Exam 14: Predetermined Overhead Rates and Overhead Analysis in a Standard Costing System

If all four of Argo Corporation's overhead variances are favorable, Argo's overhead will be underapplied.

The Murray Corporation makes and sells a single product. The company recorded the following activity and cost data for May: The fixed component of the predetermined overhead rate is $0.95 per direct labor-hour. The fixed manufacturing overhead budget variance for May was:

Derf Corporation uses a standard cost system in which it applies manufacturing overhead on the basis of standard direct labor-hours. Two direct labor-hours are required for each unit produced. The denominator activity was set at 9,000 units. Manufacturing overhead was budgeted at $135,000 for the period; 20 percent of this cost was fixed. The 17,200 hours worked during the period resulted in production of 8,500 units. Variable manufacturing overhead cost incurred was $108,500 and fixed manufacturing overhead cost was $28,000. The variable overhead efficiency variance for the period was:

Homer Corporation has a standard cost system in which manufacturing overhead is applied on the basis of standard machine-hours. The company has provided the following data concerning its manufacturing overhead costs for last year: The volume variance was:

An outdoor barbecue grill manufacturer has a standard costing system based on standard direct labor-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: The following data pertain to operations for the most recent period: The fixed manufacturing overhead budget variance for the period is closest to:

The higher the denominator activity level used to compute the predetermined overhead rate, the lower the predetermined overhead rate.

Oldham Corporation bases its predetermined overhead rate on variable manufacturing overhead cost of $4.00 per machine-hour and fixed manufacturing overhead cost of $87,822 per period. If the denominator level of activity is 4,100 machine-hours, the fixed component in the predetermined overhead rate would be:

A manufacturing company uses a standard costing system in which standard machine-hours (MHs) is the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: The following data pertain to operations for the most recent period: The fixed manufacturing overhead budget variance for the period is closest to:

A company has a standard cost system in which fixed and variable manufacturing overhead costs are applied to products on the basis of direct labor-hours. A fixed manufacturing overhead volume variance will NOT necessarily occur in a month in which the fixed manufacturing overhead applied to units of product on the basis of standard hours allowed differs from the budgeted fixed manufacturing overhead.

A manufacturing company uses a standard costing system in which standard machine-hours (MHs) is the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: The following data pertain to operations for the most recent period: The fixed manufacturing overhead volume variance for the period is closest to:

A manufacturer of playground equipment uses a standard costing system in which standard machine-hours (MHs) is the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: The following data pertain to operations for the most recent period: The predetermined fixed manufacturing overhead rate is closest to:

The Claus Corporation makes and sells a single product and uses standard costing. During January, the company actually used 8,700 direct labor-hours (DLHs) and produced 3,000 units of product. The standard cost card for one unit of product includes the following: Variable factory overhead: 3.0 DLHs @ $4.00 per DLH. Fixed factory overhead: 3.0 DLHs @ $3.50 per DLH. For January, the company incurred $22,000 of actual fixed manufacturing overhead costs and recorded a $875 favorable volume variance. The denominator level of activity in direct labor-hours (DLHs) used by Claus in setting the predetermined overhead rate for January is:

In a standard costing system, if the actual fixed manufacturing overhead cost exceeds the budgeted fixed manufacturing overhead cost for the period, then fixed manufacturing overhead cost would be overapplied for the period.

The Forbes Corporation uses a standard cost system in which overhead costs are applied to products on the basis of standard direct labor-hours (DLHs). The following data applied to the company's activities for June: The fixed component of the predetermined overhead rate for June is:

Odonell Corporation estimates that its variable manufacturing overhead is $11.20 per machine-hour and its fixed manufacturing overhead is $563,640 per period. If the denominator level of activity is 6,000 machine-hours, the fixed component in the predetermined overhead rate would be:

You have just been hired as the new executive assistant to the manager of the Eastern Division of Global Manufacturing. You have been given the following incomplete records concerning manufacturing overhead for last year: The company uses a standard cost system in which manufacturing overhead costs are applied to products on the basis of standard direct labor-hours (DLHs). Required: a. Compute the variable overhead rate variance and indicate whether it was favorable or unfavorable. b. Compute the fixed overhead volume variance and indicate whether it was favorable or unfavorable.

Which of the following variances is generally the least significant from the standpoint of cost control?

Nova Corporation produces a single product and uses a standard cost system to help control costs. Overhead is applied to production on the basis of standard machine-hours. According to the company's flexible budget, the following overhead costs should be incurred at an activity level of 18,000 machine-hours (the denominator activity level chosen for the current year): During the current year, the following operating results were recorded: At the end of the year, the company's Manufacturing Overhead account showed total debits for actual overhead costs of $145,100 and total credits of $136,000 for overhead applied. The difference ($9,100) represents under-applied overhead, the cause of which management would like to know. Required: a. Compute the predetermined overhead rate that would have been used during the year, showing separately the variable and fixed components of the rate. b. Show how the $136,000 of overhead actually applied was computed. c. Analyze the $9,100 under-applied overhead figure in terms of the variable overhead rate and efficiency variances and the fixed manufacturing overhead budget and volume variances.

Littleton Manufacturing uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of standard machine-hours. At standard, each unit of product requires one machine-hour to complete. The standard variable overhead is $1.80 per machine-hour and $432,000 per year. The denominator level of activity is 120,000 machine-hours, or 120,000 units. Actual data for the year were as follows: Required: a. What are the predetermined variable and fixed manufacturing overhead rates? b. Compute the variable overhead rate and efficiency variances. c. Compute the fixed manufacturing overhead budget and volume variances.

Nitrol Corporation manufactures brass vases using a standard cost system with standard machine-hours as the activity base for overhead. The following information relates to vase production at Nitrol for last year: The standard machine-hours per vase is 1.25. Last year Nitrol produced 84,000 vases. What was Nitrol's fixed manufacturing overhead volume variance for last year?