Exam 8: Flexible Budgets, Overhead Cost Variances, and Management Control

Mendel Company makes the following journal entry: Variable Manufacturing Overhead Allocated229,000 Variable Manufacturing Overhead Efficiency Variance7,000 Variable Manufacturing Overhead Control179,000 Variable Manufacturing Overhead Spending Variance57,000 Which of the following statements is true of the given journal entry?

Which of the following is a component of sales-volume variance?

Effective planning of fixed overhead costs includes ________.

Hockey Accessories Corporation manufactured 23,000 duffle bags during March. The following fixed overhead data pertain to March: What is the amount of fixed overhead allocated to production?

Prorated allocation of production-volume variance results in a higher operating income for current year than if the entire favorable production-volume variance were credited to Cost of Goods Sold.

Advanced Manufacturing Company reported: To isolate these variances at the end of the accounting period, John would debit Fixed Manufacturing Overhead Allocated for ________.

Really Great Corporation manufactures industrial-sized landscaping trailers and uses budgeted machine-hours to allocate variable manufacturing overhead. The following information pertains to the company's manufacturing overhead data: What is the budgeted variable overhead cost rate per output unit?

The amount reported for fixed overhead on the static budget is also reported ________.

Which of the following is the correct mathematical expression to calculate the fixed overhead spending variance?

Cold Products Corporation manufactured 27,000 ice chests during September. The variable overhead cost-allocation base is $11.75 per machine-hour. The following variable overhead data pertain to September: What is the variable overhead efficiency variance?

When machine-hours are used as an overhead cost-allocation base, the most likely cause of a favorable variable overhead spending variance is ________.

Explain why there is no efficiency variance for fixed manufacturing overhead costs.

Explain two concerns when interpreting the production-volume variance as a measure of the economic cost of unused capacity.

An unfavorable fixed overhead spending variance indicates that ________.

Neon Company manufactured 2,500 units during April with a total overhead budget of $55,000. However, while manufacturing the 2,500 units the microcomputer that contained the month's cost information broke down. With the computer out of commission, the accountant has been unable to complete the variance analysis report. The information missing from the report is lettered in the following set of data: Variable overhead: Standard cost per unit: 1.2 labor hour at $10 per hour Actual costs: $26,250 for 2,250 hours Flexible budget: a Total flexible-budget variance: b Variable overhead spending variance: c Variable overhead efficiency variance: d Fixed overhead: Budgeted costs: e Actual costs: f Flexible-budget variance: $200 favorable Required: Compute the missing elements in the report represented by the lettered items.

Effective planning of variable overhead costs includes ________.

If the production planners set the budgeted machine hours standards too loose, one could anticipate there would be a favorable fixed overhead efficiency variance.

Outdoor Gear Corporation manufactured 1,000 coolers during October. The following variable overhead data relates to October: Calculate the variable overhead flexible-budget variance.

Under standard costing, ________.

Define variable overhead spending variance. Briefly explain why a favorable variable overhead spending variance may not always be desirable.