Exam 11: Flexible Budgeting and the Management of Overhead and Support Activity Costs

The following information relates to Joplin Company for the period just ended: A.Calculate the spending and efficiency variances for variable overhead. A.Spending variance: $37,000 - (40,500 * $1)= $3,500F Efficiency variance: (40,500 *$1)- (82,000 * 0.5* * $1)= $500F *Two units per hour = 0.5 hours per unit B.Budget variance: ($121,000 - $37,000)- (40,000 * $2)= $4,000U Volume variance: (40,000 * $2)- (82,000 *0.5* *$2)= $2,000F** * Two units per hour = 0.5 hours per unit **Some accountants choose to label a negative volume variance as "favorable," while others prefer to omit the unfavorable/favorable label altogether. B.Calculate the budget and volume variances for fixed overheaD.

Which of the following is used in the computation of the variable-overhead spending variance?

Which of the following statements is (are)true?

Bavaria's budget for variable overhead and fixed overhead revealed the following information for an anticipated 40,000 hours of activity: variable overhead,$348,000;fixed overhead,$600,000. The company actually worked 43,000 hours,and actual overhead incurred was: variable,$365,500;fixed,$608,000. Required: A.Compute the company's total cost variance for variable overhead and fixed overhead if the firm uses a static budget to help assess performance. B.Repeat part "A" assuming the use of a flexible budget. C.Flexible budgets are preferred in performance evaluations.The use of flexible budgets eliminates volume differences between actual and budgeted activity,allowing the analyst to concentrate on differences between actual and budgeted costs "on the same,level playing field." The result is a clearer picture to study. C.Which of the two budgets (static or flexible)is preferred for performance evaluations? Why?

The variable-overhead spending and efficiency variances are: