Exam 13: Relevant Costs for Decision Making

Traveller Company sells one product and uses a standard cost system. Last year the overhead volume variance was zero. Which of the following is correct?

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 German Business Unit is

The Rowe Company uses a standard cost system in which it applies manufacturing overhead to units of product on the basis of machine-hours. During January, the company budgeted to incur £225,000 in manufacturing overhead cost and to operate at a denominator activity level of 25,000 machine-hours. At standard, each unit of finished product requires 3 machine-hours. The following cost and activity were recorded during January. Total actual manufacturing ov erhead cost incurred £217,750 Units of product completed 8,000 Actual machine-hours worked 23,000 The amount of overhead cost that the company applied to Work in Process for January was

Waste or excessive usage of overhead items will show up as part of the variable overhead efficiency variance

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 spending variance for March for the Italian Business Unit is

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 variable portion of the predetermined overhead rate

Which of the following overhead variances would be useful in calling attention to a possible short-term problem in the control of overhead costs: Spending variance Volume variance A. No No B. No Yes C. Yes No D. Yes Yes

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 budget 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 fixed overhead volume variance for March for the Italian Business Unit is

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 - How much overhead was applied to products during 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 variable overhead spending variance for March for the German Business Unit is

The higher the denominator level of activity

Compare and contrast the standard variance analysis approach with that need for ABC.

Discuss the relevance of Sales mix and yield variances. What useful information could they give you?

In a standard costing system where the denominator activity for the predetermined overhead rate is labour-hours, overhead costs are applied to work in process on the basis of actual hours worked

Franklin Glass Works uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of direct labour-hours. Each unit requires two standard hours of labour for completion. The denominator activity for the year was based on budgeted production of 200,000 units. Total overhead was budgeted at £900,000 for the year, and the fixed overhead rate was £3.00 per unit. The actual data pertaining to the manufacturing overhead for the year are presented below: Actual production 198,000 units Actual direct labour-hours 440,000 direct labour-hours Actual variable overhead £352,000 Actual fixed overhead £575,000 - The fixed overhead applied to Franklin's production for the year is

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 spending variance for the period to the nearest pound

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 - If Barrick Company plans to operate at 190,000 direct labour-hours during the next period, the flexible budget would show indirect labour costs of

Franklin Glass Works uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of direct labour-hours. Each unit requires two standard hours of labour for completion. The denominator activity for the year was based on budgeted production of 200,000 units. Total overhead was budgeted at £900,000 for the year, and the fixed overhead rate was £3.00 per unit. The actual data pertaining to the manufacturing overhead for the year are presented below: Actual production 198,000 units Actual direct labour-hours 440,000 direct labour-hours Actual variable overhead £352,000 Actual fixed overhead £575,000 - Franklin's variable overhead spending variance for the year is

When a flexible budget is used, a decrease in the activity level would