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: 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. Deliveries made: 22,000 Direct labour: 15,500 delivery hours at \ 8 per hour Actual variable overhead: \ 150,000

Where are the major differences found between activity-based budgeting and traditional budgeting?

Match the following terms with the items below: -Flexible budget variance

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. 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.

At the beginning of the year,Goodman Company had the following standard cost sheet for one of its food products: Goodman computes its overhead rates using practical volume,which is 72,000 units.The actual results for the year are: 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 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.

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

Practical capacity is always used to calculate fixed overhead rates.

What is a performance report?

Sarah Lindsay, controller for Cold Cream Company, has been instructed to develop a flexible budget for overhead costs. The company produces two types of frozen desserts: Icy and Tasty. The two desserts use common raw materials in different proportions. The company expects to produce 200,000 L of each product during the coming year. Icy requires 0.25 direct labour hours per litre, and Tasty requires 0.30. Sarah has developed the following fixed and variable costs for each of the four overhead items: -Refer to the Figure.Prepare an annual budget for the activity,assuming that all of the capacity of the activity is used (use kilometres as the activity driver).Identify which resources you would treat as fixed costs and which would be viewed as variable costs.

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

HyTech Production Company uses a standard costing system.The following information pertains to the current year. The factory overhead rate is based on an activity level of 10,000 units.Standard cost data for 5,000 units is as follows: Actual factory overhead costs (\ 16,500 is fixed) \4 0,125 Actual direct labour costs (11,250 hours ) \1 31,625 Standard direct labour for 5,500 units: Standard hours allowed 11,000 hours Labour rate \1 2.00 What is the variable overhead efficiency variance for HyTech Production Company? Variable factory overhead \ 22,500 Fixed factory overhead 13,500 Total factory overhead \ 36,000

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 variable overhead efficiency variance?

What is the best use of a static budget?

In an activity framework,recording costs is equivalent to managing activities.

Allegiant Company uses standard costing.Overhead is applied to products on the basis of standard direct labour hours for actual production.Data for Allegiant follows: Standard direct labour hours allowed for actual output 100,000 Actual direct labour hours 125,000 Direct labour hours budgeted in the master budget 140,000 Budgeted total fixed overhead cost \ 280,000 Actual fixed overhead cost \ 300,000 A. Calculate the fixed overhead rate. B. Calculate the total fixed overhead applied to production. C. Calculate the fixed overhead spending variance. D. Calculate the fixed overhead volume variance. E. Calculate the total fixed overhead variance.

Which budget is prepared for a particular level of activity?

Suppose a company had actual fixed overhead of $99,500,a $3,100 favourable spending variance,and a $700 unfavourable volume variance.What would be the budgeted fixed overhead?

Which of the following tasks is NOT required when building an activity-based budget?

The variable cost component for each activity should correspond to the committed resources.

During the year,Plasticine produced 10,000 units,used 21,000 direct labour hours,and incurred variable overhead of $100,000.Budgeted variable overhead for the year was $88,000.The hours allowed per unit are 2.1.The standard variable overhead rate is $4.10 per direct labour hour.What was the variable overhead spending variance?