Question 1

Briefly explain why a favourable variable overhead rate variance may not always be desireable.

Accepted Answer

The variable overhead rate variance is the difference between the actual variable overhead cost per unit of the cost-allocation base and the budgeted variable overhead cost per unit of the cost-allocation base, multiplied by the actual quantity of the variable overhead cost-allocation base used for the actual output.If a favourable variable overhead rate variance had been obtained by the managers of the company purchasing low-priced, poor-quality indirect materials, hired less talented supervisors, or performed less machine maintenance there could be negative future consequences.The long-run prospects for the business may suffer as the company ends up putting out a lower quality product, or it may end up having very large equipment repairs as a result of cutting corners in the short term.

Question 2

Use the information below to answer the following question(s).Moeller Electric manufactures light fixtures.The following information pertains to the company's manufacturing overhead data.  
-Cady Machine Shop used 15,000 machine hours during January.It takes 0.90 machine-hours to produce one unit; 15,000 units were produced during the month.Budgeted production included 12,000 units, using 10,800 machine hours.Budgeted variable manufacturing overhead costs per machine-hour is $22.50.What is the variable overhead efficiency variance for Cady?

Accepted Answer

A) $67,500 unfavourable 
B) $67,500 favourable 
C) $37,000 favourable 
D) $33,750 favourable 
E) $33,750 unfavourable 
A) $67,500 unfavourable 
B) $67,500 favourable 
C) $37,000 favourable 
D) $33,750 favourable 
E) $33,750 unfavourable E

Question 3

When machine-hours are used as a cost allocation base, the item MOST likely to contribute to an unfavourable production-volume variance is

Accepted Answer

A) a new competitor gaining market share. 
B) a new manufacturing machine costing considerably more than expected. 
C) an increase in the cost of energy. 
D) strengthened demand for the product. 
E) an increase in the number of direct-labour hours. 
A) a new competitor gaining market share. 
B) a new manufacturing machine costing considerably more than expected. 
C) an increase in the cost of energy. 
D) strengthened demand for the product. 
E) an increase in the number of direct-labour hours. A

Question 4

In flexible budgets, costs that remain the same regardless of the output levels within the relevant range are

Accepted Answer

A) allocated costs. 
B) budgeted costs. 
C) fixed costs. 
D) variable costs. 
E) estimated costs. 
A) allocated costs. 
B) budgeted costs. 
C) fixed costs. 
D) variable costs. 
E) estimated costs.

Question 5

Which of the following statements is TRUE?

Accepted Answer

A) The fixed manufacturing sales-volume variance is rarely zero. 
B) The difference between the allocated and the budgeted overhead is the production-volume variance. 
C) The production-volume variance arises for both fixed and variable costs. 
D) The fixed manufacturing overhead sales-volume variance can be written-off to cost of goods sold. 
E) The production-volume variance arises only for variable costs. 
A) The fixed manufacturing sales-volume variance is rarely zero. 
B) The difference between the allocated and the budgeted overhead is the production-volume variance. 
C) The production-volume variance arises for both fixed and variable costs. 
D) The fixed manufacturing overhead sales-volume variance can be written-off to cost of goods sold. 
E) The production-volume variance arises only for variable costs.

Question 6

If Miller Company makes the following journal entry:   It may be inferred that

Accepted Answer

A) Miller over-allocated variable manufacturing overhead. 
B) the net variance is a $12,500 favourable rate variance. 
C) actual variable manufacturing overhead costs were $62,500. 
D) the journal entry accounts are incorrect. 
E) the net variance is $12,500 unfavourable. 
A) Miller over-allocated variable manufacturing overhead. 
B) the net variance is a $12,500 favourable rate variance. 
C) actual variable manufacturing overhead costs were $62,500. 
D) the journal entry accounts are incorrect. 
E) the net variance is $12,500 unfavourable.

Question 7

All Clean of Alberta manufactures individual shampoos for hotel/motel clientele.The fixed manufacturing overhead costs for 2019 will total $576,000.The company uses good units finished for fixed overhead allocation and anticipates 300,000 units of production.Good units finished average 92 percent of total units produced.During January, 20,000 units were produced.Actual fixed overhead cost per good unit averaged $2.82 in January.Required:
a.Determine the fixed overhead rate for 2019.
b.Determine the fixed overhead static-budget variance for January.
c.Determine the fixed overhead production-volume variance for January.
d.Determine the fixed overhead rate variance for January.

Accepted Answer

a.Fixed overhead rate = $576,000/(300,00

Question 8

Use the information below to answer the following question(s).Regal Company uses a single cost pool for fixed manufacturing overhead.The amount for June 2019 was budgeted at $500,000; however, the actual amount was $700,000.Actual production for June was 12,500 units, and actual machine hours were 10,000.Budgeted production included 17,750 units and 12,375 machine hours.
-Leek Company predicted that the fixed overhead would be $200,000 in April 2018.Production amounted to 60,000 actual and 50,000 budgeted decks of cards.Each deck takes approximately 0.20 machine hours to produce.The actual overhead costs per machine hour are $25.What is the production-volume variance?

