Question 1

Identifying the reasons for variances is important because it helps managers plan for corrective action.

Accepted Answer

A) True 
 B)False

Question 2

Answer the following question(s)using the information below.Cakewalk Ltd.delivers shoes in batches.The following information pertains to shipping dance shoes in June:
 
-What is the Cakewalk Ltd.rate variance for variable shipping overhead costs?

Accepted Answer

A) $150 U 
B) $150 F 
C) $560 F 
D) $96 F 
E) $96 U

Question 3

An unfavourable variable overhead rate variance can be the result of paying lower prices than budgeted for variable overhead items such as energy.

Accepted Answer

A) True 
 B)False

Question 4

Capacity decisions are considered operating decisions because they involve the long-term acquisition of assets by purchase or lease.

Accepted Answer

A) True 
 B)False

Question 5

Can the variable overhead efficiency variance
a.be computed the same way as the efficiency variance for direct-cost items?
b.be interpreted the same way as the efficiency variance for direct-cost items? Explain.

Accepted Answer

The answer of Can the variable overhead efficiency variance
a.be computed...

Question 6

The chapter shows that variance analysis of overhead costs can be presented in 4-, 3-, 2-, and 1-variance analysis.Explain what each of the variances presented under each method shows about overhead costs.

Accepted Answer

The answer of The chapter shows that variance analysis of...

Question 7

Jael Equipment uses a flexible budget for its indirect manufacturing costs.For 2018 the company anticipated that it would produce 18,000 units with 3,500 machine-hours and 7,200 employee days.The costs and cost drivers were to be as follows:
  During the year, the company processed 20,000 units; worked 7,500 employee days; and, had 4,000 machine hours.The actual costs for 2018 were:
  Required:
a.Prepare the static-budget using the overhead items above and then compute the static-budget variances.
b.Prepare the flexible-budget using the overhead items above and then compute the flexible-budget variances.

Accepted Answer

The answer of Jael Equipment uses a flexible budget for...

Question 8

The production-volume variance

Accepted Answer

A) only pertains to variable overhead costs. 
B) only pertains to fixed overhead costs. 
C) is not applicable in analysis of inventory costs. 
D) pertains to both fixed and variable overhead costs. 
E) equals the rate variance minus the efficiency variance.

Question 9

If Pope Inc.uses standard costing, the overhead allocated to work-in-process is recorded as a

Accepted Answer

A) debit to Manufacturing Overhead Allocated and a credit to Work-in-Process. 
B) debit to Work-in-Process and credit to Manufacturing Overhead Control. 
C) debit to Manufacturing Overhead Allocated and a credit to Manufacturing Overhead Control. 
D) debit to Manufacturing Overhead Control and a credit to Manufacturing Overhead Allocated. 
E) debit to Work-in-Process and a credits to Manufacturing Overhead Allocated.

Question 10

Layer Corporation produces a special line of hockey sticks in batches.To manufacture a batch of the hockey sticks Layer Corporation must setup the machines and moulds.Setup costs are batch-level costs because they are associated with batches rather than individual units of products.A separate Setup Department is responsible for setting up machines and moulds for different styles of hockey sticks.Setup overhead costs consist of some costs that are variable and some costs that are fixed with
respect to the number of setup hours.The following information pertains to January.  Required:
a.Calculate the efficiency variance for variable setup overhead costs.
b.Calculate the rate variance for variable setup overhead costs.
c.Calculate the flexible-budget variance for variable setup overhead costs.
d.Calculate the rate variance for fixed setup overhead costs.
e.Calculate the production-volume variance for fixed setup overhead costs.

Accepted Answer

The answer of Layer Corporation produces a special line of...

Question 11

In variance analysis, fixed manufacturing overhead will have

Accepted Answer

A) an efficiency variance. 
B) a flexible-budget variance. 
C) a rate variance. 
D) a static-budget variance. 
E) no variance, because it is fixed.

Question 12

The production -volume overhead variance is favourable when actual outputs exceed the denominator level.

Accepted Answer

A) True 
 B)False

Question 13

Two of the primary ways to manage variable overhead costs include

Accepted Answer

A) eliminating non-value-added costs and reducing the consumption of cost drivers. 
B) eliminating non-value-added costs and increasing fixed overhead expenses. 
C) reducing the consumption of cost drivers and increasing variable costs. 
D) using more energy-efficient equipment and planning for appropriate capacity levels. 
E) increasing variable costs and eliminating non-value added costs.

