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Chapter 16 Standard Costing, Variance Analysis and Kaizen Costing ANSWERS to Review Questions 16.1 Responsibility reporting systems identify variances or exceptions to budget plans and relate those exceptions to the manager responsible for them. The reported variances (and the analysis thereof) further isolates and identifies the cause of exceptions to budget plans. 16.2 Standard material prices include the purchase price of the material and any transportation costs incurred to obtain the material. The standard quantity of material is the amount required to be included in the finished product plus an allowance for normal waste expected in the production process. 16.3 An unfavorable direct-material price variance means that a higher price was paid for the material than was expected when the standard was set. A favorable variance has the opposite interpretation. 16.4 The manager in the best position to influence the direct-material price variance is the purchasing manager. 16.5 An unfavorable direct-material quantity variance means that a larger amount of material was used in the production process than should have been used in accordance with the standard. A favorable variance has the opposite interpretation. 16.6 The manager in the best position to influence the direct-material quantity variance usually is the production manager. 16.7 Several factors that managers often consider when determining the significance of a variance are as follows: size of variance, extent to which the variances are recurring, trends in the variances, controllability of the variances, and the perceived costs and benefits of investigating the variances. 16.8 An unfavorable direct-labor rate variance means that a higher labor rate was paid than was anticipated when the standard was set. One possible cause is that labor rate raises granted were above those anticipated in setting the standards. Another possible cause is that more highly skilled workers were used to perform tasks than were