Exam 11: Flexible Budgets and Overhead Analysis

Which of the following is NOT one of the three steps in building an activity-based budget?

Allegiant Company uses standard costing.Overhead is applied to products on the basis of standard direct labour hours for actual production.Data for Allegiant follows: Standard direct labour hours allowed for actual output 100,000 Actual direct labour hours 125,000 Direct labour hours budgeted in the master budget 140,000 Budgeted total fixed overhead cost \ 280,000 Actual fixed overhead cost \ 300,000 A. $\quad$ Calculate the fixed overhead rate. B. $\quad$ Calculate the total fixed overhead applied to production. C. $\quad$ Calculate the fixed overhead spending variance. D. $\quad$ Calculate the fixed overhead volume variance. E. $\quad$ Calculate the total fixed overhead variance.

items: Overhead item Fixed cost Variable rate per direct labour hour Maintenance \ 8,000 \ 2.00 Power \ 2,000 \ 0.40 Direct labour \ 10.00 Equipment lease \ 5,000 Bridgestone normally produces 10,000 units (each unit requires 0.10 direct labour hours); however,this year 15,000 units were produced with the following actual costs: Overhead item Actual costs Maintenance \ 14,000 Power \ 3,600 Direct labour \ 16,000 Equipment lease \ 5,000 -Refer to the Figure.What is the predetermined variable overhead rate?

Which of the following is characteristic of a performance report?

Match the following terms with the items below: -Variable overhead efficiency variance

Why are flexible budgets powerful control tools?

In an activity flexible budget,what does the fixed cost component typically correspond to?

Static budgets are the best benchmarks for preparing a performance report.

Hyphen Corporation uses a standard costing system.Information for the month of June is as follows: Actual manufacturing overhead costs (\ 26,000 is fixed) \8 0,000 Direct labour: Actual hours worked 12,000 hours Standard hours allowed for actual production 10,000 hours Average actual labour cost per hour \ 18 The factory overhead rate is based on a normal volume of 12,000 direct labour hours.Standard cost data at 12,000 direct labour hours were as follows: Variable factory overhead \ 48,000 Fixed factory overhead 24,000 Total factory overhead \ 72,000 -Refer to the Figure.What is Cannon's fixed overhead spending variance for the current year?

items: Overhead item Fixed cost Variable rate per direct labour hour Maintenance \ 8,000 \ 2.00 Power \ 2,000 \ 0.40 Direct labour \ 10.00 Equipment lease \ 5,000 Bridgestone normally produces 10,000 units (each unit requires 0.10 direct labour hours); however,this year 15,000 units were produced with the following actual costs: Overhead item Actual costs Maintenance \ 14,000 Power \ 3,600 Direct labour \ 16,000 Equipment lease \ 5,000 -Refer to the Figure.What is the after-the-fact budget for the actual level of activity?

Overhead Item Fixed Cost Variable Rate per DLH Maintenance \ 52,000 \ 1.20 Power 1.50 Indirect labour 79,500 4.80 Rent 54,000 -Refer to the Figure.Assume that the company uses only 90% of the activity capacity.The actual costs incurred at this level were as follows: Salaries \ 252,000 Lease 36,000 Crates 200,000 Fuel 20,400 A. $\quad$ What is the budget for this level of activity? B. $\quad$ Prepare a performance report.

Because activities are what consume resources,activity-based budgeting may prove to be a much more powerful planning and control tool.

Which budget should be used to determine managerial effectiveness?

Hype Production Company uses a standard costing system.The following information pertains to the current year: Actual factory overhead costs (\ 16,500 is \4 0,125 fixed) Actual direct labour costs (11,250 hours ) \1 31,625 Standard direct labour for 5,500 units: Standard hours allowed 11,000 hours Labour rate \1 2.00 The factory overhead rate is based on an activity level of 10,000 units.Standard cost data for 5,000 units are as follows: Variable factory overhead \ 22,500 Fixed factory overhead 13,500 Total factory overhead \ 36,000 What is the fixed overhead volume variance for Hype Production Company?

Activity flexible budgeting is the prediction of what activity costs will be as production output changes.

Fixed overhead was budgeted at $85,000,and 10,000 direct labour hours were budgeted.Suppose the fixed overhead volume variance was $5,000 unfavourable and the fixed overhead spending variance was $1,200 favourable.What would be the fixed overhead applied?

Responsibility for variable overhead spending and efficiency variances is generally assigned to the purchasing department.

Static budget Actual costs (20,000 hours ) (22,000 hours ) Direct materials \ 80,000 \ 87,000 Direct labour 160,000 174,000 Rent 48,000 50,000 Total \ 288,000 \ 311000 -Refer to the Figure.What is the flexible budget variance for the first quarter?

Fixed costs per month \ 240,000 Variable cost per setup \ 5,400 -Refer to the Figure.What is the fuel budget for the year for moving materials?

The following standard overhead costs were developed for one of the products of Windrun Company: Variable overhead: 5 hours \times\ 4 per hour 20.00 Fixed overhead: 5 hours \times\ 15 per hour 75.00 Total standard overhead cost per unit \ 95.00 The following information is available regarding the company's operations for the period: Units produced 20,000 Direct labour 115,000 hours Overhead incurred: Variable \ 437,500 Fixed \ 1,320,000 Budgeted fixed overhead for the period is $1,350,000,and the standard fixed overhead rate is based on expected capacity of 90,000 direct labour hours. Required: A. Calculate the variable overhead spending variance and indicate whether it is favourable or unfavourable. B. Calculate the variable overhead efficiency variance and indicate whether it is favourable or unfavourable. C. Calculate the fixed overhead spending variance and indicate whether it is favourable or unfavourable. D. Calculate the fixed overhead volume variance and indicate whether it is favourable or unfavourable.