Exam 8: Flexible Budgets, overhead Cost Variances, and Management Control

Cold Products Corporation manufactured 32,000 ice chests during September.The variable overhead cost-allocation base is $13.45 per machine-hour.The following variable overhead data pertain to September: Actual Budgeted Production 32,000 units 26,000 units Machine-hours 15,200 hours 10,800 hours Variable overhead cost per machine-hour: \ 13,25 \ 13,45 What is the variable overhead spending variance?

Explain how fixed manufacturing overhead costs are treated under Generally Accepted Accounting Principles?

An effective plan for variable overhead costs will eliminate activities that do not add value.

Skytalk Company manufactures weathervanes.The 2015 operating budget is based on the production of 5,300 weathervanes with 1.25 machine-hour allowed per weathervane.Variable manufacturing overhead is anticipated to be $145,750. Actual production for 2015 was 5,250 weathervanes using 6,050 machine-hours.Actual variable costs were $21.75 per machine-hour. Required: Calculate the variable overhead spending and the efficiency variances.

Can the variable overhead efficiency variance a.be computed the same way as the efficiency variance for direct-cost items? b.be interpreted the same way as the efficiency variance for direct-cost items? Explain.

Effective planning of variable overhead costs includes ________.

An unfavorable production-volume variance ________.

Fixed overhead costs ________.

Which of the following is the correct mathematical expression is used to calculate variable overhead efficiency variance?

Which of the following is a component of sales-volume variance?

Fixed costs for the period are by definition a lump sum of costs that remain unchanged and therefore the fixed overhead spending variance is always zero.

Lancelot Corporation manufactures tennis gear and uses budgeted machine-hours to allocate variable manufacturing overhead.The following information relates to the company's manufacturing overhead data: Actual output units produced 8,500 units Actual machine-hours used 23,750 hours Actual variable manufacturing overhead costs \ 250,000 What is the flexible-budget amount for variable manufacturing overhead?

Explain why there is no production-volume variance for variable manufacturing overhead costs.

Effective planning of fixed overhead costs includes ________.

The production-volume variance may also be referred to as the ________.

Russo Corporation manufactured 17,000 air conditioners during November.The overhead cost-allocation base is $34.75 per machine-hour.The following variable overhead data pertain to November: Actual Budgeted Production 17,000 units 20,000 units Machine-hours 12,925 hours 14,000 hours Variable overhead cost per machine-hour: \ 34,00 \ 34.75 What is the actual variable overhead cost?

Which of the following statements is true of fixed overhead cost variances?

River Falls Company uses a flexible budget for its indirect manufacturing costs.For 2017,the company anticipated that it would produce 27,000 units with 4,800 machine-hours and 8,000 employee days.The costs and cost drivers were to be as follows: During the year,the company processed 26,500 units,worked 8,200 employee days,and had 4,850 machine-hours.The actual costs for 2017 were: Required: a.Prepare the static budget using the overhead items above and then compute the static-budget variances. b.Prepare the flexible budget using the overhead items above and then compute the flexible-budget variances.

What are the two components of sales-volume variance? Explain why sales-volume variance could be helpful to managers.

When forecasting fixed costs,managers should concentrate on total lump-sum costs instead of unitized fixed overhead costs.