Exam 11: Flexible Budgeting and Analysis of Overhead Costs

Use the following information to answer the following Questions The Step Company has the following information for the year just ended: -The Step Company's sales-price variance is:

Which of the following is not an overhead variance?

Strongheart Enterprises anticipated selling 27,000 units of a major product and paying sales commissions of $6 per unit. Actual sales and sales commissions totaled 27,500 units and $171,400, respectively. If the company used a flexible budget for performance evaluations, Strongheart would report a cost variance of:

Use the following information to answer the following Questions Seven Falls Cuisines has the following flexible-budget formula: Y = $13PH + $450,000 where PH is defined as process hours. -What is Seven Falls' budgeted total cost if its process hours equal 25,000?

Which of the following statements is/are correct concerning the application of overhead in a standard costing system driven by process hours?

A flexible budget for 15,000 hours revealed variable manufacturing overhead of $90,000 and fixed manufacturing overhead of $120,000. The budget for 20,000 hours would reveal total overhead costs of:

Briefly explain the nature of the fixed-overhead volume variance. Be sure to address the issue of capacity utilization in your response.

The overhead cost performance report presents itemized variances along with actual and budgeted costs for each overhead item.

Zhou, Inc. is planning its cash needs for an upcoming period when 85,000 machine hours are expected to be worked. Activity may drop as low as 78,000 hours if some overdue equipment maintenance procedures are performed; on the other hand, activity could jump to 94,000 hours if one of Zhou's major competitors likely goes bankrupt. A flexible cash budget to determine cash needs would best be based on:

When actual variable cost per unit equals standard variable cost per unit, the difference between actual and budgeted contribution margin is explained by a combination of which two variances?

A production manager was recently given a performance report that showed a sizable unfavorable variable-overhead efficiency variance. The manager was puzzled as to how the department could be inefficient in the use/incurrence of this cost. Required: Briefly explain the nature of this variance to the manager. Does the variance really have much to do with variable overhead efficiencies or inefficiencies? Discuss.

Chong Corporation recently prepared a manufacturing cost budget for an output of 50,000 units, as follows: Actual units produced amounted to 60,000. Actual costs incurred were: direct materials, $110,000; direct labor, $60,000; variable overhead, $100,000; and fixed overhead, $97,000. If Chong evaluated performance by the use of a flexible budget, a performance report would reveal a total variance of:

What will cause the variable-overhead efficiency variance?

The sales-price variance is the difference between the actual and budgeted sales prices multiplied by the actual sales volume.

Which of the following mathematical expressions is found in a typical flexible-budget formula for overhead?

Knee-Jerk Industries operates a delivery service for local restaurants, delivering call-in, to-go meals for restaurant customers. Variable overhead costs are applied at the budgeted rate of $3 per driving hour. The typical roundtrip takes a driver 45 minutes to complete. Actual results for March follow. Number of roundtrips run: 1,560 Hours of delivery time: 1,250 Variable overhead cost incurred: $3,450 Knee-Jerk uses flexible budgets and variance analysis to monitor performance. Required: A. Prepare a flexible-budget performance report that shows (1) actual variable overhead, (2) the amount of variable overhead that should have been incurred for the number of roundtrips taken, and (3) the variance between these amounts. B. Compute the company's variable-overhead spending and efficiency variances. C. Compare the variances that you computed in requirements "A" and "B," and comment on your findings.

Canister Industries uses labor hours to apply variable overhead to production. If the company's workers were very inefficient during the period, which of the following statements would be true about the variable-overhead efficiency variance?

Assume that machine hours drive the cost for overhead. The difference between the actual variable overhead incurred and the applied variable overhead is the:

Pizzazz Pizza Inc.’s activity based flexible budget is as follows: Pizzazz’s activity for September is as follows: Required: 1. Determine the flexible budgeted cost for each of the following: a. Indirect material b. Utilities c. Inspection d. Test kitchen e. Material handling f. Total overhead cost 2.Compute the variance for setup cost during the month, assuming that the actual setup cost was $3,000: Using the activity-based flexible budget.

Barrington Industries anticipated selling 29,000 units of a major product and paying sales commissions of $6 per unit. Actual sales and sales commissions totaled 31,500 units and $182,700, respectively. If the company used a static budget for performance evaluations, Barrington would report a cost variance of: