Exam 13: Flexible Budgets, Overhead Cost Variances and Management Control

Answer the following questions using the information below: Coober Pedy Industries produces air purifiers.Coober Pedy produces the air purifiers in batches.To manufacture a batch of the purifiers,Coober Pedy must set up the machines and assembly line tooling.Set-up costs are batch-level costs because they are associated with batches rather than individual units of products.A separate Set-up Department is responsible for setting up machines and tooling for different models of the air purifiers. Set-up overhead costs consist of some costs that are variable and some costs that are fixed with respect to the number of set-up-hours.The following information pertains to June 2018: Budget Amounts Actual Amounts Units produced and sold 10000 9000 Batch size (number of units per batch) 400 375 Set-up-hours per batch 6 5.5 Variable overhead cost per set-up-hour \ 50 \ 52 Total fixed set-up overhead costs \ 18000 \ 17750 -Calculate the spending variance for variable set-up overhead costs.

The amount reported for fixed overhead on the static budget is also reported:

McGrath Company manufactured 1000 units during April with a total overhead budget of $12 400.However,while manufacturing the 1000 units,the microcomputer that contained the month's cost information broke down.With the computer out of action,the accountant has been unable to complete the variance analysis report.The information missing from the report is lettered in the following set of data: Variable overhead: Standard cost per unit: 0.4 labour hour at $4 per hour Actual costs: $2100 for 376 hours a:Flexible budget b:Total flexible-budget variance c:Variable overhead spending variance d:Variable overhead efficiency variance Fixed overhead: e:Budgeted costs f:Actual costs Flexible-budget variance: $500 favourable Required: Compute the missing elements in the report represented by the lettered items. _____________________________________________________________________________________________ _____________________________________________________________________________________________

Day-to-day,ongoing operating decisions mainly determine the level of ___________________ costs incurred in that period.

Answer the following questions using the information below: Alice Springs Corporation manufactures industrial-sized water coolers and uses budgeted machine-hours to allocate variable manufacturing overhead.The following information pertains to the company's manufacturing overhead data: Budgeted output units 20000 units Budgeted machine-hours 6000 hours Budgeted variable manufacturing overhead costs for 20000 units \ 161250 Actual output units produced 24000 units Actual machine-hours used 7200 hours Actual variable manufacturing overhead costs \ 242000 -What is the budgeted variable overhead cost rate per output unit?

Explain the meanings of the variable overhead efficiency variance and the variable overhead spending variance. _____________________________________________________________________________________________ _____________________________________________________________________________________________

Answer the following questions using the information below: Production- Variances Spending Efficiency Volume Variable manufacturing overhead \ 4500 \ 15000 (B) Fixed manufacturing overhead \ 10000 () \ 40000 -In a 1-variance analysis the total overhead variance should be:

Answer the following questions using the information below: PlasticsRus Pty Ltd manufactured 100 000 buckets during February.The overhead cost-allocation base is $5.00 per machine-hour.The following variable overhead data pertain to February: Actual Budgeted Production 100000 units 100000 units Machine-hours 9800 hours 10000 hours Variable overhead cost per machine-hour \ 5.25 \ 5.00 -What is the flexible-budget amount?

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

Which of the following are costs of activities that are related to a group of units of products or services rather than to each individual unit?

Both financial and __________________ performance measures are used to evaluate the performance of managers.

Answer the following questions using the information below: Harvey Corporation manufactured 1500 chairs during June.The following variable overhead data pertain to June: Budgeted variable overhead cost per unit \ 12.00 Actual variable manufacturing overhead cost \ 20800 Flexible-bud get amount for variable manufacturing overhead \ 18000 Variable manufacturing overhead efficiency variance \ 360 unfavourable -What is the variable overhead spending variance?

Because there is no efficiency variance,the fixed overhead spending variance is the same amount as the fixed overhead flexible-budget variance.

Detailed 4-variance analyses are most common in large,complex businesses.

Explain two concerns when interpreting the production-volume variance as a measure of the economic cost of unused capacity. _____________________________________________________________________________________________ _____________________________________________________________________________________________

An unfavourable variable overhead efficiency variance indicates that variable overhead costs were wasted and inefficiently used.

Companies often use variable-cost information pertaining to non-manufacturing,as well as manufacturing,costs in pricing and product mix decisions.

When machine-hours are used as a cost-allocation base,the item MOST likely to contribute to a favourable variable overhead efficiency variance is:

Which of the following costs do not automatically increase or decrease with the level of activity within the relevant range?

Tate Company makes the following journal entry: Variable Manufacturing Overhead Allocated 150000 Variable Manufacturing Overhead Efficiency Variance 5000 Variable Manufacturing Overhead Control 125000 Variable Manufacturing Overhead Spending Variance 30000