Exam 11: Flexible Budgets and Overhead Analysis

Hyphen Corporation Hyphen Corporation uses a standard costing system. Information for the month of June is as follows: Actual overhead costs ($26,000 is fixed) $80,000 Direct labour: Actual hours worked 12,000 hours Standard hours allow ed for actual production 10,000 hours Average actual labour cost per hour \ 18 The overhead rate is based on a normal volume of 12,000 direct labour hours. Standard cost data at 12,000 direct labour hours were as follows: Variable overhead \ 48,000 Fixed overhead 24,000 Total overhead \7 2,000 -Refer to Hyphen Corporation. What is the variable overhead efficiency variance?

Discuss the following statement: "As long as the total variable overhead variance is small, the managers can be assured that actual activity is proceeding as planned. No further action is necessary."

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: Direct labour \ 117,000 \ 120,000 Power (variable cost) 45,000 50,000 Salary of plant superv isor Total -Refer to Kelsey Inc. What is the flexible budget variance for August?

Just Bags Just Bags produces leather purses. The company has developed a static budget for the first quarter, which is based on 20,000 direct labour hours. During the quarter, the actual activity was 22,000 direct labour hours. Data for the first quarter are summarized as follows: Direct materials \ 80,000 \ 87,000 Direct labour 160,000 174,000 Rent Total -Refer to Just Bags. What can be concluded when comparing the static budget to the actual outcomes?

What does a performance report for variable overhead reveal?

The variable overhead spending variance is conceptually identical to the price variances of materials and labour.

Briefly explain the concept of performance report.

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: Units produced: 280,000 Direct labour: 570,000 hours @\ 9 per hour Variable overhead: \ 2,320,000 Fixed overhead: \ 872,000 -Refer to Jewel Company. What is the predetermined variable overhead rate?

Refer to Cold Cream Company. Required: A. Prepare an overhead budget for the expected activity level for the coming year. B. Prepare an overhead budget that reflects production that is 10% higher than expected (for both products). C. Prepare an overhead budget that reflects production that is 10% lower than expected (for both products).

Refer to Cold Cream Company. Assume that the company uses only 90% of the activity capacity. The actual costs incurred at this level were as follows: Salaries \ 252,000 Lease 36,000 Crates 200,000 Fuel 20,400 Required: A. Calclulate the budget for this level of activity. B. Prepare a performance report.

Which formula reflects the variable overhead efficiency variance?

An activity-based budgetary approach can be used to emphasize cost increases through the reduction of wasteful activities and improving the efficiency of necessary activities.

For comparing expected costs with actual costs, before-the-fact flexible budgets are more useful than after-the fact flexible budgets.

In an activity framework, what best correlates with controlling costs?

What does the variable overhead efficiency variance claim to measure?

An activity-based budgeting system may help support continuous improvement and process management.

Refer to Cold Cream Company. Prepare an annual budget for the activity, assuming that all of the capacity of the activity is used (use kilometres as the activity driver). Identify which resources you would treat as fixed costs and which would be viewed as variable costs.

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. -Difference between the actual amount and the flexible budget amount

Refer to Jewel Company. What is the fixed overhead spending variance?

Showcase Inc.Showcase Inc's standard variable overhead rate is $7 per direct labour hour, and each unit requires three standard direct labour hours. The company recorded 7,000 actual direct labour hours, $65,000 actual variable overhead costs, and 2,950 units of product manufactured. -Refer to Showcase Inc. What is the total variable overhead variance?