Exam 11: Flexible Budgeting and Analysis of Overhead Costs

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:

Theory Enterprises uses a standard cost system and prepared the following budget for May when 24,000 machine hours of activity were anticipated: variable overhead, $48,000; fixed overhead: $240,000.Actual data for May were: The variable-overhead spending and efficiency variances for Theory are:

Holiday Company prepares packed lunches for hikers in Yosemite.Hikers order their lunches by 10 pm and their lunch is left at their hotel room door in a re-useable insulated bag by 5 am the following morning.Holiday budgeted 5,000 lunches for July and each lunch requires 0.50 process hours.Holiday's static budget for electricity for the month is $3,000.Actual sales, process hours, and electricity cost totaled 5,100 lunches, 2,480 PH, and $3,040, respectively.If the company used a flexible budget for performance evaluations, Holiday would report a cost variance of:

Which variance is commonly associated with measuring the cost of under- or over-utilization of plant capacity?

Admac Technologies has a standard variable overhead rate of $4.50 per machine hour, and each unit produced has a standard time allowed of three hours.The company's static budget was based on 46,000 units.Actual results for the year follow. Actual units produced: 42,000 Actual machine hours worked: 120,000 Actual variable overhead incurred: $520,000 Admac's variable-overhead spending variance is:

Flexible budgets reflect a company's anticipated costs based on variations in activity levels.

Which of the following variances would be useful to help control overhead spending?

A flexible budget for 15,000 hours revealed variable manufacturing overhead of $90,000 and fixed manufacturing overhead of $120,000.The budget for 25,000 hours would reveal total overhead costs of $210,000.

Eyelet Industries produces specialized laces for running shoes, hiking shoes, and work boots.Eyelet budgeted $112,500 for variable overhead and $45,000 for fixed overhead when the monthly planned activity was 7,500 process hours to produce 15,000 laces.Actual lace production was 15,400 laces and 7,680 process hours were used.If the company applies overhead using standard costing, how much overhead was applied during the month?

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

The sales-volume variance measures the effect on sales revenue of sales price deviations.

The sales-volume variance equals:

Which of the following is used in the computation of the fixed overhead budget variance?

Both normal- and standard-costing systems use a predetermined overhead rate.

Sugarland Company is using new cost drivers for its accounting system.One driver material handling for unit variable costs and number of inspections for a pool of batch-level costs.Data for the past year follow. What is the total flexible budget dollar amount for the actual level of material handling and actual number of inspections?

A flexible budget for 15,000 hours revealed variable manufacturing overhead of $90,000 and fixed manufacturing overhead of $120,000.The budget for 25,000 hours would reveal total overhead costs of:

The following data pertain to Auxilary Backup Computers for the month of April. Required: Compute the sales-price and sales-volume variances for April.

A fixed-overhead volume variance would normally arise when:

Jerome Copper Company budgeted 126,000 process hours for the month of October when one of the company's cost functions was budgeted to be $2,976,000.The process hours actually worked during October were 135,000. Jerome Copper Company experienced a cost variance of $40,000 unfavorable related to this cost function.If the company's cost function includes a $16 per process hour rate, what is the formula used by Jerome Copper Company to derive its flexible budget?

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.