Exam 11: Flexible Budgets and Overhead Analysis

Allegiant Company uses standard costing. Overhead is applied to products on the basis of standard direct labour hours for actual production. The company provided the following data: Standard direct labour hours allowed for actual output 100,000 Actual direct labour hours 125,000 Direct labour hours budgeted in the master budget 140,000 Budgeted total fixed overhead cost \ 280,000 Actual fixed overhead cost \ 300,000 Required: A. Calculate the fixed overhead rate. B. Calculate the total fixed overhead applied to production. C. Calculate the fixed overhead spending variance. D. Calculate the fixed overhead volume variance. E. Calculate the total fixed overhead variance.

Which budget should be used to determine managerial effectiveness?

Bridgestone Company Bridgestone Company has developed the following flexible budget formulas for its four overhead items: Variable rate per Overhead item Fixed cost direct labour hour Maintenance \ 8,000 \ 2.00 Power \ 2,000 \ 0.40 The company normally produces 10,000 units (each unit requires 0.10 direct labour hours); however, this year 15,000 units were produced with the following actual costs: Overhead item Actual costs Maintenance \ 14,000 Power \ 3,600 Equipment lease \ 5,000 -Refer to Bridgestone Company. What is the after-the-fact overhead budget for the actual level of activity?

What is characteristic of the fixed overhead spending variance?

What is the variable overhead spending variance?

Responsibility for variable overhead spending and efficiency variances is generally assigned to the purchasing manager.

In an activity framework, controlling costs results from managing activities.

What is one of the results of fixed overhead being made up of many items?

The fixed overhead volume variance is often interpreted as a measure of capacity utilization.

Refer to Lifter Company. Which of the following is a flexible budget formula for the moving materials activity?

Although general responsibility for the fixed overhead volume variance is usually assigned to the production department, responsibility on occasion may be assigned to the purchasing department.

Newby Company Newby Company uses an activity-based costing system. Four activities have been identified. The setup activity uses the number of setups as its cost driver. The following budget information is available for this activity: Fixed costs per month \ 240,000 Variable cost per setup \ 5,400 The company expects to perform 25 setups in June. -Refer to Newby Company. Suppose the company expects 25 setups in June. What would be the total budgeted costs of the setup activity?

Fixed overhead was budgeted at $85,000, and 10,000 direct labour hours were budgeted. Suppose the fixed overhead volume variance was $5,000 unfavourable and the fixed overhead spending variance was $1,200 favourable. How much fixed overhead was applied?

Which of the following may cause an unfavourable variable overhead spending variance?

Refer to Cold Cream Company. Assume the ccompany actually produced 240,000 L of Icy and 200,000 of Tasty. The actual overhead costs incurred were: Maintenance \ 192,000 Power 181,700 Indirect labour 649,500 Rent 54,000 Required: A. Prepare a performance report for the period. B. Based on the report, would you judge any of the variances to be significant? Discuss some possible reasons for the variances.

Activity flexible budgeting is the prediction of what activity costs will be as related output changes.

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 that specifies costs for a range of activity

Which relationship represents fixed overhead budgeted at the beginning of the year?

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 report that compares actual with planned costs

Bridgestone Company Bridgestone Company has developed the following flexible budget formulas for its four overhead items: Variable rate per Overhead item Fixed cost direct labour hour Maintenance \ 8,000 \ 2.00 Power \ 2,000 \ 0.40 The company normally produces 10,000 units (each unit requires 0.10 direct labour hours); however, this year 15,000 units were produced with the following actual costs: Overhead item Actual costs Maintenance \ 14,000 Power \ 3,600 Equipment lease \ 5,000 -Refer to Bridgestone Company. What is the variance for maintenance when using an after-the-fact flexible budget?