Question 1

Match the following terms with the items below:
-Activity-based budgeting

Accepted Answer

A) (Actual hours − standard hours)SVOR 
B) Prediction of what activity costs will be as activity output changes 
C) A measure of capacity utilization 
D) Actual variable overhead − (SVOR × actual hours) 
E) Difference between the actual amount and the flexible budget amount
F)A budget that specifies costs for a range of activity
G)A budget for a particular level of activity
H)Estimating activity output and then assessing the cost of resources to produce this output
I)A report that compares actual with planned costs
J)Difference between actual and budgeted fixed overhead 
A) (Actual hours − standard hours)SVOR 
B) Prediction of what activity costs will be as activity output changes 
C) A measure of capacity utilization 
D) Actual variable overhead − (SVOR × actual hours) 
E) Difference between the actual amount and the flexible budget amount
F)A budget that specifies costs for a range of activity
G)A budget for a particular level of activity
H)Estimating activity output and then assessing the cost of resources to produce this output
I)A report that compares actual with planned costs
J)Difference between actual and budgeted fixed overhead

Question 2

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.
Required:
A.	Prepare an overhead budget for the expected activity level for the coming year.
B.	Prepare an overhead budget that reflects production that is 10% higher than expected (for both products).
C.	Prepare an overhead budget that reflects production that is 10% lower than expected (for both products).

Accepted Answer

The answer of Sarah Lindsay, controller for Cold Cream Company,...

Question 3

Which of the following may cause an unfavourable variable overhead spending variance?

Accepted Answer

A) the use of excessive quantities of variable overhead items 
B) the payment of lower prices for variable overhead items used 
C) the use of excessive quantities of the variable overhead allocation base 
D) the payment of higher prices for variable overhead items used 
A) the use of excessive quantities of variable overhead items 
B) the payment of lower prices for variable overhead items used 
C) the use of excessive quantities of the variable overhead allocation base 
D) the payment of higher prices for variable overhead items used

Question 4

Lifter Company uses forklifts to move materials from the store area to the production floor. The company has four forklifts, which are fully used 16 hours per day (making five moves per hour). The company works 300 days per year, running two 8-hour shifts per day. The forklift operators work 2,000 hours per year and are paid an annual salary of $45,000.
According to a recent study, each forklift uses 0.25 litres of fuel per move. The cost of fuel is $2.00 per litre.
-Refer to the Figure.Suppose that the actual moves made are 80% of the forklifts' capacity.What is the after-the-fact budgeted fuel cost?

Accepted Answer

A) $9,600 
B) $38,400 
C) $48,000 
D) $153,600 
A) $9,600 
B) $38,400 
C) $48,000 
D) $153,600

Question 5

A flexible budgetary approach can be used to emphasize cost reduction and process management.

Accepted Answer

A) True 
 B)False

Question 6

A performance report compares actual costs with external benchmarks.

Accepted Answer

A) True 
 B)False

Question 7

Why are flexible budgets powerful control tools?

Accepted Answer

A) They allow managers to set the budget at a budgeted activity level. 
B) They allow the calculation of what cost should be for the actual level of activity. 
C) They allow the preparation of historical reports. 
D) They allow the calculation of what cost should be for the budgeted level of activity. 
A) They allow managers to set the budget at a budgeted activity level. 
B) They allow the calculation of what cost should be for the actual level of activity. 
C) They allow the preparation of historical reports. 
D) They allow the calculation of what cost should be for the budgeted level of activity.

Question 8

Which budget allows the determination of expected costs for various levels of activity?

Accepted Answer

A) operational budget 
B) capital budget 
C) static budget 
D) flexible budget 
A) operational budget 
B) capital budget 
C) static budget 
D) flexible budget

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Match the following terms with the items below:
-Activity flexible budget

Accepted Answer

A) (Actual hours − standard hours)SVOR 
B) Prediction of what activity costs will be as activity output changes 
C) A measure of capacity utilization 
D) Actual variable overhead − (SVOR × actual hours) 
E) Difference between the actual amount and the flexible budget amount
F)A budget that specifies costs for a range of activity
G)A budget for a particular level of activity
H)Estimating activity output and then assessing the cost of resources to produce this output
I)A report that compares actual with planned costs
J)Difference between actual and budgeted fixed overhead 
A) (Actual hours − standard hours)SVOR 
B) Prediction of what activity costs will be as activity output changes 
C) A measure of capacity utilization 
D) Actual variable overhead − (SVOR × actual hours) 
E) Difference between the actual amount and the flexible budget amount
F)A budget that specifies costs for a range of activity
G)A budget for a particular level of activity
H)Estimating activity output and then assessing the cost of resources to produce this output
I)A report that compares actual with planned costs
J)Difference between actual and budgeted fixed overhead

Question 11

Which of the following is NOT a function of activity flexible budgeting?

Accepted Answer

A) improving performance reporting 
B) allowing the prediction of activity costs as activity output changes 
C) estimating revenues and costs by organizational units 
D) improving the ability to plan and monitor activity improvements 
A) improving performance reporting 
B) allowing the prediction of activity costs as activity output changes 
C) estimating revenues and costs by organizational units 
D) improving the ability to plan and monitor activity improvements

Question 12

An activity-based budgeting system may help support continuous improvement and process management.

Accepted Answer

A) True 
 B)False

Question 13

Activity-based budgeting assumes that activity cost varies with units of product.

