Exam 11: Flexible Budgets and Overhead Analysis

What does the variable overhead efficiency variance claim to measure?

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

Bigton Company uses a standard costing system.The following monthly cost functions apply to its manufacturing overhead items: Information for the month of November is as follows: 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 Bigton uses expected capacity to calculate standard overhead rates.The monthly expected capacity is 25,000 hours. 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

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

Activity-based budgeting builds a budget for each activity based on the resources needed to provide the required activity output levels.

Cannon Company's standard fixed overhead cost is $5 per direct labour hour on the basis of budgeted fixed costs of $500,000. The standard allows one direct labour hour per unit. During the current year, Cannon produced 110,000 units of product, incurred $550,000 of fixed overhead costs, and recorded 212,000 actual hours of direct labour. -Refer to the Figure.What is the standard activity level on which Cannon based its fixed overhead rate?

Jewel Company calculates its predetermined rates using practical volume, which is 300,000 units. The standard cost system allows two direct labour hours per unit produced. Overhead is applied using direct labour hours. The total budgeted overhead is $3,200,000 of which $900,000 is fixed overhead. The actual results for the year are as follows: Units produced: 280,000 Direct labour: 570,000 hours @\ 9 per hour Variable overhead: \ 2,320,000 Fixed overhead: \ 872,000 -Refer to the Figure.What is the fixed overhead spending variance?

Just Bags produces leather purses. Just Bags has developed a static budget for the first quarter, which is based on 20,000 direct labour hours. During the quarter, the actual activity was 22,000 direct labour hours. Data for the first quarter are summarized as follows: Static budget Actual costs (20,000 hours ) (22,000 hours ) Direct materials \ 80,000 \ 87,000 Direct labour 160,000 174,000 Rent 48,000 50,000 Total \ 288,000 \ 311,000 -Refer to the Figure.Which of the following can be concluded when comparing the static budget to the actual outcomes?

How is variable overhead applied in a standard cost system?

For a static activity budget in a company already using an ABC or ABM system,the activities within the organization must be identified.

Which of the following is characteristic of a performance report?

Hyphen Corporation uses a standard costing system. Information for the month of June is as follows: 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: 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 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?

How does one create a meaningful performance report?

Price changes of variable overhead items are easily controlled by production supervisors.

Cannon Company's standard fixed overhead cost is $5 per direct labour hour on the basis of budgeted fixed costs of $500,000. The standard allows one direct labour hour per unit. During the current year, Cannon produced 110,000 units of product, incurred $550,000 of fixed overhead costs, and recorded 212,000 actual hours of direct labour. -Refer to the Figure.What is Cannon's fixed overhead spending variance for the current year?

Bridgestone Company has developed the following flexible budget formulas for its four overhead items: 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 total budget variance?

Bridgestone Company has developed the following flexible budget formulas for its four overhead items: 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.Prepare an overhead budget for the expected activity level of 10,000 units.What is the total budgeted overhead?

The variable overhead variance is affected by both input price changes and by how efficiently overhead is used.

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.

Jewel Company calculates its predetermined rates using practical volume, which is 300,000 units. The standard cost system allows two direct labour hours per unit produced. Overhead is applied using direct labour hours. The total budgeted overhead is $3,200,000 of which $900,000 is fixed overhead. The actual results for the year are as follows: Units produced: 280,000 Direct labour: 570,000 hours @\ 9 per hour Variable overhead: \ 2,320,000 Fixed overhead: \ 872,000 -Refer to the Figure.What is the fixed overhead volume variance?