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

In regard to the investigation of variances under uncertainty,which of the following is not a positive (i.e. ,desirable)combination of courses of action and states of nature?

The difference between the total factory overhead cost in the flexible budget for the actual units produced and the amount of factory overhead cost applied to products using the standard overhead rate is called the factory overhead ______________

When implementing a standard cost system,one of the system-design choices that management must make is choice of the denominator volume level for the purpose of calculating the fixed overhead application rate,which is used to determine product costs.Various alternatives exist for the denominator volume. Required: 1.List and briefly describe the various alternatives that exist for defining the denominator activity level for product-costing purposes. 2.What provisions of generally accepted accounting principles (GAAP)and current income tax requirements affect the decision as to choice of the denominator volume level when developing the standard fixed overhead application rate? Provide an overview of the requirements in this regard. Please see Feedback for answers.

A statistical control chart:

The following information is available from the Taro Company: What is the overhead production volume-variance for the period?

What are the steps in establishing the standard application rate for variable factory overhead cost? Does the procedure differ for product-costing versus cost control purposes?

Xero Company's standard factory overhead rate is $3.75 per direct labor hour (DLH),calculated at 90% capacity = 900 standard DLHs.In December,the company operated at 80% of capacity,or 800 standard DLHs.Budgeted factory overhead at 80% of capacity is $3,150,of which $1,350 is fixed overhead.For December,the actual factory overhead cost was $3,800 for 840 actual DLHs,of which $1,300 was for fixed factory overhead.Assuming the use of a four-way breakdown (decomposition)of the total overhead variance,what is the variable factory overhead efficiency variance for December?

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

Neptune Inc.uses a standard cost system and has the following information for April: The factory overhead production-volume variance is:

Which of the following statements is correct?

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

The following information is available from the Terry Company: What is the variable overhead (VOH)spending variance for the period?

The following information is available from the Taro Company: What is the total overhead spending variance for the period?

"Firms need to use the capacity of the equipment or division that is the 'bottleneck' of the manufacturing process as the denominator volume in setting the fixed overhead allocation rate.In cases where there is more than one 'bottleneck,' the denominator should be the smallest capacity among the bottleneck production processes." Required: (a)What type of variance is related to this "denominator?" Explain. (b)Why should a firm choose the smallest capacity "bottleneck" as the denominator in a manufacturing process?

A comprehensive management accounting and control system regarding manufacturing overhead costs:

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 controllable variance (i.e. ,total flexible-budget variance)is:

The fixed factory overhead production-volume variance represents:

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 total overhead variance in 2010 is:

Harrison Corporation's direct labor rate variance for May was $200 favorable,and the direct labor efficiency variance was $150 unfavorable.The total direct labor payroll for the month was $10,050. Required: (a)Prepare the summary journal entry (May 31)to accrue payroll costs,to charge Work in Process Inventory for the standard labor cost of the goods manufactured in May,and to record the direct labor variances for the month. (b)Assuming that the direct labor variances are not material,prepare the journal entry that Harrison would make to close the variance accounts.

Bonehead Co.has the following factory overhead costs: The factory overhead production-volume variance is: