Question 1

The fixed setup overhead flexible-budget variance is calculated as actual costs - flexible-budget variance.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is the mathematical expression for the budgeted fixed overhead cost per unit of cost allocation base?

Accepted Answer

A)  Budgeted fixed overhead cost per unit of cost allocation base = Actual total costs in fixed overhead cost pool ÷ Budgeted total quantity of cost allocation base 
B)  Budgeted fixed overhead cost per unit of cost allocation base = Budgeted total costs in fixed overhead cost pool ÷ Budgeted total quantity of cost allocation base 
C)  Budgeted fixed overhead cost per unit of cost allocation base = Actual total costs in fixed overhead cost pool ÷ Actual total quantity of cost allocation base 
D)  Budgeted fixed overhead cost per unit of cost allocation base = Budgeted total costs in fixed overhead cost pool ÷ Actual total quantity of cost allocation base 
A)  Budgeted fixed overhead cost per unit of cost allocation base = Actual total costs in fixed overhead cost pool ÷ Budgeted total quantity of cost allocation base 
B)  Budgeted fixed overhead cost per unit of cost allocation base = Budgeted total costs in fixed overhead cost pool ÷ Budgeted total quantity of cost allocation base 
C)  Budgeted fixed overhead cost per unit of cost allocation base = Actual total costs in fixed overhead cost pool ÷ Actual total quantity of cost allocation base 
D)  Budgeted fixed overhead cost per unit of cost allocation base = Budgeted total costs in fixed overhead cost pool ÷ Actual total quantity of cost allocation base

Question 3

Answer the following questions using the information below:
Ecocomfort Corporation manufactured 1,000 coolers during October. The following variable overhead data relates to October:
 $$\begin{array} { l l } 
\text { Variable overhead spending variance } & \$ 1,230 \text { Unfavorable } \
\text { Variable overhead efficiency variance } & \$ 175 \text { Unfavorable } \
\text { Budgeted machine hours allowed for actual output } & 615 \text { machine hours } \
\text { Actual cost per machine hour } & \$ 27 \
\text { Budgeted cost per machine hour } & \$ 25
\end{array}$$
-Calculate the actual machine hours used by Stark during October.

Accepted Answer

A)  622 hours 
B)  615 hours 
C)  608 hours 
D)  620 hours 
A)  622 hours 
B)  615 hours 
C)  608 hours 
D)  620 hours

Question 4

Mendel Company makes the following journal entry: $\begin{array}{lr}
\text { Variable Manufacturing Overhead Allocated } & 200,000 \
\text { Variable Manufacturing Overhead Efficiency Variance } & 5,000\
\end{array}$
Variable Manufacturing Overhead Control $ \quad 175,000 $
Variable Manufacturing Overhead Spending Variance $ \quad 30,000 $ Which of the following statements is true of the given journal entry?

Accepted Answer

A)  A variable manufacturing overhead cost of $175,000 is written-off. 
B)  An unfavorable spending variance of $30,000 is recorded. 
C)  A favorable efficiency variance of $5,000 is recorded. 
D)  A favorable flexible-budget variance of $25,000 is recorded. 
A)  A variable manufacturing overhead cost of $175,000 is written-off. 
B)  An unfavorable spending variance of $30,000 is recorded. 
C)  A favorable efficiency variance of $5,000 is recorded. 
D)  A favorable flexible-budget variance of $25,000 is recorded.

Question 5

Answer the following questions using the information below:
Neocomfort Corporation manufactured 3,000 chairs during June. The following variable overhead data relates to June:
 $\begin{array}{ll}
\text { Budgeted variable overhead cost per unit } & \$ 12.00 \
\text { Actual variable manufacturing overhead cost } & \$ 49,900 \
\text { Flexible-budget amount for variable manufacturing overhead } & \$ 47,800 \
\text { Variable manufacturing overhead efficiency variance } & \$ 720 \text { unfavorable }
\end{array}$
-What is the variable overhead spending variance?

Accepted Answer

A)  $1,380 favorable 
B)  $2,820 favorable 
C)  $2,820 unfavorable 
D)  $1,380 unfavorable 
A)  $1,380 favorable 
B)  $2,820 favorable 
C)  $2,820 unfavorable 
D)  $1,380 unfavorable

Question 6

Use the below information to answer the following questions:
Bekits Corporation manufactured 25,000 grooming kits for horses during March. The following fixed overhead data relates to March:
 $\begin{array}{lrr}&\text { Actual }&\text { Static Budget }\
\text { Production } & 37,500 \text { units } & 36,000 \text { units } \
\text { Machine-hours } & 6,100 \text { hours } & 5,940 \text { hours } \
\text { Fixed overhead costs for March } & \$ 133,000 & \$ 124,740
\end{array}$
-What is the flexible-budget amount?

Accepted Answer

A)  $134,375.50 
B)  $124,740.00 
C)  $129,937.50 
D)  $133,000.00 
A)  $134,375.50 
B)  $124,740.00 
C)  $129,937.50 
D)  $133,000.00

Question 7

'Managers should be wary of using the same unitized fixed overhead costs for planning and control purposes'.Do you agree with this argument? Give reasons for your answer.

Accepted Answer

Yes.Managers should always be careful to

Question 8

While calculating the costs of products and services,a standard costing system ________.

Accepted Answer

A)  allocates overhead costs on the basis of the actual overhead-cost rates 
B)  uses standard costs to determine the cost of products 
C)  does not keep track of overhead cost 
D)  traces direct costs to output by multiplying the standard prices or rates by the actual quantities 
A)  allocates overhead costs on the basis of the actual overhead-cost rates 
B)  uses standard costs to determine the cost of products 
C)  does not keep track of overhead cost 
D)  traces direct costs to output by multiplying the standard prices or rates by the actual quantities

Question 9

Answer the following questions using the information below:
Russo Corporation manufactured 16,000 air conditioners during November. The overhead cost-allocation base is $31.50 per machine-hour. The following variable overhead data pertain to November:
 $$\begin{array} { l r r } 
 & \text { Actual } & \text { Budgeted } \
\text { Production }& 16,000 \text { units } & 18,000 \text { units } \
\text { Machine-hours }  & 7,875 \text { hours }& 9,000 \text { hours } \
\text { Variable overhead cost per machine-hour: } &\$ 31.00 & \$ 31.50
\end{array}$$
-What is the actual variable overhead cost?

Accepted Answer

A)  $244,125 
B)  $279,000 
C)  $248,063 
D)  $250,000 
A)  $244,125 
B)  $279,000 
C)  $248,063 
D)  $250,000

Question 10

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.

Accepted Answer

A) True 
 B)False

Question 11

Comfort Company manufactures pillows.The 2015 operating budget is based on production of 25,000 pillows with 0.75 machine-hour allowed per pillow.Budgeted variable overhead per hour was $25.
Actual production for 2015 was 27,000 pillows using 19,050 machine-hours.Actual variable costs were $23 per machine-hour.
Required:
Calculate the variable overhead spending and efficiency variances.

Accepted Answer

Budgeted variable overhead = $25 × (25,0

Question 12

Explain why there is no efficiency variance for fixed manufacturing overhead costs.

Accepted Answer

There is no efficiency variance for fixe

Question 13

Answer the following questions using the information below:
Russo Corporation manufactured 16,000 air conditioners during November. The overhead cost-allocation base is $31.50 per machine-hour. The following variable overhead data pertain to November:
 $$\begin{array} { l r r } 
 & \text { Actual } & \text { Budgeted } \
\text { Production }& 16,000 \text { units } & 18,000 \text { units } \
\text { Machine-hours }  & 7,875 \text { hours }& 9,000 \text { hours } \
\text { Variable overhead cost per machine-hour: } &\$ 31.00 & \$ 31.50
\end{array}$$
-What is the variable overhead efficiency variance?

Accepted Answer

A)  $3,937.50 favorable 
B)  $3,937.50 unfavorable 
C)  $4,500 favorable 
D)  $4,500 unfavorable 
A)  $3,937.50 favorable 
B)  $3,937.50 unfavorable 
C)  $4,500 favorable 
D)  $4,500 unfavorable

Question 14

Effective planning of variable overhead costs means that a company performs those variable overhead costs that primarily ________.

Accepted Answer

A)  increase the planned variable overhead budgets 
B)  add value for the customer using the products or services 
C)  increase the linearity between total costs and volume of production 
D)  identify the product advertising requirements 
A)  increase the planned variable overhead budgets 
B)  add value for the customer using the products or services 
C)  increase the linearity between total costs and volume of production 
D)  identify the product advertising requirements

Question 15

When machine-hours are used as an overhead cost-allocation base,the most likely cause of a favorable variable overhead spending variance is ________.

Accepted Answer

A)  excessive machine breakdowns 
B)  the production scheduler efficiently scheduled jobs 
C)  a decline in the cost of energy 
D)  strengthened demand for the product 
A)  excessive machine breakdowns 
B)  the production scheduler efficiently scheduled jobs 
C)  a decline in the cost of energy 
D)  strengthened demand for the product

Question 16

When machine-hours are used as a cost-allocation base,the item most likely to contribute to a favorable variable overhead efficiency variance is ________.

Accepted Answer

A)  excessive machine breakdowns 
B)  skillful workforce 
C)  additional machinery 
D)  strengthened demand for the product 
A)  excessive machine breakdowns 
B)  skillful workforce 
C)  additional machinery 
D)  strengthened demand for the product

Question 17

Teddy Company uses a standard cost system.In May,$234,000 of variable manufacturing overhead costs were incurred and the flexible-budget amount for the month was $240,000.Which of the following variable manufacturing overhead entries would have been recorded for May?

Accepted Answer

A) Accounts Payable Control and other accounts $ \quad 240,000 $ 
Work-in-Process Control$ \quad 240,000 $ 
B) $ \begin{array}{ll}\text { Work-in-Process Control } & 240,000\
\text { Variable Manufacturing Overhead Allocated}&240,000
\end{array} $ 
C) $\begin{array} { l  }
 \text {Work-in-Process Control }&234,000 \ \text {Accounts Payable Control and other accounts }&234,000 \
\end{array}$ 
D) $\begin{array} { l  }
 \text {Accounts Payable Control and other accounts  }&234,000 \ \text {Variable Manufacturing Overhead Control }&234,000 \
\end{array}$ 
A) Accounts Payable Control and other accounts $ \quad 240,000 $ 
Work-in-Process Control$ \quad 240,000 $ 
B) $ \begin{array}{ll}\text { Work-in-Process Control } & 240,000\
\text { Variable Manufacturing Overhead Allocated}&240,000
\end{array} $ 
C) $\begin{array} { l  }
 \text {Work-in-Process Control }&234,000 \ \text {Accounts Payable Control and other accounts }&234,000 \
\end{array}$ 
D) $\begin{array} { l  }
 \text {Accounts Payable Control and other accounts  }&234,000 \ \text {Variable Manufacturing Overhead Control }&234,000 \
\end{array}$

Question 18

Answer the following questions using the information below:
Lukehart Industries, Inc., produces air purifiers. Lukehart, Inc., produces the air purifiers in batches. To manufacture a batch of the purifiers, Lukehart, Inc., must set up 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 2015:
 $\begin{array}{lrr}&\text { Budget } & \text { Actual } \
&\text { Amounts } & \text { Amounts }\
\text { Units produced and sold } & 10,000 & 9,000 \
\text { Batch size (number of units per batch) } & 400 & 375 \
\text { Setup-hours per batch } & 6 & 5.5 \
\text { Variable overhead cost per setup-hour } & \$ 50 & \$ 52 \
\text { Total fixed setup overhead costs } & \$ 18,000 & \$ 17,750
\end{array}$
-Calculate the production-volume variance for fixed overhead setup costs.

Accepted Answer

A)  $1,800 favorable 
B)  $1,800 unfavorable 
C)  $250 unfavorable 
D)  $250 favorable 
A)  $1,800 favorable 
B)  $1,800 unfavorable 
C)  $250 unfavorable 
D)  $250 favorable

Question 19

Under Generally Accepted Accounting Principles (GAAP),fixed manufacturing overhead costs are allocated as an inventoriable cost to the output units produced.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following mathematical expression is used to calculate budgeted variable overhead cost rate per output unit?

Accepted Answer

A)  Budgeted output allowed per input unit × Budgeted variable overhead cost rate per input unit 
B)  Budgeted input allowed per output unit ÷ Budgeted variable overhead cost rate per input unit 
C)  Budgeted output allowed per input unit ÷ Budgeted variable overhead cost rate per input unit 
D)  Budgeted input allowed per output unit × Budgeted variable overhead cost rate per input unit 
A)  Budgeted output allowed per input unit × Budgeted variable overhead cost rate per input unit 
B)  Budgeted input allowed per output unit ÷ Budgeted variable overhead cost rate per input unit 
C)  Budgeted output allowed per input unit ÷ Budgeted variable overhead cost rate per input unit 
D)  Budgeted input allowed per output unit × Budgeted variable overhead cost rate per input unit

The fixed setup overhead flexible-budget variance is calculated as actual costs - flexible-budget variance.

Which of the following is the mathematical expression for the budgeted fixed overhead cost per unit of cost allocation base?

'Managers should be wary of using the same unitized fixed overhead costs for planning and control purposes'.Do you agree with this argument? Give reasons for your answer.

While calculating the costs of products and services,a standard costing system ________.

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.

Explain why there is no efficiency variance for fixed manufacturing overhead costs.

Effective planning of variable overhead costs means that a company performs those variable overhead costs that primarily ________.

When machine-hours are used as an overhead cost-allocation base,the most likely cause of a favorable variable overhead spending variance is ________.

When machine-hours are used as a cost-allocation base,the item most likely to contribute to a favorable variable overhead efficiency variance is ________.

Teddy Company uses a standard cost system.In May,$234,000 of variable manufacturing overhead costs were incurred and the flexible-budget amount for the month was $240,000.Which of the following variable manufacturing overhead entries would have been recorded for May?

Under Generally Accepted Accounting Principles (GAAP),fixed manufacturing overhead costs are allocated as an inventoriable cost to the output units produced.

Which of the following mathematical expression is used to calculate budgeted variable overhead cost rate per output unit?

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, direct-Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Strategy, balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, just-In-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, transfer Pricing, and Multinational Considerations

Performance Measurement, compensation, and Multinational Considerations

Filters

Exam 8: Flexible Budgets, overhead Cost Variances, and Management Control

The fixed setup overhead flexible-budget variance is calculated as actual costs - flexible-budget variance.

Which of the following is the mathematical expression for the budgeted fixed overhead cost per unit of cost allocation base?

'Managers should be wary of using the same unitized fixed overhead costs for planning and control purposes'.Do you agree with this argument? Give reasons for your answer.

While calculating the costs of products and services,a standard costing system ________.

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.

Explain why there is no efficiency variance for fixed manufacturing overhead costs.

Effective planning of variable overhead costs means that a company performs those variable overhead costs that primarily ________.

When machine-hours are used as an overhead cost-allocation base,the most likely cause of a favorable variable overhead spending variance is ________.

When machine-hours are used as a cost-allocation base,the item most likely to contribute to a favorable variable overhead efficiency variance is ________.

Teddy Company uses a standard cost system.In May,$234,000 of variable manufacturing overhead costs were incurred and the flexible-budget amount for the month was $240,000.Which of the following variable manufacturing overhead entries would have been recorded for May?

Under Generally Accepted Accounting Principles (GAAP),fixed manufacturing overhead costs are allocated as an inventoriable cost to the output units produced.

Which of the following mathematical expression is used to calculate budgeted variable overhead cost rate per output unit?

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, direct-Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Strategy, balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, just-In-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, transfer Pricing, and Multinational Considerations

Performance Measurement, compensation, and Multinational Considerations

Filters