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

A favourable production volume variance,if it is the result of an unusual fluctuation in production output,should be credited to COGS in the period that it arises.

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

If Miller Company makes the following journal entry: It may be inferred that

A favourable production-volume variance indicates that the company

The variable overhead efficiency variance measures the efficiency with which the cost-allocation base is used.

Johnston Equipment develops food processing equipment.The budgeted fixed overhead costs for 2015 total $768,000.The company uses direct labour-hours for fixed overhead allocation and anticipates 480,000 hours during the year for 960,000 units.An equal number of units are budgeted for each month. During April 84,000 packages (units)were produced and $66,000 was spent on fixed overhead. Required: a.Determine the fixed overhead rate for 2015 based on direct labour-hours. b.Determine the fixed overhead static-budget variance for April. c.Determine the production-volume overhead variance for April.

In flexible budgets,costs that remain the same regardless of the output levels within the relevant range are

Answer the following question(s)using the information below. Munoz Inc.produces a special line of plastic toy racing cars in batches.To manufacture a batch of the cars Munoz Inc.must setup the machines and molds.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 molds for different styles of car. 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 flexible-budget variance for variable setup overhead costs.

Answer the following question(s)using the information below. Munoz Inc.produces a special line of plastic toy racing cars in batches.To manufacture a batch of the cars Munoz Inc.must setup the machines and molds.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 molds for different styles of car. 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 variable setup overhead costs.

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 production-volume variance for fixed setup overhead costs.

When machine-hours are used as an overhead cost-allocation base,the LEAST likely cause of a unfavourable variable overhead rate variance is

Ever-Sharp Lawnmowers Ltd.controls variable manufacturing overhead costs with assembly-line hours as the denominator.Fixed manufacturing overhead costs are applied on a unit-of-output basis.Each lawnmower is allowed 10 assembly-line hours and standard variable manufacturing overhead totals $650 per unit.Budgeted fixed manufacturing overhead totals $29,400 for 420 lawnmowers.During July 4,200 assembly-line hours were incurred and 400 lawnmowers were produced.Actual manufacturing overhead costs for July were $260,400 for variable expenses and $32,300 for fixed expenses. Required: a.Compute a 4-variance analysis for the month of July. b.Compute a 3-variance analysis for the month of July. c.Compute a 2-variance analysis for the month of July.

Budgeted output for DuCane Small Engines Inc.was 20,000 engines during February 2016.Budgeted fixed overhead per output unit was $2.50,and 30,000 engines were actually produced.Actual fixed overhead was allocated at $3.00 per engine.What is the production-volume variance?

When machine-hours are used as a cost allocation base,the item MOST likely to contribute to a favourable production-volume variance is

The variable overhead efficiency variance is computed in a different way than the efficiency variance for direct-cost items.

Kelly's Pillow Company manufactures pillows.The current year operating budget is based on production of 40,000 pillows with 0.5 machine-hour allowed per pillow.Variable manufacturing overhead is anticipated to be $440,000. Actual production was 36,000 pillows using 19,000 machine-hours.Actual variable costs were $20 per machine-hour. Required: Calculate the variable overhead rate and efficiency variances.

When separate variable and fixed manufacturing overhead control accounts are used for job costing,it is not necessary to have separate overhead allocated accounts.

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

Casey Corporation produces a special line of basketball hoops in batches.To manufacture a batch of the basketball hoops Casey Corporation must setup the machines and moulds.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 moulds for different styles of basketball hoops. 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 January. Required: a.Calculate the efficiency variance for variable setup overhead costs. b.Calculate the rate variance for variable setup overhead costs. c.Calculate the flexible-budget variance for variable setup overhead costs. d.Calculate the rate variance for fixed setup overhead costs. e.Calculate the production-volume variance for fixed setup overhead costs.

How can a standard costing system be useful in negotiating new sales?