Question 1

The manufacturing overhead applied to Work-in-Process Inventory by a company that uses standard costing would be computed as:

Accepted Answer

A)  actual hours times a predetermined (standard) overhead rate. 
B)  standard hours times a predetermined (standard) overhead rate. 
C)  actual hours times an actual overhead rate. 
D)  standard hours times an actual overhead rate. 
E)  $0, because users of standard costing do not apply overhead to work in process. 
A)  actual hours times a predetermined (standard) overhead rate. 
B)  standard hours times a predetermined (standard) overhead rate. 
C)  actual hours times an actual overhead rate. 
D)  standard hours times an actual overhead rate. 
E)  $0, because users of standard costing do not apply overhead to work in process.

Question 2

Riskless Insurance uses budgets to forecast and monitor overhead throughout the organization. The following budget formula relates to the processing of applications for automobile policies in any given month:
Total overhead = $6.80APH + $13,500
where APH = application processing hours
The typical automobile insurance policy has an estimated processing time of 1.5 hours.
During June, management originally anticipated that 320 applications would be processed. Activity was lower than expected, with only 280 applications completed by month-end, and the following costs were incurred: variable overhead, $2,950; fixed overhead, $13,700.
Required:
A. What volume level of applications and processing hours would have been used if Sitka had constructed a static budget?
B. Construct a flexible budget that shows the expected monthly variable and fixed overhead costs of processing 270, 300, and 330 applications.
C. From a cost perspective, did the company perform better or worse than anticipated in June? Show calculations to support your answer.

Accepted Answer

A. The static budget would have been bas

Question 3

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
Draco's variable-overhead spending variance is:

Accepted Answer

A)  $550 favorable. 
B)  $4,550 unfavorable. 
C)  $4,800 favorable. 
D)  $9,350 unfavorable. 
E)  None of the other answers are correct. 
A)  $550 favorable. 
B)  $4,550 unfavorable. 
C)  $4,800 favorable. 
D)  $9,350 unfavorable. 
E)  None of the other answers are correct.

Question 4

A production manager was recently given a performance report that showed a sizable unfavorable variable-overhead efficiency variance. The manager was puzzled as to how the department could be inefficient in the use/incurrence of this cost.
Required:
Briefly explain the nature of this variance to the manager. Does the variance really have much to do with variable overhead efficiencies or inefficiencies? Discuss.

Accepted Answer

The variable-overhead efficiency varianc

Question 5

Alexandria Corporation applies fixed manufacturing overhead to production on the basis of machine hours worked. The following data relate to the month just ended:
Actual fixed overhead incurred: $1,245,000
Budgeted fixed overhead: $1,200,000
Anticipated machine hours: 240,000
Standard machine hours per finished unit: 8
Actual finished units completed: 31,250
Required:
A. Compute Alexandria's standard fixed-overhead rate per machine hour.
B. Determine Alexandria's fixed-overhead budget variance and fixed-overhead volume variance.
C. Calculate the amount of fixed overhead applied to production.
D. Consider the two events that follow and determine whether the event will affect the fixed-overhead budget variance, the fixed-overhead volume variance, both variances, or neither variance. Assume that Alexandria has not yet revised its standards to reflect these events if a revision is warranted.
1. A raw material shortage halted production for two days.
2. An additional assembly-line supervisor was hired at the beginning of the month.

Accepted Answer

A. Budgeted fixed overhead ($1,200,000)

Question 6

What is the most common treatment of the fixed-overhead budget variance at the end of the accounting period?

Accepted Answer

A)  Reported as a deferred charge or credit. 
B)  Allocated among Work-in-Process Inventory, Finished-Goods Inventory, and Cost of Goods Sold. 
C)  Charged or credited to Cost of Goods Sold. 
D)  Allocated among Cost of Goods Manufactured, Finished-Goods Inventory, and Cost of Goods Sold. 
E)  Charged or credited to Income Summary. 
A)  Reported as a deferred charge or credit. 
B)  Allocated among Work-in-Process Inventory, Finished-Goods Inventory, and Cost of Goods Sold. 
C)  Charged or credited to Cost of Goods Sold. 
D)  Allocated among Cost of Goods Manufactured, Finished-Goods Inventory, and Cost of Goods Sold. 
E)  Charged or credited to Income Summary.

