Question 1

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  True

Question 2

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. C

Question 3

Using a standard costing system makes it possible to use a simple recording system.

Accepted Answer

A) True 
 B)False  True

Question 4

The chapter shows that variance analysis of overhead costs can be presented in 4-, 3-, 2-, and 1-variance analysis. Explain what each of the variances presented under each method shows about overhead costs.

Accepted Answer

Under the 4-variance analysis, there is

Question 5

Budgeted output for DuCane Small Engines Inc. was 20,000 engines during February 2012. Budgeted fixed overhead per output unit was $2.50, and 30,000 engines were actually produced. Actual fixed overhead was allocated at $3.00 per engine. What is the production-volume overhead variance?

Accepted Answer

A)  $33,500 favourable 
B)  $25,000 unfavourable 
C)  $30,000 favourable 
D)  $30,000 unfavourable 
E)  $25,000 favourable 
A)  $33,500 favourable 
B)  $25,000 unfavourable 
C)  $30,000 favourable 
D)  $30,000 unfavourable 
E)  $25,000 favourable

Question 6

Which of the following journal entries is correct with respect to recording the fixed overhead cost variances for April?

Accepted Answer

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

Question 7

Capacity decisions are considered operating decisions because they involve the long-term acquisition of assets by purchase or lease.

Accepted Answer

A) True 
 B)False

Question 8

The (production) denominator level is the quantity of the allocation base used to allocate fixed overhead costs to a cost object in developing a budgeted fixed overhead rate.

Accepted Answer

A) True 
 B)False

Question 9

Davis Company produced 20,000 cases of beer. Machinery usage is 1.5 hours per case. Budget outputs are 22,000 cases. What are the required static budget machine hour inputs and flexible budget machine hour inputs, respectively?

Accepted Answer

A)  30,000 Machine hours, 33,000 Machine hours 
B)  33,000 Machine hours, 30,000 Machine hours 
C)  39,000 Machine hours, 34,000 Machine hours 
D)  34,000 Machine hours, 39,000 Machine hours 
E)  39,000 Machine hours, 33,000 Machine hours 
A)  30,000 Machine hours, 33,000 Machine hours 
B)  33,000 Machine hours, 30,000 Machine hours 
C)  39,000 Machine hours, 34,000 Machine hours 
D)  34,000 Machine hours, 39,000 Machine hours 
E)  39,000 Machine hours, 33,000 Machine hours

Question 10

Everjoice Company makes clocks. The budgeted fixed overhead costs for 2012 total $720,000. The company uses direct labour-hours for fixed overhead allocation and anticipates 240,000 hours during the year for 480,000 units. An equal number of units are budgeted for each month.
During June, 42,000 clocks were produced and $63,000 were spent on fixed overhead.
Required:
a. Determine the fixed overhead rate for 2012 based on units of input.
b. Determine the fixed overhead static-budget variance for June.
c. Determine the production-volume overhead variance for June.

Accepted Answer

a. Fixed overhead rate = $720,000/240,00

Question 11

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.
   B. Budgeted amounts for April 2012 are:
   C. Actual amounts for April 2012 are:
  
-What is the fixed manufacturing overhead rate variance?

Accepted Answer

A)  $10,000 favourable 
B)  $10,000 unfavourable 
C)  $13,500 unfavourable 
D)  $13,500 favourable 
E)  $14,625 favourable 
A)  $10,000 favourable 
B)  $10,000 unfavourable 
C)  $13,500 unfavourable 
D)  $13,500 favourable 
E)  $14,625 favourable

Question 12

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

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Answer the following question(s) 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 fixed overhead rate variance?

Accepted Answer

A)  $1,000 unfavourable 
B)  $2,000 favourable 
C)  $3,000 unfavourable 
D)  $5,000 favourable 
E)  $983 unfavourable 
A)  $1,000 unfavourable 
B)  $2,000 favourable 
C)  $3,000 unfavourable 
D)  $5,000 favourable 
E)  $983 unfavourable

Question 15

The production -volume overhead variance is favourable when actual outputs exceed the denominator level.

Accepted Answer

A) True 
 B)False

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.
   B. Budgeted amounts for April 2012 are:
   C. Actual amounts for April 2012 are:
  
-What is the variable manufacturing overhead rate variance?

