2. Listed below are seven technical accounting terms introduced or emphasized in

Question

2. Listed below are seven technical accounting terms introduced or emphasized in this chapter: Labor rate variance Volume variance Standard costs Overhead spending vanance Labor efficiency variance Materials price variance Matenals quantity variance Each of the following statements may (or may not) describe one of these technical terms. In the space provided beside each statement, indicate the accounting term described, or answer None' if the statement does not correctly describe any of the terms.(3 pointbs) (a) A materials variance which is the responsibility of the Purchasing Department. -(b) The variance which exists whenever actual production levels differ from normal levels. -(c) Unit costs expected to be incurred under normal conditions. (d) A labor variance caused by a difference between standard and actual hours required to complete a task. (e) The variance caused by incurring more overhead costs than allowed for at a given level of production.

Explanation / Answer

S. No Technical Term Explanation A Material Price Variance Material Price Variance compares the standard purchase price with the actual price at which material is procured by purchase department. Any Adverse effect is debited to Purchase Department B Volume Variance Volume Variance provides the comparision of actual capacity utilization with the normal capacity available C Standard Cost Standard Cost is the cost that will be incurred if a product is produced. This is based on past trends of the organisation D Labor Efficieny Variance Labor Efficieny Variance is the comparision of standard time taken to produce certain product with the actual time taken. This is based on the efficiency of the labor force working. Any variance is debited to production department E Overhead Spending Variance Overhead Spending Variance compares the overhead incurred with the budgeted overhead during a given period of time

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