Question 7

Bushnell, Inc. has a standard variable overhead rate of $4 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 variable overhead: $210,000
Variable-overhead efficiency variance: $18,000U
Variable-overhead spending variance: $30,000F
How many units did Bushnell actually produce during the period?

Accepted Answer

A)  13,500. 
B)  16,500. 
C)  18,500. 
D)  21,500. 
E)  None of the other answers are correct. 
A)  13,500. 
B)  16,500. 
C)  18,500. 
D)  21,500. 
E)  None of the other answers are correct.

Question 8

Jackson Corporation uses a standard cost system, applying manufacturing overhead on the basis of machine hours. The company's overhead standards per unit are shown below.
Variable overhead: 4 hours at $9 per hour
Fixed overhead: 4 hours at $6* per hour
*Based on planned monthly activity of 120,000 machine hours
Actual data for May were:
Number of units produced: 29,000
Number of machine hours worked: 125,000
Variable overhead costs incurred: $1,085,000
Fixed overhead costs incurred: $755,000
Required:
A. Calculate the spending and efficiency variances for variable overhead.
B. Calculate the budget and volume variances for fixed overhead.

Accepted Answer

A. Spending variance: $1,085,000 - (125,

Question 9

In an effort to reduce record-keeping, companies that sell perishable goods will often enter the standard cost of direct material, direct labor, and manufacturing overhead directly into what account?

Accepted Answer

A)  Work-in-Process Inventory. 
B)  Finished-Goods Inventory. 
C)  Cost of Goods Sold. 
D)  Cost of Goods Manufactured. 
E)  Sales Revenue. 
A)  Work-in-Process Inventory. 
B)  Finished-Goods Inventory. 
C)  Cost of Goods Sold. 
D)  Cost of Goods Manufactured. 
E)  Sales Revenue.

Question 10

Robert Company, which applies overhead to production on the basis of machine hours, reported the following data for the period just ended:
Actual units produced: 12,000
Actual variable overhead incurred: $77,700
Actual machine hours worked: 18,800
Standard variable overhead cost per machine hour: $4.50
If Robert estimates 1.5 hours to manufacture a completed unit, the company's variable-overhead spending variance is:

Accepted Answer

A)  $3,600 favorable. 
B)  $3,600 unfavorable. 
C)  $6,900 favorable. 
D)  $6,900 unfavorable. 
E)  None of the other answers are correct. 
A)  $3,600 favorable. 
B)  $3,600 unfavorable. 
C)  $6,900 favorable. 
D)  $6,900 unfavorable. 
E)  None of the other answers are correct.

Question 11

The activity measure selected for use in a variable- and fixed-overhead flexible budget:

Accepted Answer

A)  should be stated in sales dollars. 
B)  should be approved by the company's president. 
C)  should vary in a similar behavior pattern to the way that variable overhead varies. 
D)  should remain fixed. 
E)  should produce the most attractive results for the individual who will use the budget in managerial applications. 
A)  should be stated in sales dollars. 
B)  should be approved by the company's president. 
C)  should vary in a similar behavior pattern to the way that variable overhead varies. 
D)  should remain fixed. 
E)  should produce the most attractive results for the individual who will use the budget in managerial applications.

Question 12

Briefly describe the procedures that are used to apply manufacturing overhead to production for companies that use (1) normal costing systems and (2) those that use standard costing systems.

