Exam 11: Flexible Budgets and Overhead Analysis

Shoppers Pharmacy operates a home delivery service for more than 2,000 home-bound clients.Shoppers has a fleet of vehicles and has invested in a sophisticated computerized communications system to coordinate its deliveries.Shoppers has gathered the following data on last year's operations: Deliveries made: 22,000 Direct labour: 15,500 delivery hours at \ 8 per hour Actual variable overhead: \ 150,000 Shoppers uses a standard costing system.During the year,the following variable overhead rate was used: $8.25 per delivery hour.The labour standard requires 0.80 hour per delivery. Compute the variable overhead spending variance and the variable overhead efficiency variance.

Which budget is prepared for a particular level of activity?

Hallow Company uses standard costing.Overhead is applied to products on the basis of standard direct labour hours for actual production.Data for Hallow follows: Standard direct labour hours allowed for actual output 110,000 Actual direct labour hours 115,000 Direct labour hours budgeted in the master budget 120,000 Budgeted total variable overhead cost \ 360,000 Actual variable overhead cost \ 328,000 A. $\quad$ Calculate the variable overhead rate. B. $\quad$ Calculate the total variable overhead applied to production. C. $\quad$ Calculate the variable overhead spending variance. D. $\quad$ Calculate the variable overhead efficiency variance. E. $\quad$ Calculate the total variable overhead variance.

Activity-based budgeting focuses on cost items required by organizational units.

How is the standard fixed overhead rate often calculated?

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.When using an after-the-fact flexible budget,what is the variance for power?

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 the standard activity level on which Cannon based its fixed overhead rate?

In an activity framework,what do controlling costs translate into?

Activity-based budgeting assumes that activity cost varies with units of product.

At the beginning of the year,Goodman Company had the following standard cost sheet for one of its food products: Direct materials (10 kg @3.20 per kilogram) \ 32.00 Direct labour (4 hours @\ 9.00 per hour) 36.00 Fixed overhead (4 hours @\ 4.00 per hour) 16.00 Variable overhead (4 hours @,\ 0.75 per hour) 3.00 Standard cost per unit \ 87.00 Goodman computes its overhead rates using practical volume,which is 72,000 units.The actual results for the year are: Units produced 70,000 Direct labour hours 290,000 Actual wage per hour \ 9.05 Fixed overhead \ 1,160,000 Variable overhead \ 218,000 A. Compute the fixed overhead spending and volume vari ances. B. Compute the variable overhead spending and efficiency variances.

Activity-based budgeting classifies costs as direct or indirect with respect to the activity output measure.

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 applied fixed overhead?

What is the fixed overhead volume variance? Suppose that the fixed overhead volume variance is unfavourable; what does that mean?

Which relationship represents fixed overhead budgeted at the beginning of the year?

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.What is the flexible budget variance for August?

Long,Inc.produces small engines.For last year's operations,the following data were gathered: Units produced: 100,000 Direct labour: 160,000 hours (\ 12.00 per hour Actual variable overhead: \ 1,300,000 Long,Inc.employs a standard costing system.During the year,a variable overhead rate of $8.00 per hour was used.The labour standard requires 1.5 hours per unit produced.What are the variable overhead spending and efficiency variances,respectively?

Which of the following is characteristic of a before-the-fact flexible budget?

A static budget is used to measure the efficiency of a manager,whereas a flexible budget is used to measure the effectiveness of a manager.

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 the fixed overhead spending variance for Hyphen?

Match the following terms with the items below: -Fixed overhead volume variance