Accepted Answer

A) True 
 B)False

Question 14

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:
 $\begin{array}{ll}
\text { Units produced: } & 280,000 \
\text { Direct labour: } & 570,000 \text { hours }@\$ 9 \text { per hour } \
\text { Variable overhead: } & \$ 2,320,000 \
\text { Fixed overhead: } & \$ 872,000
\end{array}$
-Refer to the Figure.What is the applied fixed overhead?

Accepted Answer

A) $840,000 
B) $855,000 
C) $864,000 
D) $910,000 
A) $840,000 
B) $855,000 
C) $864,000 
D) $910,000

Question 15

Which two costs are compared in a performance report that uses activity flexible budgeting?

Accepted Answer

A) budgeted costs for actual activity-usage levels and the actual activity costs 
B) actual activity costs and budgeted overhead costs 
C) actual overhead costs and the budgeted activity costs for actual activity-usage levels 
D) static activity budget costs and the budgeted activity costs for the actual activity-usage levels 
A) budgeted costs for actual activity-usage levels and the actual activity costs 
B) actual activity costs and budgeted overhead costs 
C) actual overhead costs and the budgeted activity costs for actual activity-usage levels 
D) static activity budget costs and the budgeted activity costs for the actual activity-usage levels

Question 16

What is the formula for the fixed overhead spending variance?

Accepted Answer

A) AFOH − SFOR × SH 
B) AFOH − SFOR × AH 
C) AFOH − BFOH 
D) (AFOH − SFOR) × SH 
A) AFOH − SFOR × SH 
B) AFOH − SFOR × AH 
C) AFOH − BFOH 
D) (AFOH − SFOR) × SH

Question 17

In an activity flexible budget,what does the variable cost component typically correspond to?

Accepted Answer

A) those resources that vary with direct labour hours 
B) resources acquired as needed 
C) resources acquired in advance of usage 
D) resources that do not change as the activity output changes 
A) those resources that vary with direct labour hours 
B) resources acquired as needed 
C) resources acquired in advance of usage 
D) resources that do not change as the activity output changes

Question 18

The variable overhead spending variance is conceptually identical to the price variances of materials and labour.

Accepted Answer

A) True 
 B)False

Question 19

What are the two variances for fixed overhead?

Accepted Answer

A) budget and efficiency 
B) efficiency and usage 
C) volume and spending 
D) usage and volume 
A) budget and efficiency 
B) efficiency and usage 
C) volume and spending 
D) usage and volume

Question 20

Activity flexible budgeting is the prediction of what activity costs will be as production output changes.

Accepted Answer

A) True 
 B)False

Match the following terms with the items below: -Activity-based budgeting

Which of the following may cause an unfavourable variable overhead spending variance?

A flexible budgetary approach can be used to emphasize cost reduction and process management.

A performance report compares actual costs with external benchmarks.

Why are flexible budgets powerful control tools?

Which budget allows the determination of expected costs for various levels of activity?

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

Match the following terms with the items below: -Activity flexible budget

Which of the following is NOT a function of activity flexible budgeting?

An activity-based budgeting system may help support continuous improvement and process management.

Activity-based budgeting assumes that activity cost varies with units of product.

Which two costs are compared in a performance report that uses activity flexible budgeting?

What is the formula for the fixed overhead spending variance?

In an activity flexible budget,what does the variable cost component typically correspond to?

The variable overhead spending variance is conceptually identical to the price variances of materials and labour.

What are the two variances for fixed overhead?

Activity flexible budgeting is the prediction of what activity costs will be as production output changes.

Introduction to Managerial Accounting

Basic Managerial Accounting Concepts

Cost Behaviour

Costvolumeprofit Analysis: a Managerial Planning Tool

Job-Order Costing

Process Costing

Activity-Based Costing and Management

Absorption and Variable Costing, and Inventory Management

Budgeting, production, cash, and Master Budget

Standard Costing: a Managerial Control Tool

Performance Evaluation and Decentralization

Short-Run Decision Making: Relevant Costing

Capital Investment Decisions

Filters

Exam 11: Flexible Budgets and Overhead Analysis

Match the following terms with the items below: -Activity-based budgeting

Which of the following may cause an unfavourable variable overhead spending variance?

A flexible budgetary approach can be used to emphasize cost reduction and process management.

A performance report compares actual costs with external benchmarks.

Why are flexible budgets powerful control tools?

Which budget allows the determination of expected costs for various levels of activity?

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

Match the following terms with the items below: -Activity flexible budget

Which of the following is NOT a function of activity flexible budgeting?

An activity-based budgeting system may help support continuous improvement and process management.

Activity-based budgeting assumes that activity cost varies with units of product.

Which two costs are compared in a performance report that uses activity flexible budgeting?

What is the formula for the fixed overhead spending variance?

In an activity flexible budget,what does the variable cost component typically correspond to?

The variable overhead spending variance is conceptually identical to the price variances of materials and labour.

What are the two variances for fixed overhead?

Activity flexible budgeting is the prediction of what activity costs will be as production output changes.

Introduction to Managerial Accounting

Basic Managerial Accounting Concepts

Cost Behaviour

Costvolumeprofit Analysis: a Managerial Planning Tool

Job-Order Costing

Process Costing

Activity-Based Costing and Management

Absorption and Variable Costing, and Inventory Management

Budgeting, production, cash, and Master Budget

Standard Costing: a Managerial Control Tool

Performance Evaluation and Decentralization

Short-Run Decision Making: Relevant Costing

Capital Investment Decisions

Filters