Accepted Answer

A)  $30,000 unfavourable 
B)  $28,500 favourable 
C)  $20,000 unfavourable 
D)  $16,000 favourable 
E)  $16,000 unfavourable 
A)  $30,000 unfavourable 
B)  $28,500 favourable 
C)  $20,000 unfavourable 
D)  $16,000 favourable 
E)  $16,000 unfavourable

Question 17

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 rate variance for variable setup overhead costs.

Accepted Answer

A)  $150 unfavourable 
B)  $150 favourable 
C)  $264 unfavourable 
D)  $264 favourable 
E)  $114 favourable 
A)  $150 unfavourable 
B)  $150 favourable 
C)  $264 unfavourable 
D)  $264 favourable 
E)  $114 favourable

Question 18

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

Accepted Answer

The variable overhead rate variance is t

Question 19

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 20

Human capital refers to the intangible skills provided by people and is an inventoriable cost under GAAP.

Accepted Answer

A) True 
 B)False

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

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

Using a standard costing system makes it possible to use a simple recording system.

The chapter shows that variance analysis of overhead costs can be presented in 4-, 3-, 2-, and 1-variance analysis. Explain what each of the variances presented under each method shows about overhead costs.

Budgeted output for DuCane Small Engines Inc. was 20,000 engines during February 2012. Budgeted fixed overhead per output unit was $2.50, and 30,000 engines were actually produced. Actual fixed overhead was allocated at $3.00 per engine. What is the production-volume overhead variance?

Which of the following journal entries is correct with respect to recording the fixed overhead cost variances for April?

Capacity decisions are considered operating decisions because they involve the long-term acquisition of assets by purchase or lease.

The (production) denominator level is the quantity of the allocation base used to allocate fixed overhead costs to a cost object in developing a budgeted fixed overhead rate.

Davis Company produced 20,000 cases of beer. Machinery usage is 1.5 hours per case. Budget outputs are 22,000 cases. What are the required static budget machine hour inputs and flexible budget machine hour inputs, respectively?

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

The production -volume overhead variance is favourable when actual outputs exceed the denominator level.

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

Human capital refers to the intangible skills provided by people and is an inventoriable cost under GAAP.

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

Quantitative Analyses of Cost Functions

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

Cost Management: Quality, Time, and the Theory of Constraints

Inventory Cost Management Strategies

Capital Budgeting: Methods of Investment Analysis

Capital Budgeting: a Closer Look

Transfer Pricing and Multinational Management Control Systems

Multinational Performance Measurement and Compensation

Filters

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

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

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

Using a standard costing system makes it possible to use a simple recording system.

The chapter shows that variance analysis of overhead costs can be presented in 4-, 3-, 2-, and 1-variance analysis. Explain what each of the variances presented under each method shows about overhead costs.

Budgeted output for DuCane Small Engines Inc. was 20,000 engines during February 2012. Budgeted fixed overhead per output unit was $2.50, and 30,000 engines were actually produced. Actual fixed overhead was allocated at $3.00 per engine. What is the production-volume overhead variance?

Which of the following journal entries is correct with respect to recording the fixed overhead cost variances for April?

Capacity decisions are considered operating decisions because they involve the long-term acquisition of assets by purchase or lease.

The (production) denominator level is the quantity of the allocation base used to allocate fixed overhead costs to a cost object in developing a budgeted fixed overhead rate.

Davis Company produced 20,000 cases of beer. Machinery usage is 1.5 hours per case. Budget outputs are 22,000 cases. What are the required static budget machine hour inputs and flexible budget machine hour inputs, respectively?

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

The production -volume overhead variance is favourable when actual outputs exceed the denominator level.

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

Human capital refers to the intangible skills provided by people and is an inventoriable cost under GAAP.

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

Quantitative Analyses of Cost Functions

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

Cost Management: Quality, Time, and the Theory of Constraints

Inventory Cost Management Strategies

Capital Budgeting: Methods of Investment Analysis

Capital Budgeting: a Closer Look

Transfer Pricing and Multinational Management Control Systems

Multinational Performance Measurement and Compensation

Filters