Exam 11: Flexible Budgets and Overhead Analysis

Match each of the following terms with their correct description from the items listed below.* Each term may be used more than once, and it is possible that one or more of the classifications may not be used at all. -Difference between actual and budgeted fixed overhead

For which of the following is a cost formula developed for activity flexible budgeting?

Which task is NOT required when building an activity-based budget?

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

When overhead is applied on the basis of direct labour hours, the variable overhead changes in proportion to changes in the direct labour hours used.

Which department is usually assigned responsibility for the variable overhead spending variance?

Refer to Cannon Company. What is the fixed overhead spending variance for the current year?

Kelsey, Inc.Kelsey, Inc. produces plastic grocery bags. Kelsey has developed a static budget for the month of August, which is based on 9,000 direct labour hours. During the quarter, the actual activity was 10,000 direct labour hours. Data for August are summarized as follows: Direct labour \ 117,000 \ 120,000 Power (variable cost) 45,000 50,000 Salary of plant superv isor Total -Refer to Kelsey, Inc. What can be concluded when comparing the static budget to the actual costs?

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

Bridgestone Company Bridgestone Company has developed the following flexible budget formulas for its four overhead items: Variable rate per Overhead item Fixed cost direct labour hour Maintenance \ 8,000 \ 2.00 Power \ 2,000 \ 0.40 The company 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 Equipment lease \ 5,000 -Refer to Bridgestone Company. Prepare an overhead budget for the expected activity level of 10,000 units. What is the total budgeted overhead?

Bigton Company uses a standard costing system. The following monthly cost functions apply to its overhead items: Overhead Item Cost Function Indirect materials \ 0.80 per DLH Indirect labour \ 1.00 per DLH Utilities \ 0.40 per DLH Insurance \ 8,000 Depreciation \ 32,000 Information for the month of November is as follows: Actual overhead costs incurred: Indirect materials \ 20,800 Indirect labour 24,000 Utilities 9,600 Insurance 8,800 Depreciation 32,000 Total \ 95,200 Actual direct labour hours worked 24,000 Standard direct labour hours allowed for production achieved 27,000 Bigton uses expected capacity to calculate standard overhead rates. The monthly expected capacity is 25,000 hours. Required: A. Calculate the following standard overhead rates based upon expected capacity: Variable overhead rate Fixed overhead rate Total overhead rate B. Calculate the following variances: Variable overhead spending variance Variable overhead efficiency variance Fixed overhead spending variance Fixed overhead volume variance

Hallow Company uses standard costing. Overhead is applied to products on the basis of standard direct labour hours for actual production. Data for the company 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 Required: A. Calculate the variable overhead rate. B. Calculate the total variable overhead applied to production. C. Calculate the variable overhead spending variance. D. Calculate the variable overhead efficiency variance. E. Calculate the total variable overhead variance.

Why are flexible budgets powerful control tools?

Match each of the following terms with their correct description from the items listed below.* Each term may be used more than once, and it is possible that one or more of the classifications may not be used at all. -A measure of capacity utilization

In an activity flexible budget, which of the following best correlates with the variable cost component?

Refer to Jewel Company. What is the applied fixed overhead?

Which formula reflects the fixed overhead spending variance?

Activity-based budgeting assumes that activity cost varies with units of product as the single cost driver.

Within which category are the major differences between functional and activity-based budgeting found?

Shoppers Pharmacy operates a home delivery service for more than 2,000 home-bound clients. The company has a fleet of vehicles and has invested in a sophisticated computerized communications system to coordinate its deliveries. The company 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 The company 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. Required: A. Calculate the variable overhead spending variance. B. Calculate the variable overhead efficiency variance.