Accepted Answer

In a normal costing system, overhead is

Question 13

The budget variance arises from a comparison of:

Accepted Answer

A)  budgeted fixed overhead expenditures with budgeted fixed overhead costs. 
B)  actual fixed overhead costs with budgeted fixed overhead costs. 
C)  actual variable overhead expenditures with budgeted variable overhead costs. 
D)  variable overhead costs with budgeted fixed overhead costs. 
E)  static-budget amounts with flexible-budget amounts. 
A)  budgeted fixed overhead expenditures with budgeted fixed overhead costs. 
B)  actual fixed overhead costs with budgeted fixed overhead costs. 
C)  actual variable overhead expenditures with budgeted variable overhead costs. 
D)  variable overhead costs with budgeted fixed overhead costs. 
E)  static-budget amounts with flexible-budget amounts.

Question 14

The fixed-overhead budget and volume variances are:

Accepted Answer

A)  Choice A 
B)  Choice B 
C)  Choice C 
D)  Choice D 
E)  Choice E 
A)  Choice A 
B)  Choice B 
C)  Choice C 
D)  Choice D 
E)  Choice E

Question 15

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
Draco's fixed-overhead volume variance is:

Accepted Answer

A)  $4,000 favorable. 
B)  $4,000 unfavorable. 
C)  $10,000 favorable. 
D)  $10,000 unfavorable. 
E)  None of the other answers are correct. 
A)  $4,000 favorable. 
B)  $4,000 unfavorable. 
C)  $10,000 favorable. 
D)  $10,000 unfavorable. 
E)  None of the other answers are correct.

Question 16

Which of the following is not an overhead variance?

Accepted Answer

A)  Variable-overhead spending variance. 
B)  Variable-overhead efficiency variance. 
C)  Fixed-overhead efficiency variance. 
D)  Fixed-overhead budget variance. 
E)  Fixed-overhead volume variance. 
A)  Variable-overhead spending variance. 
B)  Variable-overhead efficiency variance. 
C)  Fixed-overhead efficiency variance. 
D)  Fixed-overhead budget variance. 
E)  Fixed-overhead volume variance.

Question 17

Martin Company, which applies overhead to production on the basis of machine hours, reported the following data for the period just ended:
Actual units produced: 9,000
Actual variable overhead incurred: $54,400
Actual machine hours worked: 16,000
Standard variable overhead cost per machine hour: $3.50
If Martin estimates two hours to manufacture a completed unit, the company's variable-overhead efficiency variance is:

Accepted Answer

A)  $1,600 favorable. 
B)  $1,600 unfavorable. 
C)  $7,000 favorable. 
D)  $7,000 unfavorable. 
E)  None of the other answers are correct. 
A)  $1,600 favorable. 
B)  $1,600 unfavorable. 
C)  $7,000 favorable. 
D)  $7,000 unfavorable. 
E)  None of the other answers are correct.

Question 18

Sand Box Company is choosing new cost drivers for its accounting system. One driver is labor hours; the other is a combination of machine hours for unit variable costs and number of setups for a pool of batch-level costs. Data for the past year follow. $\begin{array}{lrr}&\text { Budget } &\text { Actual }\
\text { Labor hours } & 200,000 & 200,000 \
\text { Machine hours } & 360,000 & 450,000 \
\text { Number of setups } & 3,000 & 3,300 \
\text { Unit variable cost pool } & \$ 1,600,000 & \$ 2,000,000 \
\text { Batch-level cost pool } & \$ 900,000 & \$ 990,000
\end{array}$ Assume that the two separate pools are used. The flexible budget dollar amounts for the actual level of machine hours and actual number of setups are:

Accepted Answer

A)  Choice A 
B)  Choice B 
C)  Choice C 
D)  Choice D 
E)  Choice E 
A)  Choice A 
B)  Choice B 
C)  Choice C 
D)  Choice D 
E)  Choice E

Question 19

Briefly explain the nature of the fixed-overhead volume variance. Be sure to address the issue of capacity utilization in your response.

Accepted Answer

The fixed-overhead volume variance is th

Question 20

Which of the following statements is/are correct concerning the application of overhead in a standard costing system driven by process hours?

Accepted Answer

A)  A predetermined overhead rate is allowed only for fixed overhead. 
B)  Overhead application is based on standard process hours allowed. 
C)  Overhead application is based on actual process hours incurred. 
D)  Only prime costs are considered to be product costs in a standard costing system. 
E)  Only variable overhead costs are applied to production. 
A)  A predetermined overhead rate is allowed only for fixed overhead. 
B)  Overhead application is based on standard process hours allowed. 
C)  Overhead application is based on actual process hours incurred. 
D)  Only prime costs are considered to be product costs in a standard costing system. 
E)  Only variable overhead costs are applied to production.

The manufacturing overhead applied to Work-in-Process Inventory by a company that uses standard costing would be computed as:

What is the most common treatment of the fixed-overhead budget variance at the end of the accounting period?

In an effort to reduce record-keeping, companies that sell perishable goods will often enter the standard cost of direct material, direct labor, and manufacturing overhead directly into what account?

The activity measure selected for use in a variable- and fixed-overhead flexible budget:

Briefly describe the procedures that are used to apply manufacturing overhead to production for companies that use (1) normal costing systems and (2) those that use standard costing systems.

The budget variance arises from a comparison of:

The fixed-overhead budget and volume variances are:

Which of the following is not an overhead variance?

Briefly explain the nature of the fixed-overhead volume variance. Be sure to address the issue of capacity utilization in your response.

Which of the following statements is/are correct concerning the application of overhead in a standard costing system driven by process hours?

The Changing Role of Managerial Accounting in a Dynamic Business Environment

Basic Cost Management Concepts

Product Costing and Cost Accumulation in a Batch Production Environment

Process Costing and Hybrid Product-Costing Systems

Activity-Based Costing and Management

Activity Analysis, Cost Behavior, and Cost Estimation

Cost-Volume-Profit Analysis

Variable Costing and the Costs of Quality and Sustainability

Financial Planning and Analysis: the Master Budget

Standard Costing and Analysis of Direct Costs

Responsibility Accounting, Operational Performance Measures, and the Balanced Scorecard

Investment Centers and Transfer Pricing

Decision Making: Relevant Costs and Benefits

Target Costing and Cost Analysis for Pricing Decisions

Capital Expenditure Decisions

Allocation of Support Activity Costs and Joint Costs

The Sarbanes-Oxley Act, Internal Controls, and Management Accounting

Compound Interest and the Concept of Present Value

Inventory Management

Filters

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:

What is the most common treatment of the fixed-overhead budget variance at the end of the accounting period?

In an effort to reduce record-keeping, companies that sell perishable goods will often enter the standard cost of direct material, direct labor, and manufacturing overhead directly into what account?

The activity measure selected for use in a variable- and fixed-overhead flexible budget:

Briefly describe the procedures that are used to apply manufacturing overhead to production for companies that use (1) normal costing systems and (2) those that use standard costing systems.

The budget variance arises from a comparison of:

The fixed-overhead budget and volume variances are:

Which of the following is not an overhead variance?

Briefly explain the nature of the fixed-overhead volume variance. Be sure to address the issue of capacity utilization in your response.

Which of the following statements is/are correct concerning the application of overhead in a standard costing system driven by process hours?

The Changing Role of Managerial Accounting in a Dynamic Business Environment

Basic Cost Management Concepts

Product Costing and Cost Accumulation in a Batch Production Environment

Process Costing and Hybrid Product-Costing Systems

Activity-Based Costing and Management

Activity Analysis, Cost Behavior, and Cost Estimation

Cost-Volume-Profit Analysis

Variable Costing and the Costs of Quality and Sustainability

Financial Planning and Analysis: the Master Budget

Standard Costing and Analysis of Direct Costs

Responsibility Accounting, Operational Performance Measures, and the Balanced Scorecard

Investment Centers and Transfer Pricing

Decision Making: Relevant Costs and Benefits

Target Costing and Cost Analysis for Pricing Decisions

Capital Expenditure Decisions

Allocation of Support Activity Costs and Joint Costs

The Sarbanes-Oxley Act, Internal Controls, and Management Accounting

Compound Interest and the Concept of Present Value

Inventory Management

Filters