Question 1

Both financial and nonfinancial performance measures are key inputs when evaluating the performance of managers.

Accepted Answer

A) True 
 B)False

Question 2

For planning and control purposes, actual energy usage per machine hour compared with budgeted energy usage per machine hour, is a valid financial performance measure.

Accepted Answer

A) True 
 B)False

Question 3

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 amount of fixed overhead allocated to production?

Accepted Answer

A) $51,750 
B) $100,000 
C) $53,400 
D) $57,500 
E) $49,250 
A) $51,750 
B) $100,000 
C) $53,400 
D) $57,500 
E) $49,250

Question 4

Explain why sales-volume variance could be helpful to managers.

Accepted Answer

The sales-volume variance is useful beca

Question 5

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:
  
-Calculate the production-volume variance for fixed setup overhead costs.

Accepted Answer

A) $1,800 favourable 
B) $1,800 unfavourable 
C) $250 unfavourable 
D) $250 favourable 
E) $114 unfavourable 
A) $1,800 favourable 
B) $1,800 unfavourable 
C) $250 unfavourable 
D) $250 favourable 
E) $114 unfavourable

Question 6

Decisions about capacity are considered to be

Accepted Answer

A) operating decisions. 
B) best done by plant supervisors. 
C) best done during production. 
D) more relevant for variable costs. 
E) strategic decisions. 
A) operating decisions. 
B) best done by plant supervisors. 
C) best done during production. 
D) more relevant for variable costs. 
E) strategic decisions.

Question 7

Mediquip International is a manufacturing firm that has many assembly lines, numerous heavy duty machines and highly skilled machine operators.It has used very complex variance analysis in planning and controlling it operations during the last few years.Everything always appeared to be satisfactory until an economic recession tightened the competition and cost control became critical to the company's success.The operating managers believe that the traditional managerial accounting variance measures do not provide all the information they need during times of economic difficulties.Required:
Discuss what additional information could be provided to the managers.

Accepted Answer

Non-financial performance measures could

Question 8

Capacity refers to the quantity of outputs that can be produced from long-term resources available to the company.

Accepted Answer

A) True 
 B)False

Question 9

A favourable production-volume variance arises when manufacturing capacity planned for is not used.

Accepted Answer

A) True 
 B)False

Question 10

Answer the following question(s)using the information below.Munoz Inc.produces a special line of plastic toy racing cars in batches.To manufacture a batch of the cars Munoz Inc.must setup the machines and molds.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 molds for different styles of car.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:
  
-Calculate the flexible-budget variance for variable setup overhead costs.

Accepted Answer

A) $600 unfavourable 
B) $1,300 favourable 
C) $600 favourable 
D) $1,300 unfavourable 
E) $400 unfavourable 
A) $600 unfavourable 
B) $1,300 favourable 
C) $600 favourable 
D) $1,300 unfavourable 
E) $400 unfavourable

Question 11

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.  
-Assume that variable manufacturing overhead is allocated according to machine-hours.Aladdin Company expects to produce 400 cases of Product A using 400 machine-hours.Each machine hour is expected to take 10 KWH of electricity, which costs $6 per KWH.What is the maximum amount the company would be willing to pay for the new machine based solely on rate and efficiency variances if a new energy-efficient machine only used 8 KWH per machine-hour?

Accepted Answer

A) $120 
B) $4,680 
C) $4,920 
D) $4,800 
E) $4,120 
A) $120 
B) $4,680 
C) $4,920 
D) $4,800 
E) $4,120

Question 12

A favourable variable manufacturing overhead efficiency variance may be interpreted as meaning which of the following if machine hours are the cost allocation base?

Accepted Answer

A) Employees used too much electricity during production. 
B) Improved quality of materials resulting in less downtime to clean the machines of debris. 
C) Excess supplies were used. 
D) Too much of the cost driver was used. 
E) The cost driver is inappropriate. 
A) Employees used too much electricity during production. 
B) Improved quality of materials resulting in less downtime to clean the machines of debris. 
C) Excess supplies were used. 
D) Too much of the cost driver was used. 
E) The cost driver is inappropriate.

Question 13

A fixed manufacturing overhead cost pool can never incur an efficiency variance.

Accepted Answer

A) True 
 B)False

Question 14

Answer the following question(s)using the information below.Munoz Inc.produces a special line of plastic toy racing cars in batches.To manufacture a batch of the cars Munoz Inc.must setup the machines and molds.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 molds for different styles of car.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:
  
-Calculate the rate variance for fixed setup overhead costs.

Accepted Answer

A) $1,600 unfavourable 
B) $400 unfavourable 
C) $600 unfavourable 
D) $400 favourable 
E) $600 favourable 
A) $1,600 unfavourable 
B) $400 unfavourable 
C) $600 unfavourable 
D) $400 favourable 
E) $600 favourable

Question 15

Answer the following question(s)using the information below.Munoz Inc.produces a special line of plastic toy racing cars in batches.To manufacture a batch of the cars Munoz Inc.must setup the machines and molds.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 molds for different styles of car.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:
  
-Calculate the efficiency variance for variable setup overhead costs.

