Exam 11: Flexible Budgets and Overhead Analysis

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 fixed overhead volume variance.

Static budgets are the best benchmarks for preparing a performance report.

An activity-based budgeting system may help support continuous improvement and process management.

Often,the flexible budget formulas are based on ________________ instead of units.

The _____________________ is the difference between actual fixed overhead and applied fixed overhead.

A static budget is

A static budget is a budget for a particular level of activity.

Allen Company produced 44,000 units last year.The information on the actual costs and budgeted costs at actual production of three activities is provided below. Required: Prepare an activity-based performance report for the three activities for the past year.

A static budget is best used to

______________________ is a prerequisite for assigning responsibility.

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.The predetermined fixed overhead rate is

Responsibility for the fixed overhead volume variance is

Responsibility for variable overhead spending and efficiency variances is generally assigned to production departments.

A company had the following information for the year: Required:

Figure 11-7. Larry Miller,controller for Kipling Company,has been instructed to develop a flexible budget for overhead costs.The company produces two types of frozen desserts: Icey and Tasty.The two desserts use common raw materials in different proportions.The company expects to produce 200,000 gallons of each product during the coming year.Icey requires 0.25 direct labor hour per gallon and Tasty requires 0.30.Larry has developed the following fixed and variable costs for each of the four overhead items: Refer to Figure 11-7.Assume that Kipling actually produced 240,000 gallons of Icey and 200,000 of Tasty.The actual overhead costs incurred were: Required:

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 applied fixed overhead.

The major differences between activity-based budgeting and traditional budgeting are found in

The variable overhead spending variance is conceptually identical to the price variances of materials and labor.

Activity-based budgeting focuses on estimating the costs of activities rather than the costs of departments and plants.

For a static activity budget in a company already using an ABC or ABM system,the activities within the organization must be identified.