COST ACCOUNTING
STANDARD COSTING AND VARIANCE ANALYSIS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The original standard time was set too high
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The employees were more skilled than had been planned for in the standard
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Production volume was lower than budgeted
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An ideal standard was used for labour time
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A lower grade of material was used in production
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Detailed explanation-1: -Appointing low grade workers. Inadequate training to employees. Incorrect Instructions.
Detailed explanation-2: -An unfavorable labor efficiency variance can be caused by machine downtime, and poor quality materials.
Detailed explanation-3: -Reasons for adverse material usage variance include: Purchase of materials of lower quality than the standard (this will be reflected in a favorable material price variance). Use of unskilled labor. Increase in material wastage due to depreciation of plant and equipment.
Detailed explanation-4: -An unfavorable variance can occur due to changing economic conditions, such as lower economic growth, lower consumer spending, or a recession, which leads to higher unemployment. Market conditions can also change, such as new competitors entering the market with new products and services.