Question 14

Davis Company produced 20,000 cases of beer.Machinery usage is 1.5 hours per case.Budget outputs are 22,000 cases.What are the required static budget machine hour inputs and flexible budget machine hour inputs, respectively?

Accepted Answer

A) 30,000 Machine hours, 33,000 Machine hours 
B) 33,000 Machine hours, 30,000 Machine hours 
C) 39,000 Machine hours, 34,000 Machine hours 
D) 34,000 Machine hours, 39,000 Machine hours 
E) 39,000 Machine hours, 33,000 Machine hours

Question 15

Financial measures of performance include

Accepted Answer

A) operating income. 
B) market share. 
C) on-time delivery performance. 
D) customer acquisition rate. 
E) order time to completion.

Question 16

The variable overhead efficiency variance measures the efficiency with which the cost-allocation base is used.

Accepted Answer

A) True 
 B)False

Question 17

Answer the following question(s)using the information below.Jenny's Corporation manufactured 25,000 grooming kits for horses during March.The fixed-overhead cost allocation rate is $20.00 per machine-hour.The following fixed overhead data pertain to March:
 
-What is the amount of fixed overhead allocated to production?

Accepted Answer

A) $120,000 
B) $122,000 
C) $123,000 
D) $125,000 
E) $130,000

Question 18

Delivering value to the customer requires executing activities important to the value proposition.Many of the activities cannot be evaluated by financial measures of performance.List five non-financial measures of performance applicable to the hospitality industry.

Accepted Answer

The answer of Delivering value to the customer requires executing...

Question 19

Answer the following question(s)using the information below.Munoz Inc.produces a special line of plastic toy racing cars in batches.To manufacture a batch of the cars Munoz Inc.must setup the machines and molds.Setup costs are batch-level costs because they are associated with batches rather than individual units of products.A separate Setup Department is responsible for setting up machines and molds for different styles of car.Setup overhead costs consist of some costs that are variable and some costs that are fixed with respect to the number of setup hours.The following information pertains to June 2012:
 
-Calculate the rate variance for variable setup overhead costs.

Accepted Answer

A) $1,900 unfavourable 
B) $1,900 favourable 
C) $400 unfavourable 
D) $600 favourable 
E) $600 unfavourable

Question 20

Variance analysis of variable nonmanufacturing as well as variable manufacturing costs is used for pricing decisions and for decisions about which products to emphasize.

Accepted Answer

A) True 
 B)False

Exam 8: Flexible Budgets, Variances, and Management Control: II

Identifying the reasons for variances is important because it helps managers plan for corrective action.

Answer the following question(s) using the information below.Cakewalk Ltd.delivers shoes in batches.The following information pertains to shipping dance shoes in June: -What is the Cakewalk Ltd.rate variance for variable shipping overhead costs?

An unfavourable variable overhead rate variance can be the result of paying lower prices than budgeted for variable overhead items such as energy.

Capacity decisions are considered operating decisions because they involve the long-term acquisition of assets by purchase or lease.

Can the variable overhead efficiency variance a.be computed the same way as the efficiency variance for direct-cost items? b.be interpreted the same way as the efficiency variance for direct-cost items? Explain.

The chapter shows that variance analysis of overhead costs can be presented in 4-, 3-, 2-, and 1-variance analysis.Explain what each of the variances presented under each method shows about overhead costs.

The production-volume variance

If Pope Inc.uses standard costing, the overhead allocated to work-in-process is recorded as a

In variance analysis, fixed manufacturing overhead will have

The production -volume overhead variance is favourable when actual outputs exceed the denominator level.

Two of the primary ways to manage variable overhead costs include

Davis Company produced 20,000 cases of beer.Machinery usage is 1.5 hours per case.Budget outputs are 22,000 cases.What are the required static budget machine hour inputs and flexible budget machine hour inputs, respectively?

Financial measures of performance include

The variable overhead efficiency variance measures the efficiency with which the cost-allocation base is used.

Delivering value to the customer requires executing activities important to the value proposition.Many of the activities cannot be evaluated by financial measures of performance.List five non-financial measures of performance applicable to the hospitality industry.

Variance analysis of variable nonmanufacturing as well as variable manufacturing costs is used for pricing decisions and for decisions about which products to emphasize.