Question 1

Match the following terms with the items below:
-Variable overhead efficiency variance

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

Responsibility for variable overhead spending and efficiency variances is generally assigned to the purchasing department.

Accepted Answer

A) True 
 B)False

Question 3

Universal Forklifts,Inc.produces a specialized machine part used in forklifts.For last year's operations,the following data were gathered: Universal Forklifts employs a standard costing system.During the year,a variable overhead rate of $4.50 per hour was used.The labour standard requires a half hour per unit produced.What are the variable overhead spending and efficiency variances,respectively?
$\begin{array}{ll}
\text { Units produced: } & 60,000 \
\text { Direct labour: } & 30,000 \text { hours } @ \$ 9.00 \text { per hour } \
\text { Actual variable overhead: } & \$ 150,000
\end{array}$

Accepted Answer

A) $7,500 U and $10,000 F 
B) $10,000 U and $7,500 U 
C) $15,000 U and $15,000 U 
D) $15,000 F and $15,000 F 
A) $7,500 U and $10,000 F 
B) $10,000 U and $7,500 U 
C) $15,000 U and $15,000 U 
D) $15,000 F and $15,000 F

Question 4

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

Accepted Answer

A) resources that vary with direct labour hours 
B) resources that vary as the activity output changes 
C) resources acquired in advance of usage 
D) resources acquired as needed 
A) resources that vary with direct labour hours 
B) resources that vary as the activity output changes 
C) resources acquired in advance of usage 
D) resources acquired as needed

Question 5

The volume variance is often interpreted as a measure of capacity utilization.

Accepted Answer

A) True 
 B)False

Question 6

Glassco Company is planning to produce 4,500,000 speakers for the coming year.Actual production was 4,000,000 speakers.Each speaker requires 0.80 direct labour hours per unit.Predetermined overhead rates are calculated using expected production,measured in direct labour hours.The budgeted variable overhead for the coming year is $720,000.The actual variable overhead incurred was $714,000.What was the applied variable overhead for the year?

Accepted Answer

A) $640,000 
B) $680,000 
C) $714,000 
D) $800,000 
A) $640,000 
B) $680,000 
C) $714,000 
D) $800,000

Question 7

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:
 $\begin{array}{lrr}&\text { Static budget } & \text { Actual costs } \
&(20,000 \text { hours }) & (22,000 \text { hours })\
\text { Direct materials } & \$ 80,000 & \$ 87,000 \
\text { Direct labour } & 160,000 & 174,000 \
\text { Rent } & 48,000 & 50,000 \
\text { Total } & \$ 288,000 & \$ 311,000
\end{array}$
-Refer to the Figure.What is the flexible budget amount for the first quarter?

Accepted Answer

A) $261,000 
B) $288,000 
C) $311,000 
D) $312,000 
A) $261,000 
B) $288,000 
C) $311,000 
D) $312,000

Question 8

What is the fixed overhead volume variance? Suppose that the fixed overhead volume variance is unfavourable; what does that mean?

Accepted Answer

The fixed overhead volume variance is th

Question 9

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:
 $\begin{array}{lrr}&\text { Static budget } & \text { Actual costs } \
&(20,000 \text { hours }) & (22,000 \text { hours })\
\text { Direct materials } & \$ 80,000 & \$ 87,000 \
\text { Direct labour } & 160,000 & 174,000 \
\text { Rent } & 48,000 & 50,000 \
\text { Total } & \$ 288,000 & \$ 311,000
\end{array}$
-Refer to the Figure.What is the flexible budget variance for the first quarter?

Accepted Answer

A) $1,000 U 
B) $1,000 F 
C) $23,000 U 
D) $23,000 F 
A) $1,000 U 
B) $1,000 F 
C) $23,000 U 
D) $23,000 F

Question 10

Which of the following is characteristic of an after-the-fact flexible budget?

Accepted Answer

A) It is a budget for the actual level of activity. 
B) It allows managers to deal with uncertainty. 
C) It can be used to generate results for a number of plausible scenarios. 
D) It is a useful planning tool. 
A) It is a budget for the actual level of activity. 
B) It allows managers to deal with uncertainty. 
C) It can be used to generate results for a number of plausible scenarios. 
D) It is a useful planning tool.

Question 11

Which of the following is characteristic of activity-based budgeting?

Accepted Answer

A) It builds a budget for each function. 
B) It identifies only the overhead activity. 
C) It classifies costs as variable or fixed with respect to the activity output measure. 
D) It creates a budget after the fact. 
A) It builds a budget for each function. 
B) It identifies only the overhead activity. 
C) It classifies costs as variable or fixed with respect to the activity output measure. 
D) It creates a budget after the fact.

Question 12

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.Assume that Cold Cream actually produced 240,000 L of Icy and 200,000 of Tasty.The actual overhead costs incurred were:
Required:
 $\begin{array}{lr}
\text { Maintenance } & \$ 192,000 \
\text { Power } & 181,700 \
\text { Indirect labour } & 649,500 \
\text { Rent } & 54,000
\end{array}$ A. Prepare a performance report for the period.
B. Based on the report, would you judge any of the variances to be signi ficant? Discuss some possible reasons for the variances.

