Question 1

A primary difference between overhead costs in manufacturing companies and non-manufacturing companies is that

Accepted Answer

A)  GAAP requires both types of companies to use the same treatment for manufacturing costs 
B)  Only non-manufacturing companies must include overhead costs as inventoriable costs for financial reporting purposes 
C)  Variable and fixed manufacturing costs are not inventoriable for purposes of financial reporting 
D)  Only manufacturing companies must include overhead costs as inventoriable costs for financial reporting purposes 
A)  GAAP requires both types of companies to use the same treatment for manufacturing costs 
B)  Only non-manufacturing companies must include overhead costs as inventoriable costs for financial reporting purposes 
C)  Variable and fixed manufacturing costs are not inventoriable for purposes of financial reporting 
D)  Only manufacturing companies must include overhead costs as inventoriable costs for financial reporting purposes

Question 2

Fixed factory overhead was budgeted at $350,000 and 50,000 machine hours. If the fixed overhead volume variance was $5,000 unfavorable and the budget variance was $4,000 favorable, fixed overhead applied must have been:

Accepted Answer

A)  $354,000 
B)  $346,000 
C)  $345,000 
D)  $349,000 
A)  $354,000 
B)  $346,000 
C)  $345,000 
D)  $349,000

Question 3

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 budget variance?

Accepted Answer

A)  $15,000 unfavorable 
B)  $15,000 favorable 
C)  $50,000 unfavorable 
D)  $50,000 favorable 
A)  $15,000 unfavorable 
B)  $15,000 favorable 
C)  $50,000 unfavorable 
D)  $50,000 favorable

Question 4

Doyle Company uses machine hours to allocate variable manufacturing overhead to its product. The expected production for the coming period is 500 batches using 500 machine hours. The existing machine uses 12 KWH per machine hour at a cost of $8 per KWH. The company is considering purchasing a new machine that will use only 9 KWH per machine hour. Using the variable overhead spending and efficiency variances, how much would the company be willing to pay for this new machine?

Accepted Answer

A)  $ 180 
B)  $10,000 
C)  $11,000 
D)  $12,000 
A)  $ 180 
B)  $10,000 
C)  $11,000 
D)  $12,000

Question 5

Which of the following statements about flexible budgets is not true?

Accepted Answer

A)  The flexible budget is valid within the firm's relevant range of activity 
B)  A flexible budget is based on a simplified view of a firm's overhead cost structure 
C)  A flexible budget is not based on one particular level of activity 
D)  All of the above statements are true 
A)  The flexible budget is valid within the firm's relevant range of activity 
B)  A flexible budget is based on a simplified view of a firm's overhead cost structure 
C)  A flexible budget is not based on one particular level of activity 
D)  All of the above statements are true

Question 6

In a multiproduct firm, units of output usually are not a meaningful measure because one would have to add numbers of unlike units.

Accepted Answer

A) True 
 B)False

Question 7

Briefly discuss how standard cost variances can be disposed of and why one might choose one approach over another.

Accepted Answer

The simplest procedure for closing out v

Question 8

The variable-overhead spending variance is the real control variance for variable overhead.

Accepted Answer

A) True 
 B)False

Question 9

The ________is the difference between the budgeted fixed manufacturing overhead and the fixed overhead applied to the actual output units produced (or standard input units allowed for actual output).

Accepted Answer

A)  Efficiency variance 
B)  Spending variance 
C)  Volume variance 
D)  Yield variance 
A)  Efficiency variance 
B)  Spending variance 
C)  Volume variance 
D)  Yield variance

Question 10

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 budgeted manufacturing overhead rate?

Accepted Answer

A)  $1.00 per unit 
B)  $1.50 per unit 
C)  $0.85 per unit 
D)  $0.67 per unit 
A)  $1.00 per unit 
B)  $1.50 per unit 
C)  $0.85 per unit 
D)  $0.67 per unit

Question 11

Total budgeted monthly overhead cost can be determined by means of the following formula: (budgeted variable-overhead cost per unit x total activity units) + budgeted fixed-overhead cost per month.

