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

Answer the following questions using the information below: Healesville Animal Products manufactured 32 000 horse grooming kits during 2018.The fixed-overhead cost-allocation rate is $20.00 per machine-hour.The following fixed overhead data pertain to 2018: Actual Static Budget Production 32000 units 30000 units Machine-hours 6100 hours 6000 hours Fixed overhead costs for 2018 \ 123000 \ 120000 -What is the fixed overhead spending variance?

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):

For purposes of allocating fixed overhead costs to products,managers may view the fixed overhead costs as if they had a variable-cost behaviour pattern.

Causes of a favourable variable overhead efficiency variance might include using lower-skilled workers than expected.

Answer the following questions using the information below: OzPlastic Co.produces a special line of plastic toy racing cars.OzPlastic produces the cars in batches.To manufacture a batch of the cars,OzPlastic must set up the machines and moulds.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 moulds for different styles of car. 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: Actual Static-budget Amounts Amounts Units produced and sold 30000 22500 Batch size (number of units per batch) 250 225 Set-up-hours per batch 5 5.25 Variable overhead cost per set-up-hour \ 40 \ 38 Total fixed setup overhead costs \ 14400 \ 14000 -Calculate the spending variance for fixed set-up overhead costs.

Can the variable overhead efficiency variance be: a.computed the same way as the efficiency variance for direct-cost items? b.interpreted the same way as the efficiency variance for direct-cost items? Explain. _____________________________________________________________________________________________ _____________________________________________________________________________________________

The variable overhead efficiency variance can be interpreted the same way as the efficiency variance for direct-cost items.

Answer the following questions using the information below: Fearless Frank's Fertiliser Farm produces fertiliser 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: Budgeted output urits 450 truckloads Budgeted fleet hours 350 hours Budgeted kilos of fertiliser 12000000 kilos Budgeted variable manufacturing overhead costs for 450 loads \ 50000 Actual output units produced and delivered 470 truckloads Actual fleet hours 327 hours Actual kilos of fertiliser produced and delivered 12600000 kilos Actual variable manufacturing overhead costs \ 52250 -What is the flexible-budget variance for variable manufacturing overhead?

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 actual variable overhead cost?

____________________ performance measures,like financial variances,can be described as signals to direct managers' attention to problems.

The production-volume variance is a component of the ______________ variance.

Effective planning of fixed overhead costs is similar to effective planning for ______________ costs.

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.

Generally Accepted Accounting Principles require that unitised fixed manufacturing costs be used for:

Kristin's Basketball Manufacturing Company reported: Actual fixed overhead \ 800000 Fixed manufacturing overhead spending variance \ 60000 favourable Fixed manufacturing production-volume variance \ 40000 favourable To isolate these variances at the end of the accounting period,Kristin would debit:

_______________ set-up costs consist of wages paid to direct set-up labour and indirect support labour,costs of maintenance of set-up equipment,and costs of indirect materials and energy used during set-ups.

A 'cost-allocation base' links an indirect cost or group of indirect costs to a cost object;the term can be used interchangeably with 'cost-driver rate' when dealing with indirect costs.

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 flexible-budget variance for variable set-up overhead costs.

A crucial point to keep in mind is that in standard costing,fixed overhead cost is treated as if it is a variable cost.

Answer the following questions using the information below: Hobart Corporation manufactured 20 000 heaters during November.The overhead cost-allocation base is $15.75 per machine-hour.The following variable overhead data pertain to November: Actual Budgeted Production 20000 units 22000 units Machine-hours 7875 hours 9000 hours Variable overhead cost per machine-hour: \ 15.50 \ 15.75 -What is the total variable overhead variance?