Exam 8: Flexible Budgets,variances,and Management Control: II

Answer the following question(s)using the information below. Lukehart Industries Inc.produces air purifiers in batches.To manufacture a batch of the purifiers Lukehart Inc.must setup the machines and assembly line tooling.Setup costs are batch-level costs because they are associated with batches rather than individual units of products.A separate Setup Department is responsible for setting up machines and tooling for different models of the air purifiers. Setup overhead costs consist of some costs that are variable and some costs that are fixed with respect to the number of setup hours.The following information pertains to June 2012: -Calculate the rate variance for fixed setup overhead costs.

Explain why sales-volume variance could be helpful to managers.

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

Lungren has allocated budgeted construction overhead for August of $260,000 for variable costs and $440,000 for fixed costs.Actual costs for the month totalled $275,000 for variable and $445,000 for fixed.Allocated fixed overhead totalled $440,000.The company tracks each item in an overhead control account before allocations are made to individual jobs.Rate variances for August were $10,000 unfavourable for variable and $10,000 unfavourable for fixed.The production-volume overhead variance was $5,000 favourable. Required: a.Prepare journal entries for the actual costs incurred. b.Prepare journal entries to record the variances for August.

The difference between budgeted fixed overhead and fixed overhead allocated for actual output units achieved,is the production-volume variance.

Two of the primary ways to manage variable overhead costs include

A fixed manufacturing overhead cost pool can never incur an efficiency variance.

Use the information below to answer the following question(s). Regal Company uses a single cost pool for fixed manufacturing overhead.The amount for June 2016 was budgeted at $500,000;however,the actual amount was $700,000.Actual production for June was 12,500 units,and actual machine hours were 10,000.Budgeted production included 17,750 units and 12,375 machine hours. -What is Regal Company's budgeted fixed overhead rate per output unit?

The variable overhead flexible-budget variance can be further subdivided into the

Trilite Windows manufactures windows.The current year operating budget is based on production of 56,000 windows with 1.0 machine hours allowed per window.Variable manufacturing overhead is anticipated to be $896,000. Actual production for was 58,000 windows using 60,000 machine hours.Actual variable costs were $15 per machine hour. Required: Determine the variable overhead rate and efficiency variances.

McKenna Company planned to produce 900 units during April with a total overhead budget of $12,400. However,while manufacturing the 1,000 units the microcomputer that contained the month's cost information broke down.With the computer out of commission,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: Fixed overhead: Flexible-budget variance: $500 favourable Required: Compute the missing elements in the report represented by the lettered items

Decisions about capacity are considered to be

Answer the following question(s)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 flexible-budget amount for fixed-overhead?

The variable overhead flexible-budget variance measures the difference between standard variable overhead costs and flexible-budget variable overhead costs.

Briefly explain the meaning of the variable overhead efficiency variance and the variable overhead rate variance.

Mediquip International is a manufacturing firm that has many assembly lines,numerous heavy duty machines and highly skilled machine operators.It has used very complex variance analysis in planning and controlling it operations during the last few years.Everything always appeared to be satisfactory until an economic recession tightened the competition and cost control became critical to the company's success.The operating managers believe that the traditional managerial accounting variance measures do not provide all the information they need during times of economic difficulties. Required: Discuss what additional information could be provided to the managers.

During October Foxmore Inc.used $250,000 in manufacturing overhead costs,of which $66,500 was variable.Budgeted manufacturing overhead was $229,500,of which $75,000 was variable.Which of the following entries for manufacturing overhead could have been recorded?

There is causal relationship between the variable overhead allocation base and the variable overhead cost pool.

Sam's Furniture uses variance analysis to evaluate manufacturing overhead in its' factory.The information for the June overhead expenditures is as follows: Required: a.Calculate the variable manufacturing overhead rate and efficiency variances;and,the fixed manufacturing overhead rate and production-volume variances. b.Prepare all necessary journal entries to record the actual costs,allocated costs,and variances.Keep variable and fixed entries separate.

Answer the following question(s)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: -What is the flexible-budget amount for variable manufacturing overhead?