Accepted Answer

A) True 
 B)False

Question 12

The company closes all variances to cost of goods sold. Required:
(1) Compute the four variances for a four-way analysis.
(2) Prepare all necessary journal entries to close overhead into cost of goods sold. Keep the entries for fixed and variable items separate.
Atherton Company uses a four-way analysis for overhead. The following information is available for August for overhead:

Accepted Answer

(1) Variable overhead spending variance

Question 13

Use the following to answer questions:
Controller Rachel Tabak of Johnson Inc. is in the process of analyzing its manufacturing overhead costs for March. March results follow:
  
-Which of the following journal entries is correct for recording actual variable overhead costs when incurred?

Accepted Answer

A)  Item A 
B)  Item B 
C)  Item C 
D)  Item D 
A)  Item A 
B)  Item B 
C)  Item C 
D)  Item D

Question 14

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 contribution-margin sales-volume variance for rollerball pens?

Accepted Answer

A)  $4,000 unfavorable 
B)  $12,500 unfavorable 
C)  $0 
D)  $8,500 favorable 
A)  $4,000 unfavorable 
B)  $12,500 unfavorable 
C)  $0 
D)  $8,500 favorable

Question 15

An overhead cost performance report shows which of the following items?

Accepted Answer

A)  Variable overhead costs by component 
B)  Standard (variable) rate per machine hour for each component 
C)  Fixed overhead costs by component 
D)  All of the above 
A)  Variable overhead costs by component 
B)  Standard (variable) rate per machine hour for each component 
C)  Fixed overhead costs by component 
D)  All of the above

Question 16

Use the following to answer questions:
Controller Rachel Tabak of Johnson Inc. is in the process of analyzing its manufacturing overhead costs for March. March results follow:
  
-What is the variable overhead spending variance?

Accepted Answer

A)  $40,000 unfavorable 
B)  $25,000 unfavorable 
C)  $25,000 favorable 
D)  $40,000 favorable 
A)  $40,000 unfavorable 
B)  $25,000 unfavorable 
C)  $25,000 favorable 
D)  $40,000 favorable

Question 17

Which of the following is not involved in establishing variable factory overhead costs?

Accepted Answer

A)  Determining the patterns of variable factory overhead costs 
B)  Computing the standard variable overhead rate 
C)  Deciding upon the maximum sales price to obtain targeted market share 
D)  Selecting the most appropriate cost driver for applying variable factor overhead to each cost object 
A)  Determining the patterns of variable factory overhead costs 
B)  Computing the standard variable overhead rate 
C)  Deciding upon the maximum sales price to obtain targeted market share 
D)  Selecting the most appropriate cost driver for applying variable factor overhead to each cost object

Question 18

Health Foods Inc. sells a special multi-grain muffin. In January the budgeted output an actual output were equal. January's revenue sales-volume variance

Accepted Answer

A)  Will be unfavorable 
B)  Will be favorable 
C)  Will be zero 
D)  Cannot be determined 
A)  Will be unfavorable 
B)  Will be favorable 
C)  Will be zero 
D)  Cannot be determined

Question 19

Proration of variances recognizes that underestimation or overestimation of production costs affects Cost of Goods Sold, Work-in-Process inventory and Finished Goods inventory.

Accepted Answer

A) True 
 B)False

Question 20

An unexpected increase in property taxes on the plant could cause a fixed-overhead budget variance.

Accepted Answer

A) True 
 B)False

A primary difference between overhead costs in manufacturing companies and non-manufacturing companies is that

Fixed factory overhead was budgeted at $350,000 and 50,000 machine hours. If the fixed overhead volume variance was $5,000 unfavorable and the budget variance was $4,000 favorable, fixed overhead applied must have been:

Which of the following statements about flexible budgets is not true?

In a multiproduct firm, units of output usually are not a meaningful measure because one would have to add numbers of unlike units.

Briefly discuss how standard cost variances can be disposed of and why one might choose one approach over another.

The variable-overhead spending variance is the real control variance for variable overhead.

The ________is the difference between the budgeted fixed manufacturing overhead and the fixed overhead applied to the actual output units produced (or standard input units allowed for actual output).

Total budgeted monthly overhead cost can be determined by means of the following formula: (budgeted variable-overhead cost per unit x total activity units) + budgeted fixed-overhead cost per month.

Use the following to answer questions: Controller Rachel Tabak of Johnson Inc. is in the process of analyzing its manufacturing overhead costs for March. March results follow: -Which of the following journal entries is correct for recording actual variable overhead costs when incurred?

An overhead cost performance report shows which of the following items?

Use the following to answer questions: Controller Rachel Tabak of Johnson Inc. is in the process of analyzing its manufacturing overhead costs for March. March results follow: -What is the variable overhead spending variance?

Which of the following is not involved in establishing variable factory overhead costs?

Health Foods Inc. sells a special multi-grain muffin. In January the budgeted output an actual output were equal. January's revenue sales-volume variance

Proration of variances recognizes that underestimation or overestimation of production costs affects Cost of Goods Sold, Work-in-Process inventory and Finished Goods inventory.

An unexpected increase in property taxes on the plant could cause a fixed-overhead budget variance.

Cost Management and Strategic Decision Making Evaluating Opportunities and Leading Change

Product Costing Systems: Concepts and Design Issues

Cost Accumulation for Job-Shop and Batch Production Operations

Activity-Based Costing Systems

Activity-Based Management

Managing Customer Profitability

Managing Quality and Time to Create Value

Process-Costing Systems

Joint-Process Costing

Managing and Allocating Support-Service Costs

Cost Estimation

Financial and Cost-Volume-Profit Models

Cost Management and Decision Making

Strategic Issues in Making Long-Term Capital Investment Decisions

Budgeting and Financial Planning

Standard Costing, Variance Analysis, and Kaizen Costing

Organizational Design, Responsibility Accounting, and Evaluation of Divisional Performance

Transfer Pricing

Performance Measurement Systems Glossary Photo Credits

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

A primary difference between overhead costs in manufacturing companies and non-manufacturing companies is that

Fixed factory overhead was budgeted at $350,000 and 50,000 machine hours. If the fixed overhead volume variance was $5,000 unfavorable and the budget variance was $4,000 favorable, fixed overhead applied must have been:

Which of the following statements about flexible budgets is not true?

In a multiproduct firm, units of output usually are not a meaningful measure because one would have to add numbers of unlike units.

Briefly discuss how standard cost variances can be disposed of and why one might choose one approach over another.

The variable-overhead spending variance is the real control variance for variable overhead.

The ________is the difference between the budgeted fixed manufacturing overhead and the fixed overhead applied to the actual output units produced (or standard input units allowed for actual output).

Total budgeted monthly overhead cost can be determined by means of the following formula: (budgeted variable-overhead cost per unit x total activity units) + budgeted fixed-overhead cost per month.

Use the following to answer questions: Controller Rachel Tabak of Johnson Inc. is in the process of analyzing its manufacturing overhead costs for March. March results follow: -Which of the following journal entries is correct for recording actual variable overhead costs when incurred?

An overhead cost performance report shows which of the following items?

Use the following to answer questions: Controller Rachel Tabak of Johnson Inc. is in the process of analyzing its manufacturing overhead costs for March. March results follow: -What is the variable overhead spending variance?

Which of the following is not involved in establishing variable factory overhead costs?

Health Foods Inc. sells a special multi-grain muffin. In January the budgeted output an actual output were equal. January's revenue sales-volume variance

Proration of variances recognizes that underestimation or overestimation of production costs affects Cost of Goods Sold, Work-in-Process inventory and Finished Goods inventory.

An unexpected increase in property taxes on the plant could cause a fixed-overhead budget variance.

Cost Management and Strategic Decision Making Evaluating Opportunities and Leading Change

Product Costing Systems: Concepts and Design Issues

Cost Accumulation for Job-Shop and Batch Production Operations

Activity-Based Costing Systems

Activity-Based Management

Managing Customer Profitability

Managing Quality and Time to Create Value

Process-Costing Systems

Joint-Process Costing

Managing and Allocating Support-Service Costs

Cost Estimation

Financial and Cost-Volume-Profit Models

Cost Management and Decision Making

Strategic Issues in Making Long-Term Capital Investment Decisions

Budgeting and Financial Planning

Standard Costing, Variance Analysis, and Kaizen Costing

Organizational Design, Responsibility Accounting, and Evaluation of Divisional Performance

Transfer Pricing

Performance Measurement Systems Glossary Photo Credits

Filters