Question 1

Flexible budgets only reflect changes in the volume of activity in the variable overhead estimates.

Accepted Answer

A) True 
 B)False

Question 2

ABB works in the reverse way to ABC as under ABB, once the sales volume and production volume have been estimated then the demand for activities can be determined.

Accepted Answer

A) True 
 B)False

Question 3

Assume the number of machine hours is the cost driver for variable overhead. The difference between the actual variable overhead and the flexible budget for variable overhead (based on standard machine hours allowed for actual output) is the

Accepted Answer

A)  volume variance. 
B)  net overhead variance. 
C)  efficiency variance. 
D)  sum of variable spending and efficiency variances. 
A)  volume variance. 
B)  net overhead variance. 
C)  efficiency variance. 
D)  sum of variable spending and efficiency variances.

Question 4

Bozo Pty Ltd uses a standard costing system for product costing. The company uses direct labour hours as the cost driver to apply overhead costs. The following amounts were budgeted for the year:  
Calculate the total standard overhead rate per direct labour hour (variable and fixed).

Accepted Answer

A)  $0.125 
B)  $4.06 
C)  $8.00 
D)  $8.20 
A)  $0.125 
B)  $4.06 
C)  $8.00 
D)  $8.20

Question 5

When a flexible budget is used, a decrease in the actual production level within a range of activity would

Accepted Answer

A)  decrease variable cost per unit. 
B)  decrease total variable costs. 
C)  increase variable cost per unit. 
D)  decrease fixed cost per unit. 
A)  decrease variable cost per unit. 
B)  decrease total variable costs. 
C)  increase variable cost per unit. 
D)  decrease fixed cost per unit.

Question 6

Overhead cost performance report
Explain how a manager can use an overhead cost performance report to investigate the underlying causes of significant overhead variances.

Accepted Answer

Using these flexible budgets, we can cal

Question 7

In the accounting recording system, unfavourable variances are recorded in a similar way to revenue and favourable variances are recorded in a similar way to expenses.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following criticisms of standard costing systems is false?

Accepted Answer

A)  Variances concentrate on results rather than causes. 
B)  Standard costing systems concentrate on activities. 
C)  Standard costing systems place too much emphasis on direct labour costs and efficiency. 
D)  Standard costing systems are too narrowly defined. 
A)  Variances concentrate on results rather than causes. 
B)  Standard costing systems concentrate on activities. 
C)  Standard costing systems place too much emphasis on direct labour costs and efficiency. 
D)  Standard costing systems are too narrowly defined.

Question 9

When calculating the predetermined manufacturing overhead rates using direct labour hours as the cost driver the formula is 'total overhead divided by total direct labour hours'. This rate is applied to both the variable overhead and the fixed overhead.

Accepted Answer

A) True 
 B)False

Question 10

Carvelle Cabinets set the following standard cost per unit for 2008.  
The standards were set based on a capacity of 20 000 machine hours.
During the year, 5100 units were produced.  
What was Carvelle's fixed overhead volume variance?

Accepted Answer

A)  $4000 favourable 
B)  $1000 unfavourable 
C)  $2000 favourable 
D)  $4000 unfavourable 
A)  $4000 favourable 
B)  $1000 unfavourable 
C)  $2000 favourable 
D)  $4000 unfavourable

Question 11

Flexible overhead budgets are based on standard input measures instead of units of output in a multiproduct firm.

Accepted Answer

A) True 
 B)False

Question 12

One of the shortcomings of ABC is that it is not easy to account for common costs shared by more than one activity.

Accepted Answer

A) True 
 B)False

Question 13

Why is the budget variance the real control variance, for fixed overhead?

Accepted Answer

A)  It compares budgeted expenditures with budgeted fixed overhead costs. 
B)  It compares actual expenditures with budgeted fixed overhead costs. 
C)  It compares actual expenditures with budgeted variable overhead costs. 
D)  It compares the static budget with the flexible budget. 
A)  It compares budgeted expenditures with budgeted fixed overhead costs. 
B)  It compares actual expenditures with budgeted fixed overhead costs. 
C)  It compares actual expenditures with budgeted variable overhead costs. 
D)  It compares the static budget with the flexible budget.

Question 14

Carvelle Cabinets set the following standard cost per unit for 2008.  
The standards were set based on a capacity of 20 000 machine hours.
During the year, 5100 units were produced.  
What was the total amount of under/overapplied overhead for the firm?

Accepted Answer

A)  $3550 under 
B)  $3550 over 
C)  $3550 debit 
D)  Both A and C 
A)  $3550 under 
B)  $3550 over 
C)  $3550 debit 
D)  Both A and C

Question 15

Which of the following cannot cause an unfavourable variable overhead efficiency variance?

Accepted Answer

A)  Using more direct labour hours or direct machine hours than the standard quantity, given actual output. 
B)  Higher than expected production accomplished in less than the standard machine hours allowed. 
C)  Using more of the variable overhead item, such as electricity, than the standard amount allowed. 
D)  All of the given answers 
A)  Using more direct labour hours or direct machine hours than the standard quantity, given actual output. 
B)  Higher than expected production accomplished in less than the standard machine hours allowed. 
C)  Using more of the variable overhead item, such as electricity, than the standard amount allowed. 
D)  All of the given answers

Question 16

Master Products has the following information at the end of the year.  
What is Master Product's sales volume variance?

