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

The budget period for variable-overhead costs is typically less than three months.

Overhead costs are a major part of costs for most companies.

The planning of fixed overhead costs differs from the planning of variable overhead costs in one important respect: timing.

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 fixed set-up overhead costs.

Variable overhead costs are,by definition,a lump sum of costs that remain unchanged in total for a given period despite changes in the level of total activity or volume related to those overhead costs.

Fixed and variable cost variances can ________ be applied to activity-based costing systems.

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 amount for variable manufacturing overhead?

Which of the following is TRUE about fixed overhead cost?

Accurate-time Company makes watches.The fixed overhead costs for 2018 total $444 000.The company uses direct labour-hours for fixed overhead allocation and anticipates 14 800 hours during the year for 780 000 units.An equal number of units is budgeted for each month. During October,58 000 watches were produced and $28 000 was spent on fixed overhead. Required: a.Determine the fixed overhead rate for 2018 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. _____________________________________________________________________________________________ _____________________________________________________________________________________________

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 budgeted variable overhead cost rate per output unit?

What can the fixed overhead cost variance be further subdivided into?

Answer the following questions using the information below: Wagga Wagga Corporation manufactured 30 000 eskies during September.The overhead cost-allocation base is $12.50 per machine-hour.The following variable overhead data pertain to September: Actual Budgeted Production 30000 units 24000 units Machine-hours 15000 hours 10800 hours Variable overhead cost per machine-hour: \ 12.00 \ 12.50 -What is the variable overhead spending variance?

The efficiency variance for variable overhead cost is based on the efficiency with which the cost-allocation base is used.

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 efficiency variance for variable set-up overhead costs.

What is the MAJOR challenge when planning fixed overheads?

How is a budgeted fixed overhead cost rate calculated? _____________________________________________________________________________________________ _____________________________________________________________________________________________

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

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 production-volume variance for fixed set-up overhead costs.

Which of the following is TRUE about variable overhead costs?

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 2-variance analysis,the flexible-budget variance and the production-volume variance should be ________,respectively.