Exam 11: Flexible Budgets and Overhead Analysis

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 variable overhead spending variance?

An activity-based budgeting system may help support continuous improvement and process management.

The fixed overhead spending variance is affected primarily by changes in production levels.

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 fixed overhead spending variance?

When budgeting at the activity level,with respect to which of the following is the cost behaviour of each activity defined?

For what level of activity is a static budget prepared?

Static budget Actual costs (9,000 hours ) (10,000 hours ) Direct materials \ 117,000 \ 120,000 Power 45,000 50,000 Sal ary of plant supervisor 5,000 5,000 Total \ 167,000 \ 175,000 -Refer to the Figure.Which of the following can be concluded when comparing the static budget to the actual costs?

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 variance for maintenance when using an after-the-fact flexible budget?

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 Cold Cream actually produced 240,000 L of Icy and 200,000 of Tasty.The actual overhead costs incurred were: Maintenance \ 192,000 Power 181,700 Indirect labour 649,500 Rent 54,000 Required: A. Prepare a performance report for the period. B. Based on the report, would you judge any of the variances to be signi ficant? Discuss some possible reasons for the variances.

The volume variance is often interpreted as a measure of capacity utilization.

Which of the following is the result of fixed overhead being made up of many items?

Match the following terms with the items below: -Static budget

Match the following terms with the items below: -Flexible budget variance

Glassco Company is planning to produce 4,500,000 speakers for the coming year.Actual production was 4,000,000 speakers.Each speaker requires 0.80 direct labour hours per unit.Predetermined overhead rates are calculated using expected production,measured in direct labour hours.The budgeted variable overhead for the coming year is $720,000.The actual variable overhead incurred was $714,000.What was the applied variable overhead for the year?

Match the following terms with the items below: -Flexible budget

Activity flexible budgeting predicts what activity costs will be as direct labour hours change.

The first step of building an activity-based budget is to identify the activities within an organization.

Optimum Company uses standard costing for direct materials and direct labour.Management would like to use standard costing for variable and fixed overhead. The following monthly cost functions were developed for manufacturing overhead items: Overhead Item Cost Function Indirect materials \ 1.00 per DLH Indirect labour \ 1.25 per DLH Utilities \ 0.50 per DLH Insurance \ 10,000 Depreciation \ 40,000 The cost functions are considered reliable within a relevant range of 20,000 to 40,000 direct labour hours.The company expects to operate at 25,000 direct labour hours per month. Information for the month of June is as follows: Actual overhead costs incurred: Indirect materials \ 20,000 Indirect labour 30,000 Utilities 12,000 Insurance 11,000 Depreciation 40,000 Total \1 13,000 Actual direct labour hours worked: 24,000 Standard direct labour hours allowed for production achieved: 27,000 Required: A. Calculate the following standard manufacturing overhead rates based upon expected capacity: 1. Variable manufacturing overhead 2. Fixed manufacturing overhead rate 3. Total manufacturing overhead rate B. Calculate the following variances: 1. Variable overhead spending variance 2. Variable overhead efficiency variance 3. Fixed overhead spending variance 4. Fixed overhead volume variance

Suppose a company's variable manufacturing overhead is applied on the basis of direct labour hours,and the company has an unfavourable direct labour efficiency variance.Which of the following is most likely to result?

Practical capacity is always used to calculate fixed overhead rates.