Exam 13: Relevant Costs for Decision Making

An unfavourable volume variance means that a firm operated at an activity level that was above the activity level planned for the period

Fixed costs should never be considered when evaluating how well a manager has controlled costs

Overhead is applied to work in process in a standard costing system by

A manufacturing company has a standard costing system based on direct labour-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity 3,700 DLHs Overhead costs at the denominator activity level: Variable overhead cost £28,490 Fixed owerhead cost £47,545 The following data pertain to operations for the most recent period: Actual hours 3,900 DLHs Standard hours 3,900allowed for the actual output 3,850 DLHs Actual total variable overhead cost £29,445 Actual total fixed overhead cost £47,995 -What was the variable overhead efficiency variance for the period to the nearest pound

The Euro Company wants to compare the performance of three business units. All the business units produce the same product with similar output per month. The company uses a flexible budget to plan and control manufacturing overhead costs. Overhead costs are applied to products on the basis of direct labour-hours. The standard cost card shows that 5 direct labour-hours are required per unit of product. Phelps Company had the following budgeted and actual data for March: Actual Budgeted Units produced 11,000 10,000 Directlabour-hours 65,000 60,000 Variable overhead costs £84,000 £80,000 Fiked overhead costs £44,000 £40,000 $\text { *Represents the denom inator activity for the month. }$ German Business Unit Actual Budgeted Units produced 11,000 10,000 Directlabour-hours 65,000 60,000 Variable overhead costs £84,000 £80,000 Fiked overhead costs £44,000 £40,000 $\text { *Represents the denom inator activity for the month. }$ French Business Unit Actual Budgeted Units produced 11,000 10,000 Directlabour-hours 65,000 60,000 Variable overhead costs £84,000 £80,000 Fiked overhead costs £44,000 £40,000 $\text { *Represents the denom inator activity for the month. }$ - The fixed overhead volume variance for March for the French Business Unit is

The Euro Company wants to compare the performance of three business units. All the business units produce the same product with similar output per month. The company uses a flexible budget to plan and control manufacturing overhead costs. Overhead costs are applied to products on the basis of direct labour-hours. The standard cost card shows that 5 direct labour-hours are required per unit of product. Phelps Company had the following budgeted and actual data for March: Actual Budgeted Units produced 11,000 10,000 Directlabour-hours 65,000 60,000 Variable overhead costs £84,000 £80,000 Fiked overhead costs £44,000 £40,000 $\text { *Represents the denom inator activity for the month. }$ German Business Unit Actual Budgeted Units produced 11,000 10,000 Directlabour-hours 65,000 60,000 Variable overhead costs £84,000 £80,000 Fiked overhead costs £44,000 £40,000 $\text { *Represents the denom inator activity for the month. }$ French Business Unit Actual Budgeted Units produced 11,000 10,000 Directlabour-hours 65,000 60,000 Variable overhead costs £84,000 £80,000 Fiked overhead costs £44,000 £40,000 $\text { *Represents the denom inator activity for the month. }$ -The variable overhead efficiency variance for March for the French Business Unit is

Barrick Company has established a flexible budget for manufacturing overhead based on direct labour-hours. Total budgeted costs at 200,000 direct labour-hours are as follows $\text { Variable costs (total): }$ Packing supplies £120,000 Indirect labour £180,000 Fixed costs (total): Utilities £100,000 Rent £40,000 Insurance £20,000 -The flexible budget for factory overhead would show that the variable factory overhead cost per direct labour-hour is

In a standard cost system, the volume variance will be unfavourable when

A company has a standard cost system in which fixed and variable manufacturing overhead costs are applied to products on the basis of direct labour-hours. The company's choice of the denominator level of activity affects the fixed portion of the predetermined overhead rate

The Judd Company uses a standard cost system in which it applies manufacturing overhead to units of product on the basis of machine-hours. During May, the company budgeted £320,000 in manufacturing overhead cost at a denominator activity of 20,000 machine-hours. At standard, each unit of finished product requires 4 machine-hours. The following cost and activity was recorded during May: Total actual manufacturing ov erhead cost incurred £335,500 Units of product completed 4,700 Actual machine-hours worked 21,000 The amount of overhead cost that the company applied to Work in Process for May was

If the fixed overhead volume variance is unfavourable, too much has been spent on fixed overhead items

Wicks Company has established a flexible budget for manufacturing overhead based on direct labour-hours. Budgeted costs at 100,000 direct labour-hours are as follows: Variable costs (total): Packing supplies £70,000 Indirect labour £90,000 Fixed costs (total): Utilities £50,000 Rent £20,000 Insurance £10,000 - If Wicks Company plans to operate at 90,000 direct labour-hours during the next period, the flexible budget would show indirect labour costs of

The fixed overhead volume variance will be unfavourable if production volume is less than sales volume

A company has a standard cost system in which fixed and variable manufacturing overhead costs are applied to products on the basis of direct labour-hours. The company's choice of the denominator level of activity affects the fixed overhead budget variance

Dean Company uses a standard cost system in which it applies manufacturing overhead to units of product on the basis of direct labour-hours. The company is preparing a flexible budget for next year and the following data are available: At capacity Direct labour-hours 60,000 Variable factory overhead £150,000 Fixed factory overhead £240,000 Assume that Dean's denominator activity for the year is set at 80% of capacity. What would be the total predetermined overhead rate, based on direct labour-hours, for the year

A manufacturing company has a standard costing system based on direct labour-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity 3,700 DLHs Overhead costs at the denominator activity level: Variable overhead cost £28,490 Fixed owerhead cost £47,545 The following data pertain to operations for the most recent period: Actual hours 3,900 DLHs Standard hours 3,900allowed for the actual output 3,850 DLHs Actual total variable overhead cost £29,445 Actual total fixed overhead cost £47,995 -The overhead spending variance contains price but not quantity elements

A static budget

The budget variance represents the difference between the actual fixed overhead cost incurred during a period and the budgeted fixed overhead cost

Barrick Company has established a flexible budget for manufacturing overhead based on direct labour-hours. Total budgeted costs at 200,000 direct labour-hours are as follows $\text { Variable costs (total): }$ Packing supplies £120,000 Indirect labour £180,000 Fixed costs (total): Utilities £100,000 Rent £40,000 Insurance £20,000 -At an activity level of 170,000 direct labour-hours, the flexible budget for factory overhead would show the budgeted amount for utilities as

The Euro Company wants to compare the performance of three business units. All the business units produce the same product with similar output per month. The company uses a flexible budget to plan and control manufacturing overhead costs. Overhead costs are applied to products on the basis of direct labour-hours. The standard cost card shows that 5 direct labour-hours are required per unit of product. Phelps Company had the following budgeted and actual data for March: Actual Budgeted Units produced 11,000 10,000 Directlabour-hours 65,000 60,000 Variable overhead costs £84,000 £80,000 Fiked overhead costs £44,000 £40,000 $\text { *Represents the denom inator activity for the month. }$ German Business Unit Actual Budgeted Units produced 11,000 10,000 Directlabour-hours 65,000 60,000 Variable overhead costs £84,000 £80,000 Fiked overhead costs £44,000 £40,000 $\text { *Represents the denom inator activity for the month. }$ French Business Unit Actual Budgeted Units produced 11,000 10,000 Directlabour-hours 65,000 60,000 Variable overhead costs £84,000 £80,000 Fiked overhead costs £44,000 £40,000 $\text { *Represents the denom inator activity for the month. }$ -The fixed overhead volume variance for March for the German Business Unit is