Question

Favorable or Unfavorable?

If production volume is greater than expected - Fixed overhead has been over-allocated - therefore the fixed overhead volume variance is ___________.

If production volume is less than expected - fixed overhead has been under allocated - therefore the fixed overhead volume variance is ___________.

Rule of thumb: When production volume is higher than expected, fixed overhead volume variance will be ___________. When production is lower than expected the variance will be ___________.

The direct materials price variance is defined as which of the following?

1. Standard price x (Actual quantity used - Standard quantity allowed)
2. Actual quantity purchased x (Actual price - standard price)
3. Actual price x (Actual quantity used - Standard quantity allowed)
4. Standard quantity allowed x (Actual Price - Standard Price)

The direct labor rate variance can be defined as which of the following?

1. Actual rate x (Actual hours - Standard hours allowed)
2. Standard hours allowed X (Actual rate - Standard rate)
3. Standard rate X (Actual rate - Standard hours allowed)
4. Actual hours x (Actual rate - Standard rate)

The variable overhead rate variance can be defined as which of the following?

1. Actual rate x (Actual hours - Standard hours allowed)
2. Standard hours allowed x (Actual rate - Standard rate)
3. Standard rate X (Actual hours - Standard hours allowed
4. Actual hours X (Actual rate - Standard rate)

Answer 1

1.unfavorable - because fixed overhead has been over allocated, production volume is greater than expected

2. Favourable- because fixed overhead under allocated, production is less than budgeted.

3.rule of thumb- when the production volume is higher than expected, fixed overhead volume variance will be unfavorable. When production is lower than expected the variance will be Favourable

4.Direct material price variance =

Standard quantity allowed x (Actual Price - Standard Price)

So answer c is correct

5 . Direct labour rate variance=

Standard hours allowed X (Actual rate - Standard rate)

So answer B is correct

6. Variable overhead rate variance=

Standard hours allowed x (Actual rate - Standard rate)

So answer B is correct