The direct materials price standard is determined by averaging costs of current
ID: 2490957 • Letter: T
Question
The direct materials price standard is determined by averaging costs of current purchases. Once standard costs for direct materials, direct labor, and variable and fixed overhead have been developed, a total standard unit cost can be determined at any time. The final step in variance analysis is determining the cause of the variance. The flexible budget formula is an equation that determines unexpected costs at any level of output. The direct labor rate variance is the difference between actual hours worked and standard hours allowed for good units produced, multiplied by the standard labor rate. The direct labor efficiency variance is the difference between the standard hours allowed and the actual hours multiplied by the standard labor rate. The flexible budget can be adjusted automatically for changes in the level of output. Even if a variance is insignificant, corrective action should be taken. Another name for a flexible budget is a variable budget.Explanation / Answer
Solution 4 FALSE 5 TRUE 6 FALSE 7 TRUE 8 FALSE 9 TRUE 10 TRUE 11 FALSE 12 TRUE