Why is there no efficiency variance for revenues?Ch. 17 - For what decisions would a manager want to know...Ch. 17 - If the sales activity or materials efficiency...Ch. 17 - Prob. 8RQCh. 17 - Prob. 9RQCh. 17 - What is the advantage of recognizing materials...
Ch. 17 - How could a professional sports firm use the mix...Ch. 17 - Prob. 12CADQCh. 17 - How could a hospital firm use the mix variance to...Ch. 17 - Prob. 14CADQCh. 17 - There is no reason to investigate favorable...Ch. 17 - Prob. 16CADQCh. 17 - Consider a firm in the sharing economy, such as...Ch. 17 - Prob. 18ECh. 17 - Prob. 19ECh. 17 - Prob. 20ECh. 17 - Variable Cost Variances: Materials Purchased and...Ch. 17 - Prob. 22ECh. 17 - Industry Volume and Market Share Variances DB Ice...Ch. 17 - Olive Tree Products sold 72,000 units during the...Ch. 17 - Prob. 25ECh. 17 - Sales Mix and Quantity Variances A-Zone Media...Ch. 17 - Prob. 27ECh. 17 - Sales Mix and Quantity Variances The restaurant at...Ch. 17 - Sales Mix and Quantity Variances Chow-4-Hounds...Ch. 17 - Materials Mix and Yield Variances Stacy, Inc.,...Ch. 17 - Materials Mix and Yield Variances Johns...Ch. 17 - Labor Mix and Yield Variances Matts Eat N Run has...Ch. 17 - Flexible Budgeting, Service Organization KB is a...Ch. 17 - Prob. 34ECh. 17 - Prob. 35ECh. 17 - Sales Price and Activity Variances EZ-Tax is a tax...Ch. 17 - Write a memo to the senior manager of EZ-Tax...Ch. 17 - Variable Cost Variances The standard direct labor...Ch. 17 - Refer to the information in Exercise...Ch. 17 - Prob. 40PCh. 17 - Variable Cost Variances: Materials Purchased and...Ch. 17 - Industry Volume and Market Share Variances:...Ch. 17 - Industry Volume and Market Share: Missing Data The...Ch. 17 - Sales Mix and Quantity Variances Lake Cellars...Ch. 17 - Analyze Performance for a Restaurant Dougs Diner...Ch. 17 - Nonmanufacturing Cost Variances FSBCU is a...Ch. 17 - Performance Evaluation in Service Industries Bay...Ch. 17 - Refer to the information in Problem...Ch. 17 - Prob. 49PCh. 17 - Refer to the data for the Peninsula Candy Company...Ch. 17 - Materials Mix and Yield Variances Plano Products...Ch. 17 - Pinnuck Products makes a liquid solvent using two...Ch. 17 - Labor Mix and Yield Variances Matthews Bros, is a...Ch. 17 - Refer to the information in Problem...Ch. 17 - Derive Amounts for Profit Variance Analysis...Ch. 17 - Flexible Budget Oak Hill Township operates a motor...
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- Which of the following is the most likely explanation for an unfavorable materials usage variance and a favorable labor wage variance? a. The new labor contract increased wages. b. Higher quality materials were purchased, resulting in less waste. c. The company experience labor turnover and newer, less experienced workers were hired. d. A new supplier offered a lower price for materials.arrow_forwardRefer to Cornerstone Exercise 18.6. Required: 1. Calculate the sales mix variance. 2. What if actual units sold of the toaster oven increased? How would that affect the sales mix variance? What if actual units sold of the convection oven increased? How would that affect the sales mix variance?arrow_forwardWhich of the following is a possible cause of an unfavorable material price variance? A. purchasing too much material B. purchasing higher-quality material C. hiring substandard workers D. buying substandard materialarrow_forward
- Although there are many reasons to this concern, one of the general reasons in gross profit variance analysis why an unfavorable sales volume variance occur is that * a. the company's product is not properly marketed. b. the finished product is over priced. c. the figures are not properly accounted for. d. the accounts are taking too long to collect. e. the raw materials used are overpriced.arrow_forwardI need help with sales mix variance and quantity variance, please.arrow_forwardThe unfavorable volume variance may be due to all but which of the following factors? * Machine breakdown. Failure to obtain enough sales orders. Failure to maintain an even flow of work. Unexpected increases in the cost of utilities.arrow_forward
- Why do product costing systems using a single, volume-based cost driver tend to overcost highvolume products? Will there be any undesirable strategic effects from such product cost distortion?arrow_forwardTop of Form Multiple Choice Theories Choose the best answer. A cost variance of zero indicates that the manufacturing management was * able to control production cost below budgeted costs. unable to keep production costs at budgeted costs even if the purchasing department was able to keep the budgeted price. able to control production costs at budgeted costs. unable to keep production costs at budgeted costs. In gross profit analysis, a favorable cost of sales variance that includes an unfavorable cost volume variance will mean: * The production department was able to control costs within the budget but the purchasing department went over the budget. The purchasing department was able to control costs within the budget but the production department over the budget. The production and purchasing department were able to control costs within the budget. The production and purchasing departments went over the budget. Variance that arises solely because the actual units sold differs from…arrow_forwardQ.Explain in details with example:- Control and Cost Reduction are the two important factors by which Manufacturing companies may increase their Profits. One of the most important tool is the installation of Standard Costing system. But companies have to be very careful while deciding the Proper interpretation of variances from standard is very important for the success of standard costing system as a tool for Cost Control. Mention some important factors that must be born in your mind while interpreting variances.arrow_forward
- In a business, who is responsible for setting standard costs, and who is responsible if there are negative variances from standard?arrow_forwardAnalyze the variances that you computed in requirements 1 and 2. Was the new service a success from an overall cost-control perspective? Briefly discuss. What seems to have happened that would give rise to customer complaints?arrow_forwardShould both favorable and unfavorable variances be investigated, or only the unfavorable ones? Explain your response. What if a company found that they had a favorable price variance and an unfavorable quantity variance for direct materials. What might be the cause(s) of this pattern of variances?arrow_forward
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What is variance analysis?; Author: Corporate finance institute;https://www.youtube.com/watch?v=SMTa1lZu7Qw;License: Standard YouTube License, CC-BY