Exam 11: Flexible Budgets and Overhead Analysis

Gallant Company uses standard costing.Overhead is applied to products on the basis of standard direct labor hours for actual production.Data for Gallant follows:

Fixed overhead was budgeted at $200,000,and 25,000 direct labor hours were budgeted.If the fixed overhead volume variance was $8,000 favorable and the fixed overhead spending variance was $6,000 unfavorable,fixed overhead applied must be

The ________________________ measures the change in the actual variable overhead cost that occurs because of efficient (or inefficient)use of direct labor

Figure 11-8. Booth Inc.uses three delivery trucks to transport finished parts from its plant to the plants of its customers.The delivery trucks are obtained through a five-year operating lease that costs $12,000 per year per truck.Booth employs 6 drivers who receive an average salary of $36,000 per year,including benefits.Parts are placed in boxes and placed in the trucks.Each truck holds 20 boxes.The average round-trip distance for a delivery is 40 miles.The boxes are retained by the customers.Each box costs $2.00.Fuel for the trucks costs $1.80 per gallon.A gallon of gas is used every 20 miles.A driver can travel 160 miles in an eight-hour shift.Each driver works 40 hours per week and 50 weeks per year. Refer to Figure 11-8.Prepare an annual budget for the activity,assuming that all of the capacity of the activity is used (use miles as the activity driver).Identify which resources you would treat as fixed costs and which would be viewed as variable costs.

A static budget compares actual cost with budgeted costs.

An activity-based budgetary approach can be used to emphasize cost increases through the reduction of wasteful activities and improving the efficiency of necessary activities.

In a standard cost system,variable overhead is applied

In an activity framework controlling costs translates into

Although general responsibility for the volume variance is usually assigned to the purchasing department,responsibility on occasion may be assigned to the production department.

In an activity framework,controlling costs is equivalent to managing activities.

Figure 11-8. Booth Inc.uses three delivery trucks to transport finished parts from its plant to the plants of its customers.The delivery trucks are obtained through a five-year operating lease that costs $12,000 per year per truck.Booth employs 6 drivers who receive an average salary of $36,000 per year,including benefits.Parts are placed in boxes and placed in the trucks.Each truck holds 20 boxes.The average round-trip distance for a delivery is 40 miles.The boxes are retained by the customers.Each box costs $2.00.Fuel for the trucks costs $1.80 per gallon.A gallon of gas is used every 20 miles.A driver can travel 160 miles in an eight-hour shift.Each driver works 40 hours per week and 50 weeks per year. Refer to Figure 11-8.Assume that the company uses only 90 percent of the activity capacity.The actual costs incurred at this level were:

_________________ are capacity costs acquired in advance of usage.

A budget prepared for a particular level of activity is a(n)

Figure 11-4. Kris Company calculates its predetermined rates using practical volume,which is 325,000 units.The standard cost system allows 3 direct labor hours per unit produced.Overhead is applied using direct labor hours.The total budgeted overhead is $4,260,000,of which $994,000 is fixed overhead.The actual results for the year are as follows: Refer to Figure 11-4.Calculate the variable overhead spending variance.

The following costs were developed for one of the products of Larry Corporation: The following information is available regarding the company's operations for the period: Budgeted fixed overhead for the period is $960,000,and the standard fixed overhead rate is based on expected capacity of 80,000 direct labor hours. Required:

A difference between the actual amount and the flexible budget amount is known as the ____________________.

The _____________________ measures the aggregate effect of differences between the actual variable overhead rate and the standard variable overhead rate.

If actual fixed overhead was $54,000 and there was a $1,300 unfavorable spending variance and a $1,000 unfavorable volume variance,budgeted fixed overhead must have been

The ____________________ is the difference between budgeted fixed overhead and applied fixed overhead.

In an activity flexible budget,the variable cost component typically corresponds to