Exam 11: Flexible Budgeting and Analysis of Overhead Costs

The manufacturing overhead applied to Work-in-Process Inventory by a company that uses standard costing would be computed as actual hours times a predetermined (standard) overhead rate.

A flexible budget for 15,000 hours revealed variable manufacturing overhead of $90,000 and fixed manufacturing overhead of $120,000. The budget for 25,000 hours would reveal total overhead costs of:

Abbott has a standard variable overhead rate of $4.50 per machine hour, and each unit produced has a standard time allowed of three hours. The company's static budget was based on 46,000 units. Actual results for the year follow. Actual units produced: 42,000 Actual machine hours worked: 120,000 Actual variable overhead incurred: $520,000 Abbott's variable-overhead efficiency variance is:

Enberg Company, which applies overhead to production on the basis of machine hours, reported the following data for the period just ended: Actual units produced: 14,800 Actual fixed overhead incurred: $791,000 Standard fixed overhead rate: $13 per hour Budgeted fixed overhead: $780,000 Planned level of machine-hour activity: 60,000 If Enberg estimates four hours to manufacture a completed unit, the company's fixed-overhead volume variance would be:

Young Corporation has a high probability of operating at 40,000 activity hours during the upcoming period, and lower probabilities of operating at 30,000 hours and 50,000 hours. The company's flexible budget revealed the following: Variable costs \ 135,000 \ 180,000 \ 225,000 Fixed costs 720,000 720,000 720,000 If Young operated at 35,000 hours, its total budgeted cost would be:

Bunnie's Bakery anticipated making 17,000 fancy cakes during a recent period, requiring 14,000 hours of process time. Each hour of process time was expected to cost the firm $11. Actual activity for the period was higher than anticipated: 18,000 cakes and 15,200 hours. If each hour of process time actually cost Bunnie $12, what process-time variance would be disclosed on a performance report that incorporated static budgets and flexible budgets?

Rich Company, which uses a standard cost system, budgeted $800,000 of fixed overhead when 50,000 machine hours were anticipated. Other data for the period were: Actual units produced: 10,600 Actual machine hours worked: 51,800 Actual variable overhead incurred: $475,000 Actual fixed overhead incurred: $790,100 Standard variable overhead rate per machine hour: $8.50 Standard production time per unit: 5 hours Rich's variable-overhead efficiency variance is:

Which of the following is used in the computation of the fixed overhead budget variance?

When actual variable cost per unit equals standard variable cost per unit, the difference between actual and budgeted contribution margin is explained by a combination of which two variances?

Which variance is commonly associated with measuring the cost of under- or over-utilization of plant capacity?

Assume that machine hours is the cost driver for overhead. The difference between the actual variable overhead incurred and the applied variable overhead is the:

Luke, Inc. has a standard variable overhead rate of $5 per machine hour, with each completed unit expected to take three machine hours to produce. A review of the company's accounting records found the following: Actual production: 19,500 units Variable-overhead efficiency variance: $9,000U Variable-overhead spending variance: $21,000F What was Luke's actual variable overhead during the period?

The sales-volume variance equals:

Rowe Corporation reported the following variances for the period just ended: Variable-overhead spending variance: $50,000U Variable-overhead efficiency variance: $28,000U Fixed-overhead budget variance: $70,000U Fixed-overhead volume variance: $30,000U If Rowe prepared an overhead cost performance report, which of these overhead variances is likely to be excluded from the report?

The following information relates to Joplin Company for the period just ended: Standard variable overhead rate per hour \ 1 Standard fixed-overhead rate per hour \ 2 Planned monthly activity 40,000 machine hours Actual production completed 82,000 units Standard machine processing time Two units per hour Actual variable overhead \ 37,000 Actual total overhead \ 121,000 Actual machine hours worked 40,500 All of the company's overhead is variable or fixed in nature. Required: A. Calculate the spending and efficiency variances for variable overhead. B. Calculate the budget and volume variances for fixed overhead.

A static budget:

A flexible budget:

Young Corporation has a high probability of operating at 40,000 activity hours during the upcoming period, and lower probabilities of operating at 30,000 hours and 50,000 hours. The company's flexible budget revealed the following: Variable costs \ 135,000 \ 180,000 \ 225,000 Fixed costs 720,000 720,000 720,000 Young's flexible-budget formula, where Y is defined as total cost and AH represents activity hours, is:

Draco, Inc. has the following overhead standards: Variable overhead: 4 hours at $8 per hour Fixed overhead: 4 hours at $10 per hour The standards were based on a planned activity of 20,000 machine hours when 5,000 units were scheduled for production. Actual data follow. Variable overhead incurred: $167,750 Fixed overhead incurred: $210,000 Machine hours worked: 19,800 Actual units produced: 5,100 The amount of variable overhead that Draco applied to production is:

Efficient or inefficient use of a specific component of variable overhead (e.g., electricity) will cause the firm to have a variable-overhead efficiency variance.