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

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 are the variable overhead efficiency and variable volume variance, respectively?

Sales variance analysis attempts to explain the difference between actual sales performance and budgeted sales performance by focusing on several factors that underlie overall sales results.

Variances occurring in a standard backflush cost system are charged to a separate account as incurred and, if immaterial, are not prorated to inventories or, if material, they are prorated in the same manner as under a traditional standard cost system.

If a cost is fixed with respect to a single volume-based cost driver, it must always be fixed.

The amount of the current period's standard cost remaining in Work-in-Process Inventory, Finished Goods Inventory, and Cost of Goods Sold is the basis for the variance proration procedures.

The revenue sales-volume variance is

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-mix variance?

XYZ Corp. produced 26,000 units of its only product. Machine hours per unit are 2.8. The budget planned for 23,000 units. What are the budgeted machine hours and the flexible-budget machine hours, respectively?

Which of the following statements about activity-based flexible budgeting are true?

The flexible overhead budget is the cost manager's primary tool for the control of manufacturing-overhead costs under traditional cost management techniques.

Activity levels in the flexible budget are based on output measures.

Cucto Company uses machine hours to allocate its fixed overhead costs. Mr. Salezar, the production manager has been told that his fixed overhead variances for the past month were as follows: Fixed overhead budget variance: $ 2,000 F Fixed overhead volume variance: $20,000 U The production V.P. has asked Mr. Salezar to account for his underutilization of capacity for the month. Required: Explain the meaning of the two variances and Mr. Salezar's responsibility for them.

Moody Company manufactures two products, A and B. During September, the following occurred: Required: (1) Calculate the total revenue sales-mix variance. (2) Calculate the total revenue sales-quantity variance. (3) Calculate the total revenue sales-volume variance.

Reed Company uses a standard costing system for its main product. The controller has prepared the performance reports for the month and is not satisfied with the performance shown by Mr. Catesof the book division. This dissatisfaction is conveyed to Mr. Cates at a meeting. His performance report, in very summarized form, is shown below: Required: (1) Discuss a better way of presenting a performance report. In the process of the discussion point out weaknesses in the report as shown. (2) What kind of behavioral implications would the controller's remarks have on Mr.Cates? *includes direct material and direct labor. Mr. Cates is upset with the report as shown and wonders if there isn't a better way to present the information.

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 fixed overhead budget variance?

Use the following to answer questions: Tillinghuisen Inc. uses a standard cost system. Last year's records showed the following information: -How much is the variable overhead spending variance?

Which of the following will cause a negative or favorable fixed overhead volume variance

The cost functions are considered reliable within a relevant range of 25,000 to 50,000 direct labor hours per month. The company expects to operate at 30,000 hours per month. Actual results for February are as follows: McIntire Inc. developed the following monthly cost functions for manufacturing overhead: Required: (1) What are the following standard manufacturing overhead rates based on expected activity? (a) Variable manufacturing overhead (b) Fixed manufacturing overhead (2) (a) Prepare a flexible budget using the following headings: Budget at Overhead Cost VC/DLH Actual cost actual hrs. Variance (b) Which variances need to be investigated and what are some probable causes?

Use the following to answer questions: Henendez Co. collects its fixed overhead into a single cost pool. The budget for April was $600,000 and $775,000 was actually spent. April production was 15,000 units with actual machine hours of 12,000. Budgeted production for April was 12,000 units using 14,000 machine hours. -What is budgeted fixed overhead rate per unit of input (round to nearest dollar)?

Which of the following statements about activity measures is false?