When using a standard costing system, the balances in all inventory and cost of goods sold accounts ...

a.	The direct material price variance is calculated as the difference between the full

amount owed to the supplier and the standard price. It is recorded at the point of purchase. An unfavorable variance indicates that the price paid for the material was more than the standard price set.

b.	The direct material quantity variance is the difference between the quantity of direct

material used and the quantity that should have been used according to the standards set times the standard price. The variance is recorded when the material is transferred to the production floor. An unfavorable variance indicates that too much material is being used in the production of the product.

c.	The direct labor rate variance is calculated as the difference between the actual rate

and the standard rate of pay multiplied by the actual hours worked. The variance is recorded at the time the payroll is recorded. An unfavorable variance indicates that the company is paying more per hour for direct labor than the amount set as the standard.

d.	The direct labor efficiency variance is calculated as the difference between the actual

hours worked and the standard hours allowed for production, times the standard rate of pay. It is recorded at the time the payroll is recorded. An unfavorable variance indicates that the number of direct labor hours used to produce the product was more than that allowed by the standards.

e.	The variable overhead spending variance is the difference between the amount spent

for variable overhead and the amount of budgeted variable overhead (static budget). The variance is recorded at the end of the period. An unfavorable variance indicates that the company paid more for variable overhead than set by standards.

f.	The variable overhead efficiency variance is the difference between flexible budget

and variable overhead applied. The variance is recorded at the end of the period. It indicates how efficiently the company used its resources. An unfavorable variance indicates that standards set for drivers such as direct labor or machine hours were too low or usage was too high.

g.	The fixed overhead spending variance is the difference between the amount spent for

fixed overhead and the amount of budgeted fixed overhead. The variance is recorded at the end of the period. An unfavorable variance indicates that the company paid more for fixed overhead than set by standards.

h.	The fixed overhead volume variance is the difference between budgeted fixed

overhead cost and applied fixed overhead costs. The variance is recorded at the end of the period. An unfavorable variance indicates that the company was not fully utilizing capacity (actual production was less than expected).

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When using a standard costing system, the balances in all inventory and cost of goods sold accounts ...

Managerial Accounting

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