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

Cold Products Corporation manufactured 34,000 ice chests during September.The variable overhead cost-allocation base is $14.50 per machine-hour.The following variable overhead data pertain to September: Actual Budgeted Production 34,000 units 30,000 units Machine-hours 15,200 hours 10,800 hours Variable overhead cost per machine-hour: \ 14,00 \ 14.50 What is the actual variable overhead cost?

If fixed overhead cost variances are always written off to Cost of Goods Sold,operating income can be manipulated for either financial reporting or income tax purposes.

Standard costing is a cost system that allocates overhead costs on the basis of overhead cost rates based on actual overhead costs times the standard quantities of the allocation bases allowed for the actual outputs produced.

Define variable overhead spending variance.Briefly explain why a favorable variable overhead spending variance may not always be desirable.

A favorable production-volume variance arises when manufacturing capacity planned for is NOT used.

When variances are immaterial,which of the following statements is true of the journal entry to write-off the variable overhead variance accounts?

All of the following are possible causes of actual machine hours exceeding budgeted machine hours except:

Neon Company manufactured 2,500 units during April with a total overhead budget of $55,000.However,while manufacturing the 2,500 units the microcomputer that contained the month's cost information broke down.With the computer out of commission,the accountant has been unable to complete the variance analysis report.The information missing from the report is lettered in the following set of data: Variable overhead: Fixed overhead: Required: Compute the missing elements in the report represented by the lettered items.

Service-sector companies have no use of variance analysis as only few costs can be traced to their outputs in a cost effective way.

Raposa,Inc. ,produces a special line of plastic toy racing cars.Raposa,Inc. ,produces the cars in batches.To manufacture a batch of the cars,Raposa,Inc. ,must set up the machines and molds.Setup costs are batch-level costs because they are associated with batches rather than individual units of products.A separate Setup Department is responsible for setting up machines and molds for different styles of car. Setup overhead costs consist of some costs that are variable and some costs that are fixed with respect to the number of setup-hours.The following information pertains to June 2015: Calculate the production-volume variance for fixed overhead setup costs.(Round all intermediary calculations to two decimal places and your final answer to the nearest whole number. )

Explain how service-sector companies can benefit from variance analysis.