Accepted Answer

A)  $10 000 unfavourable 
B)  $4000 unfavourable 
C)  $4400 favourable 
D)  $3000 unfavourable 
A)  $10 000 unfavourable 
B)  $4000 unfavourable 
C)  $4400 favourable 
D)  $3000 unfavourable

Question 17

The budgeted costs per unit for a company are fixed costs $2 per unit; variable costs $3 per unit. What is the expected cost of producing 1005 units?

Accepted Answer

A)  $2013 
B)  $5025 
C)  $3017 
D)  Insufficient information to determine 
A)  $2013 
B)  $5025 
C)  $3017 
D)  Insufficient information to determine

Question 18

Which of the following statements is false?

Accepted Answer

A)  Standard costing systems do not indicate the causes of the variances. 
B)  Standard costing systems enable the production of timely performance reports. 
C)  Standard costing systems may create undesirable behaviour. 
D)  Standard costing systems tend to forget the importance of product quality and customer service. 
A)  Standard costing systems do not indicate the causes of the variances. 
B)  Standard costing systems enable the production of timely performance reports. 
C)  Standard costing systems may create undesirable behaviour. 
D)  Standard costing systems tend to forget the importance of product quality and customer service.

Question 19

A favourable overhead efficiency variance is the result of

Accepted Answer

A)  actual outputs exceeding actual inputs within the framework of a flexible budget. 
B)  standard outputs allowed for actual inputs exceeding the flexible budget inputs. 
C)  the flexible budget for actual input exceeding the actual costs incurred. 
D)  standard inputs allowed for actual outputs achieved exceeding the actual inputs within the framework of a flexible budget. 
A)  actual outputs exceeding actual inputs within the framework of a flexible budget. 
B)  standard outputs allowed for actual inputs exceeding the flexible budget inputs. 
C)  the flexible budget for actual input exceeding the actual costs incurred. 
D)  standard inputs allowed for actual outputs achieved exceeding the actual inputs within the framework of a flexible budget.

Question 20

Felter Company sold 8000 units of Product X last month. The actual production level was 9000 units. The budget selling price was $10, but the sales manager had to discount the products by 20 per cent before managing to sell these units. The sales price variance is

Accepted Answer

A)  $16 000 unfavourable. 
B)  $20 000 unfavourable. 
C)  $16 000 favourable. 
D)  $20 000 favourable. 
A)  $16 000 unfavourable. 
B)  $20 000 unfavourable. 
C)  $16 000 favourable. 
D)  $20 000 favourable.

Exam 11: Standard Costs for Control: Flexible Budgets and Manufacturing Overhead

Flexible budgets only reflect changes in the volume of activity in the variable overhead estimates.

ABB works in the reverse way to ABC as under ABB, once the sales volume and production volume have been estimated then the demand for activities can be determined.

Assume the number of machine hours is the cost driver for variable overhead. The difference between the actual variable overhead and the flexible budget for variable overhead (based on standard machine hours allowed for actual output) is the

Bozo Pty Ltd uses a standard costing system for product costing. The company uses direct labour hours as the cost driver to apply overhead costs. The following amounts were budgeted for the year: Calculate the total standard overhead rate per direct labour hour (variable and fixed).

When a flexible budget is used, a decrease in the actual production level within a range of activity would

Overhead cost performance report Explain how a manager can use an overhead cost performance report to investigate the underlying causes of significant overhead variances.

In the accounting recording system, unfavourable variances are recorded in a similar way to revenue and favourable variances are recorded in a similar way to expenses.

Which of the following criticisms of standard costing systems is false?

When calculating the predetermined manufacturing overhead rates using direct labour hours as the cost driver the formula is 'total overhead divided by total direct labour hours'. This rate is applied to both the variable overhead and the fixed overhead.

Carvelle Cabinets set the following standard cost per unit for 2008. The standards were set based on a capacity of 20 000 machine hours. During the year, 5100 units were produced. What was Carvelle's fixed overhead volume variance?

Flexible overhead budgets are based on standard input measures instead of units of output in a multiproduct firm.

One of the shortcomings of ABC is that it is not easy to account for common costs shared by more than one activity.

Why is the budget variance the real control variance, for fixed overhead?

Carvelle Cabinets set the following standard cost per unit for 2008. The standards were set based on a capacity of 20 000 machine hours. During the year, 5100 units were produced. What was the total amount of under/overapplied overhead for the firm?

Which of the following cannot cause an unfavourable variable overhead efficiency variance?

Master Products has the following information at the end of the year. What is Master Product's sales volume variance?

The budgeted costs per unit for a company are fixed costs $2 per unit; variable costs $3 per unit. What is the expected cost of producing 1005 units?

Which of the following statements is false?

A favourable overhead efficiency variance is the result of

Felter Company sold 8000 units of Product X last month. The actual production level was 9000 units. The budget selling price was $10, but the sales manager had to discount the products by 20 per cent before managing to sell these units. The sales price variance is

Management Accounting: Information for Creating Value and Managing Resources

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