Exam 11: Flexible Budgeting and Analysis of Overhead Costs

Rich Company, which uses a standard cost system, budgeted $800,000 of fixed overhead when 50,000 machine hours were anticipated. Other data for the period were: Actual units produced: 10,600 Actual machine hours worked: 51,800 Actual variable overhead incurred: $475,000 Actual fixed overhead incurred: $790,100 Standard variable overhead rate per machine hour: $8.50 Standard production time per unit: 5 hours Rich's fixed-overhead budget variance is:

Which of the following mathematical expressions is found in a typical flexible-budget formula for overhead?

The difference between the total actual factory overhead and the total factory overhead applied to production is the:

Delicious Treats (DT) anticipated that 84,000 process hours would be worked during an upcoming accounting period when, in fact, 92,000 hours were actually worked. One of the company's cost functions is expressed as follows: Y = $16PH + $640,000 where PH is defined as process hours What budgeted dollar amount would appear in DT's static budget and flexible budget for the preceding cost function?

Gourmet Restaurants has the following flexible-budget formula: Y = $13PH + $450,000 where PH is defined as process hours. What is Gourmet's budgeted total cost if its process hours equal 25,000?

Gourmet Restaurants has the following flexible-budget formula: Y = $13PH + $450,000 where PH is defined as process hours. Which of the following statements is (are) true?

Zin, Inc. is planning its cash needs for an upcoming period when 85,000 machine hours are expected to be worked. Activity may drop as low as 78,000 hours if some overdue equipment maintenance procedures are performed; on the other hand, activity could jump to 94,000 hours if one of Zin's major competitors likely goes bankrupt. A flexible cash budget to determine cash needs would best be based on:

A fixed-overhead volume variance would normally arise when:

Hunters, Inc. uses a standard cost system when accounting for its sole product. Manufacturing overhead is applied to production on the basis of process hours. Planned activity is 60,000 process hours per month, which gives rise to the following per-unit standards: Variable overhead: 13 hours at $15 per hour Fixed overhead: 13 hours at $7 per hour During September, 5,100 units were produced and the company incurred the following overhead costs: variable, $942,500; fixed, $429,000. Actual process hours totaled 65,000. Required: A. Calculate the spending and efficiency variances for variable overhead. B. Calculate the budget and volume variances for fixed overhead.

Trois Elles Corporation recently prepared a manufacturing cost budget for an output of 50,000 units, as follows: Direct materials \ 100,000 Direct labor 50,000 Variable overhead 75,000 Fixed overhead 100,000 Actual units produced amounted to 60,000. Actual costs incurred were: direct materials, $110,000; direct labor, $60,000; variable overhead, $100,000; and fixed overhead, $97,000. If Trois Elles evaluated performance by the use of a flexible budget, a performance report would reveal a total variance of:

The budget variance arises from a comparison of actual variable overhead expenditures with budgeted variable overhead costs.

Flexible budgets reflect a company's anticipated costs based on variations in:

Rowe Corporation reported the following variances for the period just ended: Variable-overhead spending variance: $50,000U Variable-overhead efficiency variance: $28,000U Fixed-overhead budget variance: $70,000U Fixed-overhead volume variance: $30,000U If Rowe desires to analyze variances that arose primarily from managers' expenditures in excess of anticipated amounts, the company should focus on variances that total:

Which of the following elements is (are) needed in a straightforward calculation of the variable-overhead spending variance?

Which of the following variances would be useful to help control overhead spending?

Benson Company, which uses a standard cost system, budgeted $600,000 of fixed overhead when 40,000 machine hours were anticipated. Other data for the period were: Actual units produced: 10,000 Standard production time per unit: 3.9 machine hours Fixed overhead incurred: $620,000 Actual machine hours worked: 42,000 Benson's fixed-overhead volume variance is:

Which of the following is not an overhead variance?

Interspace Merchandising anticipated selling 29,000 units of a major product and paying sales commissions of $6 per unit. Actual sales and sales commissions totaled 31,500 units and $182,700, respectively. If the company used a static budget for performance evaluations, Interstate would report a cost variance of:

Which of the following is used in the computation of the variable-overhead spending variance?

The Houston Chamber Orchestra presents a series of concerts throughout the year. Budgeted fixed costs total $300,000 for the concert season; variable costs are expected to average $5 per patron. The orchestra uses flexible budgeting. Required: A. Prepare a flexible budget that shows the expected costs of 8,000, 8,500, and 9,000 patrons. B. Construct the orchestra's flexible budget formula. C. Assume that 8,700 patrons attended concerts during the year just ended, and actual costs were: variable, $42,000; fixed, $307,500. Evaluate the orchestra's financial performance by computing variances for variable costs and fixed costs.