Accepted Answer

A) $1,900 unfavourable 
B) $600 favourable 
C) $1,900 favourable 
D) $600 unfavourable 
E) $400 unfavourable 
A) $1,900 unfavourable 
B) $600 favourable 
C) $1,900 favourable 
D) $600 unfavourable 
E) $400 unfavourable

Question 16

Mostly Miniatures has just implemented a new cost accounting system that provides two variances for fixed manufacturing overhead.While the company's managers are familiar with the concept of static-budget variance, they are unclear as to how to interpret the production-volume overhead variances.Currently the company has a production capacity of 54,000 miniatures a month although it generally produces only 46,000 cases.However, in any given month the actual production is probably something other than 46,000.Required:
a.Does the production-volume overhead variance measure the difference between the 54,000 and 46,000, or the difference between the 46,000 and the actual monthly production? Explain.
b.What advice can you provide the managers that will help them interpret the production-volume overhead variances?

Accepted Answer

a.It is the difference between the 46,00

Question 17

When machine-hours are used as an overhead cost-allocation base, the LEAST likely cause of a unfavourable variable overhead rate variance is

Accepted Answer

A) excessive machine breakdowns. 
B) the production scheduler inefficiently scheduled jobs. 
C) poor coordination between sales and production resulting in displacement of normal batches by.rush orders and excessive setup times. 
D) strengthened demand for the product. 
E) a decrease in the cost of energy. 
A) excessive machine breakdowns. 
B) the production scheduler inefficiently scheduled jobs. 
C) poor coordination between sales and production resulting in displacement of normal batches by.rush orders and excessive setup times. 
D) strengthened demand for the product. 
E) a decrease in the cost of energy.

Question 18

The variable overhead flexible-budget variance can be further subdivided into the

Accepted Answer

A) price variance and the efficiency variance. 
B) static-budget variance and sales-volume variance. 
C) rate variance and production-volume variance. 
D) sales-volume variance and the rate variance. 
E) rate variance and the efficiency variance. 
A) price variance and the efficiency variance. 
B) static-budget variance and sales-volume variance. 
C) rate variance and production-volume variance. 
D) sales-volume variance and the rate variance. 
E) rate variance and the efficiency variance.

Question 19

Brown Company makes watches.The budgeted fixed overhead costs for 2019 total $324,000.The company uses direct labour-hours for fixed overhead allocation and anticipates 10,800 hours during the year for 540,000 units.An equal number of units are budgeted for each month.During October, 48,000 watches were produced and $28,000 was spent on fixed overhead.Required:
a.Determine the fixed overhead rate for 2019 based on the units of input.
b.Determine the fixed overhead static-budget variance for October.
c.Determine the production-volume overhead variance for October.

Accepted Answer

a.Fixed overhead rate = $324,000/10,800

Question 20

The budgeted fixed overhead rate per output unit is computed by dividing budgeted fixed overhead costs by the level of input units.

Accepted Answer

A) True 
 B)False

Both financial and nonfinancial performance measures are key inputs when evaluating the performance of managers.

For planning and control purposes, actual energy usage per machine hour compared with budgeted energy usage per machine hour, is a valid financial performance measure.

Explain why sales-volume variance could be helpful to managers.

Decisions about capacity are considered to be

Capacity refers to the quantity of outputs that can be produced from long-term resources available to the company.

A favourable production-volume variance arises when manufacturing capacity planned for is not used.

A favourable variable manufacturing overhead efficiency variance may be interpreted as meaning which of the following if machine hours are the cost allocation base?

A fixed manufacturing overhead cost pool can never incur an efficiency variance.

When machine-hours are used as an overhead cost-allocation base, the LEAST likely cause of a unfavourable variable overhead rate variance is

The variable overhead flexible-budget variance can be further subdivided into the

The budgeted fixed overhead rate per output unit is computed by dividing budgeted fixed overhead costs by the level of input units.

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

Both financial and nonfinancial performance measures are key inputs when evaluating the performance of managers.

For planning and control purposes, actual energy usage per machine hour compared with budgeted energy usage per machine hour, is a valid financial performance measure.

Explain why sales-volume variance could be helpful to managers.

Decisions about capacity are considered to be

Capacity refers to the quantity of outputs that can be produced from long-term resources available to the company.

A favourable production-volume variance arises when manufacturing capacity planned for is not used.

A favourable variable manufacturing overhead efficiency variance may be interpreted as meaning which of the following if machine hours are the cost allocation base?

A fixed manufacturing overhead cost pool can never incur an efficiency variance.

When machine-hours are used as an overhead cost-allocation base, the LEAST likely cause of a unfavourable variable overhead rate variance is

The variable overhead flexible-budget variance can be further subdivided into the

The budgeted fixed overhead rate per output unit is computed by dividing budgeted fixed overhead costs by the level of input units.

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