Exam 15: Operational Performance Measurement: Indirect-Cost Variances and Resource-Capacity Management

The variances discussed in Chapter 15 (for manufacturing overhead) are all components of a short- term financial control system. These variances are calculated using standard manufacturing costs and flexible budgets. As was argued in the text (both in Chapter 15 and elsewhere) a financial control system is but part of a more comprehensive management accounting and control system. Required: 1. What are the primary limitations of short-run financial control measures? 2. How can a short-run financial control system be expanded to become a more comprehensive management accounting and control system? Discuss, in at least some detail, how and why you would expand the system in an attempt to provide management with more useful information.

What is the factory overhead efficiency variance for Gerhan Company in May, under the assumption that the company uses a two-variance breakdown (decomposition) of the total overhead variance?

The fixed overhead spending variance for Megan, Inc. for the month is:

When there is a standard batch size for production activity:

For which one of the following reasons is the calculation of overhead variances in conjunction with an activity-based cost (ABC) system desirable from the standpoint of management?

The total overhead flexible-budget variance for Norland Co. is:

The factory overhead production volume variance for Bonehead Co. this period is:

For product-costing purposes, which of the following statements is true?

Given this information, what is the indifference probability, p (i.e., the probability of a nonrandom variance that would make management indifferent between investigating and not investigating the variance)? (Round your answer to one decimal place.)

The difference between budgeted fixed factory overhead for a period and the amount of the fixed factory overhead applied to production during the period is the:

What was the fixed factory overhead spending variance for Zero Company in December?

The variable overhead spending variance in 2013 for Bluecap Co. is:

The standard fixed overhead application rate for the Machining Department is:

Which one of the following journal entries in a standard cost system would be used to apply factory overhead costs to production?

The production-volume variance should generally not be calculated and reported for control purposes because, unless interpreted properly, it can:

Which of the following tools is helpful in addressing the variance-investigation problem under uncertainty?

Under a two-variance breakdown (decomposition) of the total factory overhead variance, the factory overhead production volume variance is:

Which of the following factors is not usually important when deciding whether to investigate a variance?

In a standard cost system, an unfavorable production-volume variance would result if:

Under a two-variance breakdown (decomposition) of the total factory overhead variance, the factory overhead controllable variance (i.e., total flexible-budget variance) is: