Question:Match the variance to the correct definition.

Variance Definition

2. Cost variance

3. Efficiency variance

4. Flexible budget variance

5. Sales volume variance

6. Static budget variance

a. The difference between the expected results in the flexible budget for the actual units sold and the static budget.

b. The difference between actual results and the expected results in the flexible budget for the actual units sold.

c. Measures how well the business keeps unit costs of material and labor inputs within standards.

d. The difference between actual results and the expected results in the static budget.

e. Measures how well the business uses its materials or human resources

Short Answer

Expert verified

Answer

The definition of each type of variance is stated with the appropriate part numb

Step by step solution

01

Definition of variances

In accounting, variances are defined as the study of the reason of difference in the value of the actual amount and the budgeted amount.

02

Computation of direct material efficiency variance

Variance

Definitions

2 Cost Variance

C

3 Efficiency Variance

E

4 Flexible budget Variance

B

5 Sales volume variance

A

6 Static budget variance

D

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Most popular questions from this chapter

Question:Tipton Company manufactures shirts. During June, Tipton made 1,200 shirts and gathered the following additional data:

Direct materials cost standard \(6.00 per yard of fabric

Direct materials efficiency standard 1.50 yards per shirt

Actual amount of fabric purchased and used 1,680 yards

Actual cost of fabric purchased and used \)10,500

Direct labor cost standard \(15.00 per DLHr

Direct labor efficiency standard 2.00 DLHr per shirt

Actual amount of direct labor hours 2,520 DLHr

Actual cost of direct labor \)36,540

Calculate the following variances:

7. Direct materials cost variance

8. Direct materials efficiency variance

9. Total direct materials variance

10. Direct labor cost variance

11. Direct labor efficiency variance

12. Total direct labor variance

Interpreting material and labor variances

Refer to your results from Short Exercises S23­6 and S23­7.

Requirements

1. For each variance, who in Martin’s organization is most likely responsible?

2. Interpret the direct materials and direct labor variances for Martin’s management.

Murphy Company managers received the following incomplete performance report:

Units Actual Results Flexible Budget Variance Static Budget Flexible Budget Sales Volume Variance Sales Revenue Contribution Margin Fixed Expenses Operating Income 35,000 (a) (b) 5,000 F \( 29,000 \) 14,000 105,000 0 \( 219,000 \) 27,000 F 85,000 13,000 MURPHY COMPANY Flexible Budget Performance Report For the Year Ended July 31, 2018 134,000 14,000 35,000 \( 35,000 100,000 \) 219,000 84,000 135,000 (c) (d) (e) (f) (h) (g) (i) (j) (k) (l)

Complete the performance report. Identify the employee group that may deserve praise and the group that may be subject to criticism. Give your reasoning.

Question: List the variable overhead variances, and briefly describe each

The following direct labor variance analysis was performed for Morris.

AC × AQ \(19,800 SC × SQ \)14.00 per DLHr × 1,350 DLHr \(18,900 SC × AQ \)14.00 per DLHr × 1,800 DLHr \(11.00 per DLHr × 1,800 DLHr \)25,200 Efficiency Variance Cost Variance \(5,400 F \)6,300 U

Requirements

1. Record Morris’s direct labor journal entry (use Wages Payable).

2. Explain what management will do with this variance information.

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