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

If I = the cost of conducting an investigation,C = the estimated cost to correct the cause of a variance,and L = loss associated with not investigating a variance,what is the formula for determining the indifference probability,p?

The following information is available from Thinnews Co. ,a company that uses machine hours to apply factory overhead: Under a two-variance breakdown (decomposition)of the total factory overhead variance,the factory overhead production-volume variance is:

Bonehead Co.has the following factory overhead costs: The total underapplied or overapplied factory overhead for the period is:

All of the following choices exist for defining the denominator volume (denominator activity level)for assigning fixed overhead costs in a standard cost system,except:

"In fact,a 'favorable' production-volume variance of a 'non-bottleneck' machine or operation is not favorable to the firm as a whole;rather,it increases work and costs for the firm." Why?

The following information is available from Thinnews Co. ,a company that uses machine hours to apply factory overhead: Under a two-variance breakdown (decomposition)of the total factory overhead variance,the factory overhead efficiency variance is:

The difference between the total actual overhead cost incurred during a period and budgeted total factory overhead for the actual quantity of the cost driver used to apply overhead is equal to the:

Bluecap Co.uses a standard cost system and flexible budgets for control purposes.The following budgeted information pertains to 2010: During 2010,Bluecap worked 28,000 direct labor hours and manufactured 9,600 units.The actual factory overhead was $14,000 greater than the flexible budget amount for the units produced,of which $6,000 was due to fixed factory overhead.In preparing a budget for 2011 Bluecap decided to raise the level of operation to 90% of capacity,to manufacture 9,000 units at a budgeted total of 27,000 direct labor hours.The standard variable overhead application rate per direct labor hour in 2010 was:

In deciding whether to further investigate a variance,an organization needs to weigh the costs of investigation against the:

For internal reporting purposes,it is recommended that fixed overhead allocation rates in a standard costing system be based on:

A deviation from standard that occurs because of an incorrect number resulting from improper or inaccurate accounting systems or procedures is an example of a(n):

Intangible attributes often play dominant roles in determining the value of outputs from a service organization.These characteristics often lead service firms to rely on:

Proration of manufacturing cost variances among ending inventories and cost of goods sold has the effect of carrying the cost (savings)of inefficient (efficient)operations of a period to:

Some accountants would argue that any variances from standard costs,when such standards are current,should be written off to cost of goods sold.The principal rationale for this treatment is:

If standard cost variances are allocated (i.e. ,prorated)to inventory and cost of goods sold (CGS)accounts at the end of a period,which of the following is correct?

Megan,Inc.uses the following standard costs per unit for one of its products: Direct labor (2 hrs @ $5/hr)$10.Overhead (2 hrs @ $2.50/hr)5.The flexible budget for overhead is $120,000 plus $1 per direct labor hour (DLH).Actual data for the month show total overhead costs of $225,000,total fixed overhead of $123,000,85,000 hours worked,and 40,000 units produced.The fixed overhead spending variance is:

Which one of the following reflects both price (rate)as well as efficiency (quantity)effects regarding variable overhead items?

The following information is available from the Terry Company: The total under or over applied overhead for the period is:

Gerhan Company's flexible budget for the units actually manufactured in May shows $15,640 of total factory overhead;this output level represents 70% of available capacity.During May the company applied overhead to production at the rate of $3.00 per direct labor hour (DLH),based on a denominator volume level of 6,120 DLHs,which represents 90% of available capacity.The company spent 5,000 DLHs and incurred $16,500 of total factory overhead cost during May,including $6,800 for fixed factory overhead. What is the factory overhead efficiency for May under the assumption that the company uses a four-variance breakdown (decomposition)of the total overhead variance?

Megan,Inc.uses the following standard costs per unit for one of its products: Direct labor (2 hrs @ $5/hr)= $10;overhead (2 hrs @ $2.50/hr)= $5.The flexible budget for overhead is $120,000 plus $1 per direct labor hour (DLH).Actual data for the month show total overhead costs of $225,000,total fixed overhead of $123,000,85,000 hours worked,and 40,000 units produced.The total overhead variance for the month is: