Question 1

What is the result of inefficient use of labour?

Accepted Answer

A)  favourable variable overhead spending variance 
B)  favourable variable overhead efficiency variance 
C)  unfavourable variable overhead spending variance 
D)  unfavourable variable overhead efficiency variance 
A)  favourable variable overhead spending variance 
B)  favourable variable overhead efficiency variance 
C)  unfavourable variable overhead spending variance 
D)  unfavourable variable overhead efficiency variance

Question 2

Kelsey, Inc.Kelsey, Inc. produces plastic grocery bags. Kelsey has developed a static budget for the month of August, which is based on 9,000 direct labour hours. During the quarter, the actual activity was 10,000 direct labour hours. Data for August are summarized as follows: $\begin{array}{lrr}
&\underline{\text { Static budget }}&\underline{\text { Actual costs }}\
&\underline{(9,000 \text { hours })} &\underline{(10,000 \text { hours })}\
\text { Direct labour } & \$ 117,000 & \$ 120,000 \
\text { Power (variable cost) } & 45,000 & 50,000 \
\text { Salary of plant superv isor } &\underline{ 5,000} &\underline{ 5,000} \
\text { Total } & \underline{\$ 167,000} & \underline{\$ 175,000}
\end{array}$

-Refer to Kelsey Inc. What is the flexible budget for August?

Accepted Answer

A)  $165,000 
B)  $171,000 
C)  $185,000 
D)  $194,000 
A)  $165,000 
B)  $171,000 
C)  $185,000 
D)  $194,000

Question 3

An after-the-fact flexible budget is based the actual level of activity achieved in the period.

Accepted Answer

A) True 
 B)False

Question 4

What are the two variances for fixed overhead?

Accepted Answer

A)  usage and volume 
B)  efficiency and usage 
C)  volume and spending 
D)  budget and efficiency 
A)  usage and volume 
B)  efficiency and usage 
C)  volume and spending 
D)  budget and efficiency

Question 5

Which formula reflects the total fixed overhead variance?

Accepted Answer

A)  AFOH - (SFOR × SH) 
B)  AFOH - (SFOR × AH) 
C)  AFOH - (standard overhead rate × SH) 
D)  total actual overhead - total applied overhead 
A)  AFOH - (SFOR × SH) 
B)  AFOH - (SFOR × AH) 
C)  AFOH - (standard overhead rate × SH) 
D)  total actual overhead - total applied overhead

Question 6

Match each of the following terms with their correct description from the items listed below.* Each term may be used more than once, and it is possible that one or more of the classifications may not be used at all.
-(Actual hours - standard hours) x SVOR

Accepted Answer

A) Variable overhead efficiency variance 
B) Activity flexible budget 
C) Fixed overhead volume variance 
D) Variable overhead spending variance 
E) Flexible budget variance
F)Flexible budget
G)Static budget
H)Activity-based budgeting
I)Performance report
J)Fixed overhead spending variance 
A) Variable overhead efficiency variance 
B) Activity flexible budget 
C) Fixed overhead volume variance 
D) Variable overhead spending variance 
E) Flexible budget variance
F)Flexible budget
G)Static budget
H)Activity-based budgeting
I)Performance report
J)Fixed overhead spending variance

Question 7

Suppose a company had actual fixed overhead of $60,000, a $1,500 unfavourable spending variance, and a $1,000 unfavourable volume variance. What was the budgeted fixed overhead?

Accepted Answer

A)  $50,300 
B)  $52,700 
C)  $53,000 
D)  $58,500 
A)  $50,300 
B)  $52,700 
C)  $53,000 
D)  $58,500

Question 8

Refer to Lifter Company. Assume that the labour market does NOT permit the hiring of part-time forklift operators. What is the salary budget for moving materials?

Accepted Answer

A)  $135,000 
B)  $180,000 
C)  $360,000 
D)  $450,000 
A)  $135,000 
B)  $180,000 
C)  $360,000 
D)  $450,000

Question 9

For what level of activity is a static budget prepared?

Accepted Answer

A)  for past levels of activity 
B)  for several levels of activity 
C)  for the actual level of activity 
D)  for a particular level of activity 
A)  for past levels of activity 
B)  for several levels of activity 
C)  for the actual level of activity 
D)  for a particular level of activity

Question 10

Universal Forklifts, Inc.Universal Forklifts, Inc. produces a specialized machine part used in forklifts. For last year's operations, the following data were gathered: $\begin{array}{ll}
\text { Units produced: } & 60,000 \
\text { Direct labour: } & 30,000 \text { hours }(a) \$ 9.00 \text { per hour } \
\text { Actual variable overhead: } & \$ 150,000
\end{array}$ The company employs a standard costing system. During the year, a variable overhead rate of $4.50 per hour was used. The labour standard requires a half hour per unit produced.
-Refer to Universal Forklifts. What is the variable overhead efficiency variances?

Accepted Answer

A)  $0 
B)  $7,500 U 
C)  $10,000 F 
D)  $15,000 F 
A)  $0 
B)  $7,500 U 
C)  $10,000 F 
D)  $15,000 F

Question 11

Discuss the following statement: "Since fixed overhead is, by definition, not related to changes in activity level, then the fixed overhead spending variance is zero."

Accepted Answer

It is true that fixed overhead costs do

Question 12

Where are the major differences found between activity-based budgeting and traditional budgeting?

Accepted Answer

A)  in the cash budget 
B)  in the sales and production budgets 
C)  in the materials and labour categories 
D)  in the overhead and selling and administrative categories 
A)  in the cash budget 
B)  in the sales and production budgets 
C)  in the materials and labour categories 
D)  in the overhead and selling and administrative categories

Question 13

Which budget allows the determination of expected costs for various levels of activity?

Accepted Answer

A)  static budget 
B)  capital budget 
C)  flexible budget 
D)  operational budget 
A)  static budget 
B)  capital budget 
C)  flexible budget 
D)  operational budget

Question 14

Match each of the following terms with their correct description from the items listed below.* Each term may be used more than once, and it is possible that one or more of the classifications may not be used at all.
-A budget for a particular level of activity

Accepted Answer

A) Variable overhead efficiency variance 
B) Activity flexible budget 
C) Fixed overhead volume variance 
D) Variable overhead spending variance 
E) Flexible budget variance
F)Flexible budget
G)Static budget
H)Activity-based budgeting
I)Performance report
J)Fixed overhead spending variance 
A) Variable overhead efficiency variance 
B) Activity flexible budget 
C) Fixed overhead volume variance 
D) Variable overhead spending variance 
E) Flexible budget variance
F)Flexible budget
G)Static budget
H)Activity-based budgeting
I)Performance report
J)Fixed overhead spending variance

Question 15

It is reasonable to use average or expected capacity instead of practical capacity to calculate fixed overhead rates.

Accepted Answer

A) True 
 B)False

Question 16

Fixed overhead costs are capacity costs that are acquired in advance of usage.

Accepted Answer

A) True 
 B)False

Question 17

Define static budget and flexible budget. Briefly explain the use of each of these types of budgets?

Accepted Answer

A static budget is a budget for a partic

Question 18

The following standard overhead costs were developed for one of the products of Windrun Company: $\begin{array}{llc}
\text { Variable overhead: } & 5 \text { hours } \times \$ 4 \text { per hour } & 20.00 \
\text { Fixed overhead: } & 5 \text { hours } \times \$ 15 \text { perhour } & 75.00\
\text { Total standard overhead cost per unit }&&\$95.00
\end{array}$ The following information is available regarding the company's operations for the period: $\begin{array}{lr}
\text { Units produced } & 20,000 \
\text { Direct labour } & 115,000 \text { hours } \
\text { Overhead incurred: } & \
\text { Variable } & \$ 437,500 \
\text { Fixed } & \$ 1,320,000
\end{array}$ Budgeted fixed overhead for the period is $1,350,000, and the standard fixed overhead rate is based on expected capacity of 90,000 direct labour hours.
Required:
A. Calculate the variable overhead spending variance and indicate whether it is favourable or unfavourable.
B. Calculate the variable overhead efficiency variance and indicate whether it is favourable or unfavourable.
C. Calculate the fixed overhead spending variance and indicate whether it is favourable or unfavourable.
D. Calculate the fixed overhead volume variance and indicate whether it is favourable or unfavourable.

Accepted Answer

A. $ 22,500 F $437,500 - (115,

Question 19

Jewel Company
Jewel Company calculates its predetermined rates using practical volume, which is 300,000 units. The standard cost system allows two direct labour hours per unit produced. Overhead is applied using direct labour hours. The total budgeted overhead is $3,200,000 of which $900,000 is fixed overhead. The actual results for the year are as follows: $\begin{array}{ll}
\text { Units produced: } & 280,000 \
\text { Direct labour: } & 570,000 \text { hours } @ \$ 9 \text { per hour } \
\text { Variable overhead: } & \$ 2,320,000 \
\text { Fixed overhead: } & \$ 872,000
\end{array}$
-Refer to Jewel Company. What is the predetermined fixed overhead rate?

Accepted Answer

A)  $1.50 per direct labour hour 
B)  $3.00 per direct labour hour 
C)  $4.00 per direct labour hour 
D)  $5.50 per direct labour hour 
A)  $1.50 per direct labour hour 
B)  $3.00 per direct labour hour 
C)  $4.00 per direct labour hour 
D)  $5.50 per direct labour hour

Question 20

Budgets are often used as benchmarks for performance evaluation.

Accepted Answer

A) True 
 B)False

What is the result of inefficient use of labour?

An after-the-fact flexible budget is based the actual level of activity achieved in the period.

What are the two variances for fixed overhead?

Which formula reflects the total fixed overhead variance?

Match each of the following terms with their correct description from the items listed below.* Each term may be used more than once, and it is possible that one or more of the classifications may not be used at all. -(Actual hours - standard hours) x SVOR

Suppose a company had actual fixed overhead of $60,000, a $1,500 unfavourable spending variance, and a $1,000 unfavourable volume variance. What was the budgeted fixed overhead?

Refer to Lifter Company. Assume that the labour market does NOT permit the hiring of part-time forklift operators. What is the salary budget for moving materials?

For what level of activity is a static budget prepared?

Discuss the following statement: "Since fixed overhead is, by definition, not related to changes in activity level, then the fixed overhead spending variance is zero."

Where are the major differences found between activity-based budgeting and traditional budgeting?

Which budget allows the determination of expected costs for various levels of activity?

Match each of the following terms with their correct description from the items listed below.* Each term may be used more than once, and it is possible that one or more of the classifications may not be used at all. -A budget for a particular level of activity

It is reasonable to use average or expected capacity instead of practical capacity to calculate fixed overhead rates.

Fixed overhead costs are capacity costs that are acquired in advance of usage.

Define static budget and flexible budget. Briefly explain the use of each of these types of budgets?

Budgets are often used as benchmarks for performance evaluation.

Introduction to Managerial Accounting

Basic Managerial Accounting Concepts

Cost Behaviour

Cost-Volume-Profit Analysis: a Managerial Planning Tool

Job-Order Costing

Process Costing

Activity-Based Costing and Management

Absorption and Variable Costing, and Inventory Management

Budgeting, Production, Cash, and Master Budget

Standard Costing: a Managerial Control Tool

Performance Evaluation and Decentralization

Short-Run Decision Making: Relevant Costing

Capital Investment Decisions

Filters

Exam 11: Flexible Budgets and Overhead Analysis

What is the result of inefficient use of labour?

An after-the-fact flexible budget is based the actual level of activity achieved in the period.

What are the two variances for fixed overhead?

Which formula reflects the total fixed overhead variance?

Match each of the following terms with their correct description from the items listed below.* Each term may be used more than once, and it is possible that one or more of the classifications may not be used at all. -(Actual hours - standard hours) x SVOR

Suppose a company had actual fixed overhead of $60,000, a $1,500 unfavourable spending variance, and a $1,000 unfavourable volume variance. What was the budgeted fixed overhead?

Refer to Lifter Company. Assume that the labour market does NOT permit the hiring of part-time forklift operators. What is the salary budget for moving materials?

For what level of activity is a static budget prepared?

Discuss the following statement: "Since fixed overhead is, by definition, not related to changes in activity level, then the fixed overhead spending variance is zero."

Where are the major differences found between activity-based budgeting and traditional budgeting?

Which budget allows the determination of expected costs for various levels of activity?

Match each of the following terms with their correct description from the items listed below.* Each term may be used more than once, and it is possible that one or more of the classifications may not be used at all. -A budget for a particular level of activity

It is reasonable to use average or expected capacity instead of practical capacity to calculate fixed overhead rates.

Fixed overhead costs are capacity costs that are acquired in advance of usage.

Define static budget and flexible budget. Briefly explain the use of each of these types of budgets?

Budgets are often used as benchmarks for performance evaluation.

Introduction to Managerial Accounting

Basic Managerial Accounting Concepts

Cost Behaviour

Cost-Volume-Profit Analysis: a Managerial Planning Tool

Job-Order Costing

Process Costing

Activity-Based Costing and Management

Absorption and Variable Costing, and Inventory Management

Budgeting, Production, Cash, and Master Budget

Standard Costing: a Managerial Control Tool

Performance Evaluation and Decentralization

Short-Run Decision Making: Relevant Costing

Capital Investment Decisions

Filters