Chapter 6 Questions

The master budget is an example of a

Static budget

A favorable variance is a variance that

increases operating income relative to the budgeted amount

The direct materials quantity variance is part of the direct materials flexible budget variance is caused by

Using more or less material than the standard quantity allowed for actual production

Which of the following is a possible reason why actual prices might differ from standard prices, resulting in a direct materials price variance

The vendors may change their prices as a result of changes in the market

If a company uses more direct labor hours than the standard allowed, the result is

A reduction in operating income

Why do variances have little meaning until their causes are identified

Because identifying their causes allows managers to take correct acition

If the actual wage rate is $4.50 per direct labor hour, but the standard wage rate is $4.70 per direct labor hour, the direct labor

Rate variance will be favorable