Accepted Answer

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

Question 13

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.Which of the following is a flexible budget formula for the moving materials activity?

Accepted Answer

A) $180,000 + $0.50 × moves 
B) $405,000 + $0.50 × moves 
C) $450,000 + $0.50 × moves 
D) $450,000 + $2.00 × moves 
A) $180,000 + $0.50 × moves 
B) $405,000 + $0.50 × moves 
C) $450,000 + $0.50 × moves 
D) $450,000 + $2.00 × moves

Question 14

Match the following terms with the items below:
-Variable overhead spending variance

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 15

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 variable overhead spending variance?

Accepted Answer

A) $24,000 U 
B) $24,000 F 
C) $136,900 U 
D) $136,900 F 
A) $24,000 U 
B) $24,000 F 
C) $136,900 U 
D) $136,900 F

Question 16

Kelsey, Inc. produces plastic grocery bags. Kelsey has developed a static budget for the month of August, which is based on 8,000 direct labour hours. During the quarter, the actual activity was 9,000 direct labour hours. Data for August are summarized as follows:
  
-Refer to the Figure.What is the flexible budget for August?

Accepted Answer

A) $142,000 
B) $159,000 
C) $165,000 
D) $171,000 
A) $142,000 
B) $159,000 
C) $165,000 
D) $171,000

Question 17

Discuss the following statement: "Since fixed overhead is,by definition,not related to changes in activity level,then the fixed overhead spending variance is zero."

Accepted Answer

It is true that fixed overhead costs do

Question 18

The difference between which two amounts equals the total variable overhead variance?

Accepted Answer

A) the actual overhead and the budgeted overhead 
B) the total actual variable overhead and the total budgeted variable overhead 
C) the total actual variable overhead and the total applied variable overhead 
D) the total actual variable overhead and the total applied overhead 
A) the actual overhead and the budgeted overhead 
B) the total actual variable overhead and the total budgeted variable overhead 
C) the total actual variable overhead and the total applied variable overhead 
D) the total actual variable overhead and the total applied overhead

Question 19

Hype 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 are as follows:
$\begin{array}{lr}
\text { Actual factory overhead costs }(\$ 16,500 \text { is }\\text { fixed) }&\$40,125\\text { Actual direct labour costs }(11,250 \text { hours })&\$131,625\\text { Standard direct labour for } 5,500 \text { units: }\\text { Standard hours allowed }&11,000 \text { hours }\\text { Labour rate }&\$12.00
\end{array}$
 What is the fixed overhead volume variance for Hype Production Company?
$\begin{array}{lr}
\text { Variable factory overhead } & \$ 22,500 \
\text { Fixed factory overhead } & 13,500 \
\text { Total factory overhead } & \$ 36,000
\end{array}$

Accepted Answer

A) $1,350 (U) 
B) $1,350 (F) 
C) $3,600 (F) 
D) $4,125 (U) 
A) $1,350 (U) 
B) $1,350 (F) 
C) $3,600 (F) 
D) $4,125 (U)

Question 20

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.Assume that the company uses only 90% of the activity capacity.The actual costs incurred at this level were as follows:
 $$\begin{array} { l r } 
\text { Salaries } & \$ 252,000 \
\text { Lease } & 36,000 \
\text { Crates } & 200,000 \
\text { Fuel } & 20,400
\end{array}$$ A. What is the budget for this level of activity?
B. Prepare a performance report.

Accepted Answer

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

Match the following terms with the items below: -Variable overhead efficiency variance

Responsibility for variable overhead spending and efficiency variances is generally assigned to the purchasing department.

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

The volume variance is often interpreted as a measure of capacity utilization.

What is the fixed overhead volume variance? Suppose that the fixed overhead volume variance is unfavourable; what does that mean?

Which of the following is characteristic of an after-the-fact flexible budget?

Which of the following is characteristic of activity-based budgeting?

Match the following terms with the items below: -Variable overhead spending variance

Discuss the following statement: "Since fixed overhead is,by definition,not related to changes in activity level,then the fixed overhead spending variance is zero."

The difference between which two amounts equals the total variable overhead variance?

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: -Variable overhead efficiency variance

Responsibility for variable overhead spending and efficiency variances is generally assigned to the purchasing department.

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

The volume variance is often interpreted as a measure of capacity utilization.

What is the fixed overhead volume variance? Suppose that the fixed overhead volume variance is unfavourable; what does that mean?

Which of the following is characteristic of an after-the-fact flexible budget?

Which of the following is characteristic of activity-based budgeting?

Match the following terms with the items below: -Variable overhead spending variance

Discuss the following statement: "Since fixed overhead is,by definition,not related to changes in activity level,then the fixed overhead spending variance is zero."

The difference between which two amounts equals the total variable overhead variance?

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