Question 1

Causes of a favorable variable overhead efficiency variance might include using lower-skilled workers than expected.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

Variance analysis of fixed nonmanufacturing costs, such as distribution costs, can also be useful when planning for capacity.

Accepted Answer

A) True 
 B)False

Question 4

Answer the following questions using the information below:
Russo Corporation manufactured 16,000 air conditioners during November. The overhead cost-allocation base is $31.50 per machine-hour. The following variable overhead data pertain to November:
  
-What is the variable overhead spending variance?

Accepted Answer

A) $4,500 unfavorable 
B) $3,937.50 unfavorable 
C) $4,500 favorable 
D) $3,937.50 favorable 
A) $4,500 unfavorable 
B) $3,937.50 unfavorable 
C) $4,500 favorable 
D) $3,937.50 favorable

Question 5

Answer the following questions using the information below:
  
-In a 2-variance analysis the flexible-budget variance and the production-volume variance should be ________, respectively.

Accepted Answer

A) $11,000 U; $110,000 U 
B) $41,000 U; $80,000 U 
C) $21,000 U; $100,000 U 
D) $121,000 U; Zero 
A) $11,000 U; $110,000 U 
B) $41,000 U; $80,000 U 
C) $21,000 U; $100,000 U 
D) $121,000 U; Zero

Question 6

Fixed overhead is:

Accepted Answer

A) overallocated by $4,000 
B) underallocated by $4,000 
C) overallocated by $44,000 
D) underallocated by $44,000 
A) overallocated by $4,000 
B) underallocated by $4,000 
C) overallocated by $44,000 
D) underallocated by $44,000

Question 7

For fixed overhead costs, the flexible-budget amount is always the same as the static-budget amount.

Accepted Answer

A) True 
 B)False

Question 8

Overhead costs are a major part of costs for most companiesmore than 50% of all costs for some companies.

Accepted Answer

A) True 
 B)False

Question 9

Answer the following questions using the information below:
Munoz, Inc., produces a special line of plastic toy racing cars. Munoz, Inc., produces the cars in batches. To manufacture a batch of the cars, Munoz, Inc., must set up 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 2011:
  
-Calculate the production-volume variance for fixed setup overhead costs.

Accepted Answer

A) $3,325 unfavorable 
B) $400 unfavorable 
C) $3,325 favorable 
D) $400 favorable 
A) $3,325 unfavorable 
B) $400 unfavorable 
C) $3,325 favorable 
D) $400 favorable

Question 10

Answer the following questions using the information below:
Jenny's Corporation manufactured 25,000 grooming kits for horses during March. The fixed-overhead cost-allocation rate is $20.00 per machine-hour. The following fixed overhead data pertain to March:
  
-What is the amount of fixed overhead allocated to production?

Accepted Answer

A) $120,000 
B) $122,000 
C) $123,000 
D) $125,000 
A) $120,000 
B) $122,000 
C) $123,000 
D) $125,000

Question 11

A favorable fixed overhead spending variance might indicate that:

Accepted Answer

A) more capacity was used than planned 
B) the denominator level was less than planned 
C) the fixed overhead cost-allocation base was not used efficiently 
D) a plant expansion did not proceed as originally planned 
A) more capacity was used than planned 
B) the denominator level was less than planned 
C) the fixed overhead cost-allocation base was not used efficiently 
D) a plant expansion did not proceed as originally planned

Question 12

Answer the following questions using the information below:
Roberson Corporation manufactured 30,000 ice chests during September. The overhead cost-allocation base is $11.25 per machine-hour. The following variable overhead data pertain to September:
  
-What is the variable overhead spending variance?

Accepted Answer

A) $3,750 favorable 
B) $16,875 unfavorable 
C) $13,125 unfavorable 
D) $30,375 unfavorable 
A) $3,750 favorable 
B) $16,875 unfavorable 
C) $13,125 unfavorable 
D) $30,375 unfavorable

Question 13

Answer the following questions using the information below:
  
-In a 3-variance analysis the spending variance should be:

Accepted Answer

A) $ 9,000 F 
B) $20,000 U 
C) $11,000 U 
D) $21,000 U 
A) $ 9,000 F 
B) $20,000 U 
C) $11,000 U 
D) $21,000 U

Question 14

For purposes of allocating fixed overhead costs to products, managers may view the fixed overhead costs as if they had a variable-cost behavior pattern.

Accepted Answer

A) True 
 B)False

Question 15

An unfavorable production-volume variance always infers that management made a bad planning decision regarding the plant capacity.

Accepted Answer

A) True 
 B)False

Question 16

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 
A) allocated costs 
B) budgeted costs 
C) fixed costs 
D) variable costs

Question 17

Answer the following questions using the information below:
Russo Corporation manufactured 16,000 air conditioners during November. The overhead cost-allocation base is $31.50 per machine-hour. The following variable overhead data pertain to November:
  
-What is the variable overhead efficiency variance?

Accepted Answer

A) $3,937.50 favorable 
B) $3,937.50 unfavorable 
C) $4,500 favorable 
D) $4,500 unfavorable 
A) $3,937.50 favorable 
B) $3,937.50 unfavorable 
C) $4,500 favorable 
D) $4,500 unfavorable

Question 18

Answer the following questions using the information below:
Brown Corporation manufactured 3,000 chairs during June. The following variable overhead data pertain to June:
  
-What is the variable overhead spending variance?

Accepted Answer

A) $1,680 unfavorable 
B) $2,400 favorable 
C) $2,400 unfavorable 
D) $3,120 favorable 
A) $1,680 unfavorable 
B) $2,400 favorable 
C) $2,400 unfavorable 
D) $3,120 favorable

Question 19

Answer the following questions using the information below:
Munoz, Inc., produces a special line of plastic toy racing cars. Munoz, Inc., produces the cars in batches. To manufacture a batch of the cars, Munoz, Inc., must set up 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 2011:
  
-Calculate the efficiency variance for variable setup overhead costs.

Accepted Answer

A) $1,900 unfavorable 
B) $600 unfavorable 
C) $1,900 favorable 
D) $600 favorable 
A) $1,900 unfavorable 
B) $600 unfavorable 
C) $1,900 favorable 
D) $600 favorable

Question 20

Answer the following questions using the information below:
Gus Corporation manufactured 10,000 golf bags during April. The fixed overhead cost-allocation rate is $40.00 per machine-hour. The following fixed overhead data pertain to March:
  
-An unfavorable production-volume variance of $20,000 indicates that the company has:

Accepted Answer

A) unused fixed manufacturing overhead capacity 
B) overallocated $20,000 of fixed manufacturing overhead costs 
C) $20,000 more capacity than needed 
D) an economic loss of $20,000 from selling fewer products than planned 
A) unused fixed manufacturing overhead capacity 
B) overallocated $20,000 of fixed manufacturing overhead costs 
C) $20,000 more capacity than needed 
D) an economic loss of $20,000 from selling fewer products than planned

Causes of a favorable variable overhead efficiency variance might include using lower-skilled workers than expected.

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

Variance analysis of fixed nonmanufacturing costs, such as distribution costs, can also be useful when planning for capacity.

Answer the following questions using the information below: -In a 2-variance analysis the flexible-budget variance and the production-volume variance should be ________, respectively.

Fixed overhead is:

For fixed overhead costs, the flexible-budget amount is always the same as the static-budget amount.

Overhead costs are a major part of costs for most companiesmore than 50% of all costs for some companies.

A favorable fixed overhead spending variance might indicate that:

Answer the following questions using the information below: Roberson Corporation manufactured 30,000 ice chests during September. The overhead cost-allocation base is $11.25 per machine-hour. The following variable overhead data pertain to September: -What is the variable overhead spending variance?

Answer the following questions using the information below: -In a 3-variance analysis the spending variance should be:

For purposes of allocating fixed overhead costs to products, managers may view the fixed overhead costs as if they had a variable-cost behavior pattern.

An unfavorable production-volume variance always infers that management made a bad planning decision regarding the plant capacity.

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

Answer the following questions using the information below: Brown Corporation manufactured 3,000 chairs during June. The following variable overhead data pertain to June: -What is the variable overhead spending variance?

The Accountants Role in the Organization

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, Direct-Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Pricing Decisions and Cost Management

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, Common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, Rework, and Scrap

Balanced Scorecard: Quality, Time, and the Theory of Constraints

Inventory Management, Just-In-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing, and Multinational Considerations

Performance Measurement, Compensation, and Multinational Considerations

Filters

Exam 8: Flexible Budgets, Overhead Cost Variances, and Management Control

Causes of a favorable variable overhead efficiency variance might include using lower-skilled workers than expected.

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

Variance analysis of fixed nonmanufacturing costs, such as distribution costs, can also be useful when planning for capacity.

Answer the following questions using the information below: -In a 2-variance analysis the flexible-budget variance and the production-volume variance should be ________, respectively.

Fixed overhead is:

For fixed overhead costs, the flexible-budget amount is always the same as the static-budget amount.

Overhead costs are a major part of costs for most companiesmore than 50% of all costs for some companies.

A favorable fixed overhead spending variance might indicate that:

Answer the following questions using the information below: -In a 3-variance analysis the spending variance should be:

For purposes of allocating fixed overhead costs to products, managers may view the fixed overhead costs as if they had a variable-cost behavior pattern.

An unfavorable production-volume variance always infers that management made a bad planning decision regarding the plant capacity.

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

Answer the following questions using the information below: Brown Corporation manufactured 3,000 chairs during June. The following variable overhead data pertain to June: -What is the variable overhead spending variance?

The Accountants Role in the Organization

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, Direct-Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Pricing Decisions and Cost Management

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, Common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, Rework, and Scrap

Balanced Scorecard: Quality, Time, and the Theory of Constraints

Inventory Management, Just-In-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing, and Multinational Considerations

Performance Measurement, Compensation, and Multinational Considerations

Filters