Question 1

Fixed overhead costs for March for a factory were Salaries of $44,000,depreciation of $10,000,and property taxes of $4,000.Which of the following journal entries would be correct?

Accepted Answer

The answer of Fixed overhead costs for March for a...

Question 2

Lump-sum fixed costs of acquiring capacity decrease automatically if the capacity needed turns out to be less than the capacity acquired.

Accepted Answer

A) True 
 B)False

Question 3

The major challenge when planning fixed overhead is ________.

Accepted Answer

A) calculating total costs 
B) calculating the cost-allocation rate 
C) choosing the appropriate level of capacity 
D) choosing the appropriate planning period

Question 4

Raposa,Inc. ,produces a special line of plastic toy racing cars.Raposa,Inc. ,produces the cars in batches.To manufacture a batch of the cars,Raposa,Inc. ,must set up 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 2015:

Calculate the efficiency variance for variable overhead setup costs.(Round all intermediary calculations two decimal places and your final answer to the nearest whole number. )

Accepted Answer

A) $4,810 unfavorable 
B) $435 unfavorable 
C) $4,810 favorable 
D) $435 favorable

Question 5

When machine-hours are used as an overhead cost-allocation base and annual leasing costs for equipment unexpectedly increase,the most likely result would be to report a(n)________.

Accepted Answer

A) unfavorable variable overhead spending variance 
B) favorable variable overhead efficiency variance 
C) unfavorable fixed overhead flexible-budget variance 
D) favorable production-volume variance

Question 6

If the production planners set the budgeted machine hours standards too loose,one could anticipate there would be a favorable fixed overhead efficiency variance.

Accepted Answer

A) True 
 B)False

Question 7

The variable overhead flexible-budget variance can be further explained by calculating the:

Accepted Answer

A) price variance and the efficiency variance 
B) static-budget variance and sales-volume variance 
C) spending variance and the efficiency variance 
D) sales-volume variance and the spending variance

Question 8

Bristol Fabricators,Inc. ,produces air purifiers in batches.To manufacture a batch of the purifiers,Bristol Fabricators,Inc. ,must set up the machines and assembly line tooling.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 tooling for different models of the air purifiers.
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 2015:

Calculate the spending variance for fixed overhead setup costs.

Accepted Answer

A) $100 unfavorable 
B) $220 unfavorable 
C) $100 favorable 
D) $220 favorable

Question 9

Fixed overhead costs include ________.

Accepted Answer

A) the cost of sales commissions 
B) Leasing of machinery used in a factory 
C) energy costs 
D) indirect materials

Question 10

Compared to variable overhead costs planning,fixed overhead cost planning has an additional strategic issue beyond undertaking only essential activities and efficient operations.That additional requirement is best described as:

Accepted Answer

A) focusing on the highest possible quality 
B) increasing the linearity between total costs and volume of production 
C) choosing the appropriate level of capacity that will benefit the company in the long-run 
D) identifying essential value-adding activities

Question 11

Russo Corporation manufactured 21,000 air conditioners during November.The overhead cost-allocation base is $34.50 per machine-hour.The following variable overhead data pertain to November:
$\begin{array}{lll}&\text { Actual }&\text { Budgeted } \
\text { Production } & 21,000 \text { units } & 23,000 \text { units } \
\text { Machine-hours } & 12,700 \text { hours } & 13,800 \text { hours } \
\text { Variable overhead cost per machine-hour: } & \$ 34,00 & \$ 34,50
\end{array}$
What is the total variable overhead variance?

Accepted Answer

A) $2,900.00 unfavorable 
B) $3,450.00 unfavorable 
C) $2,900.00 favorable 
D) $3,450.00 favorable

Question 12

What is a standard costing system?

Accepted Answer

The answer of What is a standard costing system?...

Question 13

Fixed costs automatically increase or decrease with the level of activity within a relevant range of activity.

Accepted Answer

A) True 
 B)False

Question 14

Davidson Corporation manufactured 53,400 units during September.The following fixed overhead data relates to September:
$\begin{array}{lll}& \text { Actual } & \text { Static Buidget } \
\text { Production } & 53,400 \text { units } & 53,000 \text { units } \
\text { Machine-hours } & 1,960 \text { hours } & 2,120 \text { hours } \
\text { Fixed overhead costs for September } & \$ 86,520 & \$ 86,920
\end{array}$
What is the fixed overhead spending variance?

Accepted Answer

A) $1,056 unfavorable 
B) $400 favorable 
C) $400 unfavorable 
D) $1,056 favorable

Question 15

Which of the following best defines standard costing?

Accepted Answer

A) It is the same as actual costing but done in real time. 
B) It is a system that traces direct cost to output by multiplying actual process or rates by actual quantities of inputs + allocates overhead by on the basis of actual quantities of the allocation base used. 
C) It is a system that traces direct costs to output produced by multiplying the standard prices or rates by the standard quantities of inputs allowed for the actual output produced. 
D) It is a system that allocates overhead costs on the basis of standard overhead cost rates times the actual quantities of the allocation based used.

Question 16

Managers can always view a favorable variable overhead spending variance as desirable.

Accepted Answer

A) True 
 B)False

Question 17

Lancelot Corporation manufactures tennis gear and uses budgeted machine-hours to allocate variable manufacturing overhead.The following information relates to the company's manufacturing overhead data:

$\begin{array}{ll}
\text { Actual output units produced } & 9,800 \text { units } \
\text { Actual machine-hours used } & 28,100 \text { hours } \
\text { Actual variable manufacturing overhead costs } & \$ 250,000
\end{array}$
What is the amount of the budgeted variable manufacturing overhead cost per unit?

Accepted Answer

A) $2.40 per unit 
B) $6.98 per unit 
C) $7.20 per unit 
D) $25.51 per unit

Question 18

Prorated allocation of production-volume variance results in a higher operating income for current year than if the entire favorable production-volume variance were credited to Cost of Goods Sold.

Accepted Answer

A) True 
 B)False

Question 19

Bristol Fabricators,Inc. ,produces air purifiers in batches.To manufacture a batch of the purifiers,Bristol Fabricators,Inc. ,must set up the machines and assembly line tooling.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 tooling for different models of the air purifiers.
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 2015:

Calculate the flexible-budget variance for variable overhead setup costs.(Round all intermediary calculations two decimal places and your final answer to the nearest whole number. )

Accepted Answer

A) $1,178 favorable 
B) $1,222 favorable 
C) $1,222 unfavorable 
D) $1,178 unfavorable

Question 20

Hockey Accessories Corporation manufactured 23,000 duffle bags during March.The following fixed overhead data pertain to March:
$\begin{array}{lll}& \text { Actual } & \text { Static Buidget } \
\text { Production } & 23,000 \text { units } & 23,500 \text { units } \
\text { Machine-hours } & 13,100 \text { hours } & 14,100 \text { hours } \
\text { Fixed overhead cost for March } & \$ 626,100 & \$ 634,500
\end{array}$
What is the amount of fixed overhead allocated to production?

Accepted Answer

A) $621,000 
B) $634,500 
C) $639,711 
D) $612,779

Exam 8: Flexible Budgets, overhead Cost Variances, and Management Control

Fixed overhead costs for March for a factory were Salaries of $44,000,depreciation of $10,000,and property taxes of $4,000.Which of the following journal entries would be correct?

Lump-sum fixed costs of acquiring capacity decrease automatically if the capacity needed turns out to be less than the capacity acquired.

The major challenge when planning fixed overhead is ________.

When machine-hours are used as an overhead cost-allocation base and annual leasing costs for equipment unexpectedly increase,the most likely result would be to report a(n) ________.

If the production planners set the budgeted machine hours standards too loose,one could anticipate there would be a favorable fixed overhead efficiency variance.

The variable overhead flexible-budget variance can be further explained by calculating the:

Fixed overhead costs include ________.

Compared to variable overhead costs planning,fixed overhead cost planning has an additional strategic issue beyond undertaking only essential activities and efficient operations.That additional requirement is best described as:

What is a standard costing system?

Fixed costs automatically increase or decrease with the level of activity within a relevant range of activity.

Which of the following best defines standard costing?

Managers can always view a favorable variable overhead spending variance as desirable.

Prorated allocation of production-volume variance results in a higher operating income for current year than if the entire favorable production-volume variance were credited to Cost of Goods Sold.