Exam 17: Flexible Budgets, Overhead Cost Management, and Activity-Based Budgeting

Under standard backflush costing all standard costs are initially charged to Cost of Goods Sold and, if any inventories exist at the end of the period, a portion of the current period standard costs originally charged to Cost of Goods Sold is transferred to the respective inventory accounts as an end-of-period adjustment.

In a multi-product firm, activity levels for a flexible budget are based on

Use the following to answer questions: Arco Inc.'s fixed overhead budget is $400,000; the standard fixed overhead rate is $5 per direct labor hour or $10 per unit of product. During the immediate past year Arco produced 45,000 units of product, incurred $385,000 of fixed overhead, and used 82,500 direct labor hours. -How much is Arco's fixed overhead volume variance?

A flexible budget is not based on only one level of activity.

The real cost of underutilizing productive capacity is due to the lost contribution margins of the products that are not produced when capacity is underutilized.

A company based its fixed overhead cost allocation upon the production of 1,000,000 units, but actually produced 900,000 units. The company should expect a positive or unfavorable fixed-overhead volume variance.

Use the following to answer questions: The WriteAll Company sells two types of pens - rollerball and ballpoint - to specialty retailers. The company budgets by month in order to anticipate the peak demands occurring at various times during the year. The following information is available for July. -How much is the total contribution-margin sales-volume variance?

Use the following to answer questions: Grachev Co. manufactures hedge clippers, its only product. The following information relates to the company's manufacturing overhead for an output of 20,000 clippers: -What is the variable manufacturing overhead total variance?

Use the following to answer questions: Riyyad Co. produces its only product in a highly automated process, expected monthly production is 50,000 units. The required direct material costs $0.85 per unit. Manufacturing overhead costs are $75,000 per month and are allocated based on units of production. -What is the total flexible budget for 50,000 units and 25,000 units, respectively?

The individual products' mix variance components convey a meaningful interpretation for management's analysis.

The Campus Express bookstore ordered T-shirts and bookbags with the university log in September. The bookstore expected to sell 2,000 T-shirts and actually sold 1,800; the planned selling price was $25 while the actual was $20. The planned sales of bookbags was 1,000 at a price of $75. The actual sales were 1,200 at a price of $60. What was the revenue sales-volume variance for September?

Menendez Incorporated is trying to decide which method of analyzing its overhead variances provides the most useful information. The following information is available from the records for April: Required: compute the overhead variances using the following approaches; (1) four-way analysis (2) three-way analysis (3) two-way analysis

The _____measures the differences between the actual amount of variable overhead incurred and the actual quantity of variable overhead at the budgeted amount.

The production V.P. has asked Mr. Alul to account for his overhead variances for the month. Required: Explain the meaning of the two variable overhead variances and Mr. Alul's responsibility for them. Alexky Company uses labor hours to allocate its variable overhead costs. Mr. Alul, the production manager has been told that his direct labor and variable overhead variances for the past month were as follows:

Which of the following is not a step in the preparation of a flexible budget?

Which of the following variances would not be included in an Overhead Cost Performance Report?

Use the following to answer questions: The WriteAll Company sells two types of pens - rollerball and ballpoint - to specialty retailers. The company budgets by month in order to anticipate the peak demands occurring at various times during the year. The following information is available for July. -How much is the total contribution-margin sales-quantity variance?

Which of the following is not important to managers when analyzing revenue sales-volum variance information?

Jewel Company produces jewelry for a specialized market. The fixed overhead costs for the coming year are budgeted at $705,000 and are allocated on the basis of good units completed. It is expected that 300,000 units will be completed during the year. Good units average 94 percent of total production. During the month of July 30,000 units were produced. The actual fixed overhead per good unit averaged $2.78. Required (Where necessary, round variances to nearest dollar): (1) Determine the fixed overhead rate for the year. (2) Determine the fixed overhead budget variance for the month of July, (3) Determine the fixed overhead volume variance for the month of July.

The Direct Material Inventory account had an ending balance of $10,000 If the company prorates the overhead variance to the ending balances in the appropriate accounts, how much is the balance in Work-in-Process Inventory after proration? [Appendix A] Hammid Co ended this year with a total overhead variance of $50,000 favorable. The records showed the following overhead amounts in the relevant accounts: