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

Jeremy's Football Manufacturing Company reported: To isolate these variances at the end of the accounting period, Jeremy would debit Fixed Manufacturing Overhead Allocated for:

Effective planning of variable overhead includes all of the following EXCEPT:

A favorable production-volume variance arises when manufacturing capacity planned for is NOT used.

The production volume variance arises only for fixed costs.

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 flexible-budget variance?

When machine-hours are used as a cost-allocation base, the item most likely to contribute to a favorable variable overhead efficiency variance is:

Teddy Company uses a standard cost system. In May, $234,000 of variable manufacturing overhead costs were incurred and the flexible-budget amount for the month was $240,000. Which of the following variable manufacturing overhead entries would have been recorded for May?

Fixed costs may have a spending variance and/or an efficiency variance.

A $5,000 unfavorable flexible-budget variance indicates that:

Variance information regarding nonmanufacturing costs can be used to:

Choosing the appropriate level of capacity:

Answer the following questions using the information below: Fearless Frank's Fertilizer Farm produces fertilizer and distributes the product by using his tanker trucks. Frank's uses budgeted fleet hours to allocate variable manufacturing overhead. The following information pertains to the company's manufacturing overhead data: -What is the flexible-budget variance for variable manufacturing overhead?

Which of the following is NOT a step in developing budgeted variable overhead rates?

A favorable fixed setup overhead spending variance could be due to higher lease costs of new setup equipment.

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 flexible-budget amount?

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 flexible-budget variance for variable setup overhead costs.

When machine-hours are used as a cost-allocation base, the item most likely to contribute to an unfavorable variable overhead efficiency variance is:

Briefly explain the meaning of the variable overhead efficiency variance and the variable overhead spending variance.

Kelly's Pillow Company manufactures pillows. The 2011 operating budget is based on production of 40,000 pillows with 0.5 machine-hour allowed per pillow. Variable manufacturing overhead is anticipated to be $440,000. Actual production for 2011 was 36,000 pillows using 19,000 machine-hours. Actual variable costs were $20 per machine-hour. Required: Calculate the variable overhead spending and efficiency variances.

What are the arguments for prorating a production-volume variance that has been deemed to be material among work-in-process, finished goods, cost and cost of goods sold as opposed to writing it all off to cost of goods sold?