Question 1

Variable overhead costs include:

Accepted Answer

A) plant-leasing costs 
B) the plant manager's salary 
C) depreciation on plant equipment 
D) machine maintenance 
A) plant-leasing costs 
B) the plant manager's salary 
C) depreciation on plant equipment 
D) machine maintenance

Question 2

Sanchez Company made the following journal entry:

Accepted Answer

A) Sanchez overallocated variable manufacturing overhead. 
B) A $10,000 favorable spending variance was recorded. 
C) Work-in-Process is currently overstated. 
D) This entry may be recorded yearly to provide timely feedback to managers. 
A) Sanchez overallocated variable manufacturing overhead. 
B) A $10,000 favorable spending variance was recorded. 
C) Work-in-Process is currently overstated. 
D) This entry may be recorded yearly to provide timely feedback to managers.

Question 3

Answer the following questions using the information below:
Fearless Frank's Fertilizer Farm produces fertilizer and distributes the product by using his tanker trucks. Frank's uses budgeted fleet hours to allocate variable manufacturing overhead. The following information pertains to the company's manufacturing overhead data:
    
-When machine-hours are used as an overhead cost-allocation base, the most likely cause of a favorable variable overhead spending variance is:

Accepted Answer

A) excessive machine breakdowns 
B) the production scheduler efficiently scheduled jobs 
C) a decline in the cost of energy 
D) strengthened demand for the product 
A) excessive machine breakdowns 
B) the production scheduler efficiently scheduled jobs 
C) a decline in the cost of energy 
D) strengthened demand for the product

Question 4

Brown Company makes watches. The fixed overhead costs for 2011 total $324,000. The company uses direct labor-hours for fixed overhead allocation and anticipates 10,800 hours during the year for 540,000 units. An equal number of units are budgeted for each month.
During October, 48,000 watches were produced and $28,000 was spent on fixed overhead.
Required:
a. Determine the fixed overhead rate for 2011 based on the units of input.
b. Determine the fixed overhead static-budget variance for October.
c. Determine the production-volume overhead variance for October.

Accepted Answer

a. Fixed overhead rate = $324,000/10,800

Question 5

Answer the following questions using the information below:
Jenny's Corporation manufactured 25,000 grooming kits for horses during March. The fixed-overhead cost-allocation rate is $20.00 per machine-hour. The following fixed overhead data pertain to March:
  
-What is the fixed overhead spending variance?

Accepted Answer

A) $1,000 unfavorable 
B) $2,000 favorable 
C) $3,000 unfavorable 
D) $5,000 favorable 
A) $1,000 unfavorable 
B) $2,000 favorable 
C) $3,000 unfavorable 
D) $5,000 favorable

Question 6

When machine-hours are used as an overhead cost-allocation base and annual leasing costs for equipment unexpectedly increase, the most likely result would be to report a(n):

Accepted Answer

A) unfavorable variable overhead spending variance 
B) favorable variable overhead efficiency variance 
C) unfavorable fixed overhead flexible-budget variance 
D) favorable production-volume variance 
A) unfavorable variable overhead spending variance 
B) favorable variable overhead efficiency variance 
C) unfavorable fixed overhead flexible-budget variance 
D) favorable production-volume variance

Question 7

Answer the following questions using the information below:
Christine Corporation manufactures baseball uniforms and uses budgeted machine-hours to allocate variable manufacturing overhead. The following information pertains to the company's manufacturing overhead data:
    
-What is the budgeted variable overhead cost rate per output unit?

Accepted Answer

A) $12.00 
B) $12.21 
C) $18.00 
D) $19.00 
A) $12.00 
B) $12.21 
C) $18.00 
D) $19.00

Question 8

Variable overhead costs:

Accepted Answer

A) never have any unused capacity 
B) have no production-volume variance 
C) allocated are always the same as the flexible-budget amount 
D) All of these answers are correct. 
A) never have any unused capacity 
B) have no production-volume variance 
C) allocated are always the same as the flexible-budget amount 
D) All of these answers are correct.

Question 9

Explain the meaning of a favorable production-volume variance.

Accepted Answer

The production-volume variance is favora

Question 10

Luke's Football Manufacturing Company reported:   To isolate these variances at the end of the accounting period, John would debit Fixed Manufacturing Overhead Allocated for:

Accepted Answer

A) $390,000 
B) $395,000 
C) $400,000 
D) $405,000 
A) $390,000 
B) $395,000 
C) $400,000 
D) $405,000

Question 11

The production-volume variance arises whenever the actual level of the denominator differs from the level used to calculate the budgeted fixed overhead rate.

Accepted Answer

A) True 
 B)False

Question 12

Fixed costs for the period are by definition a lump sum of costs that remain unchanged and therefore the fixed overhead spending variance is always zero.

Accepted Answer

A) True 
 B)False

Question 13

The variable overhead efficiency variance is computed ________ and interpreted ________ the direct-cost efficiency variance.

Accepted Answer

A) the same as; the same as 
B) the same as; differently than 
C) differently than; the same as 
D) differently than; differently than 
A) the same as; the same as 
B) the same as; differently than 
C) differently than; the same as 
D) differently than; differently than

Question 14

In the journal entry that records overhead variances, the manufacturing overhead allocated accounts are closed.

Accepted Answer

A) True 
 B)False

Question 15

A favorable fixed overhead flexible-budget variance indicates that actual fixed costs exceeded the lump-sum amount budgeted.

Accepted Answer

A) True 
 B)False

Question 16

Answer the following questions using the information below:
Gus Corporation manufactured 10,000 golf bags during April. The fixed overhead cost-allocation rate is $40.00 per machine-hour. The following fixed overhead data pertain to March:
  
-What is the flexible-budget amount?

Accepted Answer

A) $200,000 
B) $204,000 
C) $240,000 
D) $244,000 
A) $200,000 
B) $204,000 
C) $240,000 
D) $244,000

Question 17

Standard costing is a cost system that allocates overhead costs on the basis of overhead cost rates based on actual overhead costs times the standard quantities of the allocation bases allowed for the actual outputs produced.

Accepted Answer

A) True 
 B)False

Question 18

One way to manage both variable and fixed overhead costs is to eliminate value-adding activities.

Accepted Answer

A) True 
 B)False

Question 19

Answer the following questions using the information below:
Willis Corporation manufactures industrial-sized gas furnaces and uses budgeted machine-hours to allocate variable manufacturing overhead. The following information pertains to the company's manufacturing overhead data:
    
-Variable manufacturing overhead costs were ________ for actual output.

Accepted Answer

A) higher than expected 
B) the same as expected 
C) lower than expected 
D) indeterminable 
A) higher than expected 
B) the same as expected 
C) lower than expected 
D) indeterminable

Question 20

The chapter shows that variance analysis of overhead costs can be presented in 4, 3, 2, and 1-variance analysis. Explain what each of the variances presented under each method shows about overhead costs.

Accepted Answer

Under the 4-variance analysis, there is

Variable overhead costs include:

Sanchez Company made the following journal entry:

When machine-hours are used as an overhead cost-allocation base and annual leasing costs for equipment unexpectedly increase, the most likely result would be to report a(n):

Variable overhead costs:

Explain the meaning of a favorable production-volume variance.

Luke's Football Manufacturing Company reported: To isolate these variances at the end of the accounting period, John would debit Fixed Manufacturing Overhead Allocated for:

The production-volume variance arises whenever the actual level of the denominator differs from the level used to calculate the budgeted fixed overhead rate.

Fixed costs for the period are by definition a lump sum of costs that remain unchanged and therefore the fixed overhead spending variance is always zero.

The variable overhead efficiency variance is computed and interpreted the direct-cost efficiency variance.

In the journal entry that records overhead variances, the manufacturing overhead allocated accounts are closed.

A favorable fixed overhead flexible-budget variance indicates that actual fixed costs exceeded the lump-sum amount budgeted.

Answer the following questions using the information below: Gus Corporation manufactured 10,000 golf bags during April. The fixed overhead cost-allocation rate is $40.00 per machine-hour. The following fixed overhead data pertain to March: -What is the flexible-budget amount?

Standard costing is a cost system that allocates overhead costs on the basis of overhead cost rates based on actual overhead costs times the standard quantities of the allocation bases allowed for the actual outputs produced.

One way to manage both variable and fixed overhead costs is to eliminate value-adding activities.

The chapter shows that variance analysis of overhead costs can be presented in 4, 3, 2, and 1-variance analysis. Explain what each of the variances presented under each method shows about overhead costs.

The Accountants Role in the Organization

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, Direct-Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Pricing Decisions and Cost Management

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, Common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, Rework, and Scrap

Balanced Scorecard: Quality, Time, and the Theory of Constraints

Inventory Management, Just-In-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing, and Multinational Considerations

Performance Measurement, Compensation, and Multinational Considerations

Filters

Exam 8: Flexible Budgets, Overhead Cost Variances, and Management Control

Variable overhead costs include:

Sanchez Company made the following journal entry:

When machine-hours are used as an overhead cost-allocation base and annual leasing costs for equipment unexpectedly increase, the most likely result would be to report a(n):

Variable overhead costs:

Explain the meaning of a favorable production-volume variance.

Luke's Football Manufacturing Company reported: To isolate these variances at the end of the accounting period, John would debit Fixed Manufacturing Overhead Allocated for:

The production-volume variance arises whenever the actual level of the denominator differs from the level used to calculate the budgeted fixed overhead rate.

Fixed costs for the period are by definition a lump sum of costs that remain unchanged and therefore the fixed overhead spending variance is always zero.

The variable overhead efficiency variance is computed ________ and interpreted ________ the direct-cost efficiency variance.

In the journal entry that records overhead variances, the manufacturing overhead allocated accounts are closed.

A favorable fixed overhead flexible-budget variance indicates that actual fixed costs exceeded the lump-sum amount budgeted.

Answer the following questions using the information below: Gus Corporation manufactured 10,000 golf bags during April. The fixed overhead cost-allocation rate is $40.00 per machine-hour. The following fixed overhead data pertain to March: -What is the flexible-budget amount?

Standard costing is a cost system that allocates overhead costs on the basis of overhead cost rates based on actual overhead costs times the standard quantities of the allocation bases allowed for the actual outputs produced.

One way to manage both variable and fixed overhead costs is to eliminate value-adding activities.

The chapter shows that variance analysis of overhead costs can be presented in 4, 3, 2, and 1-variance analysis. Explain what each of the variances presented under each method shows about overhead costs.

The Accountants Role in the Organization

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, Direct-Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Pricing Decisions and Cost Management

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, Common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, Rework, and Scrap

Balanced Scorecard: Quality, Time, and the Theory of Constraints

Inventory Management, Just-In-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing, and Multinational Considerations

Performance Measurement, Compensation, and Multinational Considerations

Filters

The variable overhead efficiency variance is computed and interpreted the direct-cost efficiency variance.