Accepted Answer

A) $40,000 unfavourable 
B) $40,000 favourable 
C) $150,000 unfavourable 
D) $150,000 favourable 
E) $0 
A) $40,000 unfavourable 
B) $40,000 favourable 
C) $150,000 unfavourable 
D) $150,000 favourable 
E) $0

Question 9

Answer the following question(s)using the information below.Lukehart Industries Inc.produces air purifiers in batches.To manufacture a batch of the purifiers Lukehart Inc.must setup the machines and assembly line tooling.Setup costs are batch-level costs because they are associated with batches rather than individual units of products.A separate Setup Department is responsible for setting up machines and tooling for different models of the air purifiers.Setup overhead costs consist of some costs that are variable and some costs that are fixed with respect to the number of setup hours.The following information pertains to June 2012:
  
-Fixed and variable cost variances can ________ be applied to activity-based costing systems.

Accepted Answer

A) occasionally 
B) always 
C) seldom 
D) most times 
E) never 
A) occasionally 
B) always 
C) seldom 
D) most times 
E) never

Question 10

Variable overhead rate variance is the difference between the actual amount of variable overhead incurred and the budgeted amount allowed for the actual quantity of the variable overhead allocation base used for the actual output units achieved.

Accepted Answer

A) True 
 B)False

Question 11

Teri's Furniture uses variance analysis to evaluate manufacturing overhead in its' table factory.The information for the May overhead expenditures is as follows:
   Required:
a.Calculate the variable manufacturing overhead rate and efficiency variances; and, the fixed manufacturing overhead rate and production-volume variances.
b.Prepare all necessary journal entries to record the actual costs, allocated costs, and variances.Keep variable and fixed entries separate.

Accepted Answer

a.Variance analysis
Variable overhead ra

Question 12

Answer the following question(s)using the information below.Willis Corporation manufactures industrial-sized gas furnaces and uses budgeted machine-hours to allocate variable manufacturing overhead.The following information pertains to the company's manufacturing overhead data:
  
-What is the variable overhead efficiency variance?

Accepted Answer

A) $8,600 favourable 
B) $8,600 unfavourable 
C) $141,900 favourable 
D) $141,900 unfavourable 
E) $11,000 unfavourable 
A) $8,600 favourable 
B) $8,600 unfavourable 
C) $141,900 favourable 
D) $141,900 unfavourable 
E) $11,000 unfavourable

Question 13

Calculate the fixed manufacturing overhead rate variance based on the following data:

Accepted Answer

$135,000 - 65,000 -

Question 14

Use the information below to answer the following question(s).Michelle Inc.uses a level 4-variance analysis of its manufacturing overhead costs, and has the following results for April.A.Budgeted direct labour-hours per unit is used to allocate variable manufacturing overhead.Fixed overhead is allocated on a per unit basis.
b.Budgeted amounts for April are:
   C.Actual amounts for April are:
  
-If Michelle Inc.uses a two-variance analysis format then what will be the reported variances?

Accepted Answer

A) flexible-budget variance $100,000 U; Production-volume variance $200,000 U 
B) efficiency variance $80,000 U; production-volume variance $200,000 F 
C) rate variance $10,000 U; efficiency variance $120,000 F 
D) rate variance $10,000 U; efficiency variance $80,000 U 
E) flexible-budget variance $90,000 U; production-volume variance $200,000 F 
A) flexible-budget variance $100,000 U; Production-volume variance $200,000 U 
B) efficiency variance $80,000 U; production-volume variance $200,000 F 
C) rate variance $10,000 U; efficiency variance $120,000 F 
D) rate variance $10,000 U; efficiency variance $80,000 U 
E) flexible-budget variance $90,000 U; production-volume variance $200,000 F

Question 15

In order to properly record a fixed manufacturing overhead rate variance of $30,000 unfavourable and a production-volume overhead variance of $20,000 favourable, what would the appropriate journal entry be if actual fixed overhead is $500,000?

Accepted Answer

A)    
B)    
C)    
D)    
E)    
A)    
B)    
C)    
D)    
E)

Question 16

Use the information below to answer the following question(s).Michelle Inc.uses a level 4-variance analysis of its manufacturing overhead costs, and has the following results for April.A.Budgeted direct labour-hours per unit is used to allocate variable manufacturing overhead.Fixed overhead is allocated on a per unit basis.
b.Budgeted amounts for April are:
   C.Actual amounts for April are:
  
-What is the Michelle Inc.variable production-volume variance?

Accepted Answer

A) $13,500 unfavourable 
B) $6,000 unfavourable 
C) $6,000 favourable 
D) $0 
E) There is never a variable production-volume variance. 
A) $13,500 unfavourable 
B) $6,000 unfavourable 
C) $6,000 favourable 
D) $0 
E) There is never a variable production-volume variance.

Question 17

Answer the following question(s)using the information below.Rutch Corporation manufactured 54,000 door jambs during September.The fixed-overhead cost allocation rate is $50.00 per machine-hour.The following fixed overhead data pertain to September:
  
-What is the flexible-budget amount for fixed overhead?

Accepted Answer

A) $63,888 
B) $53,400 
C) $49,250 
D) $51,750 
E) $57,500 
A) $63,888 
B) $53,400 
C) $49,250 
D) $51,750 
E) $57,500

Question 18

Fixed overhead costs are a lump sum that does not change in total despite changes in the cost driver.

Accepted Answer

A) True 
 B)False

Question 19

The variable overhead flexible-budget variance measures the difference between standard variable overhead costs and flexible-budget variable overhead costs.

Accepted Answer

A) True 
 B)False

Question 20

Capacity cost is

Accepted Answer

A) only an inventoriable cost. 
B) only a period cost. 
C) never amortized. 
D) a variable manufacturing overhead cost. 
E) a fixed manufacturing overhead cost. 
A) only an inventoriable cost. 
B) only a period cost. 
C) never amortized. 
D) a variable manufacturing overhead cost. 
E) a fixed manufacturing overhead cost.

Briefly explain why a favourable variable overhead rate variance may not always be desireable.

When machine-hours are used as a cost allocation base, the item MOST likely to contribute to an unfavourable production-volume variance is

In flexible budgets, costs that remain the same regardless of the output levels within the relevant range are

Which of the following statements is TRUE?

If Miller Company makes the following journal entry: It may be inferred that

Variable overhead rate variance is the difference between the actual amount of variable overhead incurred and the budgeted amount allowed for the actual quantity of the variable overhead allocation base used for the actual output units achieved.

Calculate the fixed manufacturing overhead rate variance based on the following data:

In order to properly record a fixed manufacturing overhead rate variance of $30,000 unfavourable and a production-volume overhead variance of $20,000 favourable, what would the appropriate journal entry be if actual fixed overhead is $500,000?

Fixed overhead costs are a lump sum that does not change in total despite changes in the cost driver.

The variable overhead flexible-budget variance measures the difference between standard variable overhead costs and flexible-budget variable overhead costs.

Capacity cost is

The Accountants Vital Role in Decision Making

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Management

Master Budget and Responsibility Accounting

Flexible Budgets, Variances, and Management Control: I

Income Effects of Denominator Level on Inventory Valuation

Analysis of Cost Behaviour

Decision Making and Relevant Information

Pricing Decisions, Product Profitability Decisions, and Cost Management

Strategy, Balanced Scorecard, and Profitability Analysis

Period Cost Allocation

Cost Allocation: Joint Products and Byproducts

Revenue and Customer Profitability Analysis

Process Costing

Spoilage, Rework, and Scrap

Inventory Cost Management Strategies

Capital Budgeting: Methods of Investment Analysis

Transfer Pricing and Multinational Management Control Systems

Multinational Performance Measurement and Compensation

Filters

Exam 8: Flexible Budgets, Variances, and Management Control: II

Briefly explain why a favourable variable overhead rate variance may not always be desireable.

When machine-hours are used as a cost allocation base, the item MOST likely to contribute to an unfavourable production-volume variance is

In flexible budgets, costs that remain the same regardless of the output levels within the relevant range are

Which of the following statements is TRUE?

If Miller Company makes the following journal entry: It may be inferred that

Variable overhead rate variance is the difference between the actual amount of variable overhead incurred and the budgeted amount allowed for the actual quantity of the variable overhead allocation base used for the actual output units achieved.

Calculate the fixed manufacturing overhead rate variance based on the following data:

In order to properly record a fixed manufacturing overhead rate variance of $30,000 unfavourable and a production-volume overhead variance of $20,000 favourable, what would the appropriate journal entry be if actual fixed overhead is $500,000?

Fixed overhead costs are a lump sum that does not change in total despite changes in the cost driver.

The variable overhead flexible-budget variance measures the difference between standard variable overhead costs and flexible-budget variable overhead costs.

Capacity cost is

The Accountants Vital Role in Decision Making

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Management

Master Budget and Responsibility Accounting

Flexible Budgets, Variances, and Management Control: I

Income Effects of Denominator Level on Inventory Valuation

Analysis of Cost Behaviour

Decision Making and Relevant Information

Pricing Decisions, Product Profitability Decisions, and Cost Management

Strategy, Balanced Scorecard, and Profitability Analysis

Period Cost Allocation

Cost Allocation: Joint Products and Byproducts

Revenue and Customer Profitability Analysis

Process Costing

Spoilage, Rework, and Scrap

Inventory Cost Management Strategies

Capital Budgeting: Methods of Investment Analysis

Transfer Pricing and Multinational Management Control Systems

Multinational Performance Measurement and Compensation

Filters