Exam 11: Flexible Budgets and Overhead Analysis

Figure 11-1. Jason,Inc.produces leather purses.Jason has developed a static budget for the first quarter,based on 20,000 direct labor hours.During the quarter,the actual activity was 22,000 direct labor hours.Data for the first quarter are summarized as follows: Refer to Figure 11-1.Comparing the static budget to the actual outcomes,we can say the following:

Discuss the following statement: "Since fixed overhead is,by definition,not related to changes in activity level,then the fixed overhead spending variance is zero."

The total fixed overhead variance is calculated by the following formula:

Flexible budgets are powerful control tools because

The two variances for variable overhead are

Gina Production Company uses a standard costing system.The following information pertains to 2011. The factory overhead rate is based on an activity level of 10,000 units.Standard cost data for 5,000 units is as follows: What is the variable overhead efficiency variance for Gina Production Company?

Figure 11-6. Kyle Company uses forklifts to move materials from the storage area to the production floor.There are five forklifts.They are fully used 20 hours per day (making 8 moves per hour).The company works 320 days per year,running two seven-hour shifts per day.Fork-lift operators work 1,800 hours per year and are paid an annual salary of $56,000. Based on a recent study each forklift uses 0.45 gallons of fuel per move.The cost of fuel is $3.80 per gallon. Refer to Figure 11-6.Prepare a flexible budget formula for the moving materials activity.

The fixed overhead spending variance is affected primarily by changes in production levels.

The major differences between functional and activity-based budgeting are found within which of the following categories?

_______________________ is the difference between the actual variable overhead and applied variable overhead.

Activity flexible budgeting is the prediction of what activity costs will be as related output changes.

Because fixed overhead is made up of many items

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 efficiency variance.

You decide Describe flexible budgeting,including the two types of flexible budgets.

Figure 11-3. Montgomery Company has developed the following flexible budget formulas for its four overhead items: Montgomery normally produces 15,000 units (each unit requires 0.30 direct labor hours); however this year 19,000 units were produced with the following actual costs: Refer to Figure 11-3.Using an after-the-fact flexible budget,calculate the variance for power.

Figure 11-2. Lawson,Inc.produces plastic grocery bags.Lawson has developed a static budget for the month of July based on 8,000 direct labor hours.During the quarter,the actual activity was 9,000 direct labor hours.Data for July are summarized as follows: Refer to Figure 11-2.What is the flexible budget for July?