Deck 11: Flexible Budgeting and Analysis of Overhead Costs

Question 1

A static budget:

A) is based totally on prior year's costs.
B) is based on one anticipated activity level.
C) is based on a range of activity.
D) is preferred over a flexible budget in the evaluation of performance.
E) presents a clear measure of performance when planned activity differs from actual activity.

Answer 1

B

Question 2

The advantage of dollar measures as a basis for flexible overhead budgeting is that they are relatively stable over time.

Answer 2

False

Question 3

The activity-based flexible budget provides a more accurate benchmark against which to compare actual costs than does a conventional flexible budget.

Answer 3

True

Question 4

Flexible budgets reflect a company's anticipated costs based on variations in:

A) activity levels.
B) inflation rates.
C) managers.
D) anticipated capital acquisitions.
E) standards.

Question 5

The budget variance arises from a comparison of actual variable overhead expenditures with budgeted variable overhead costs.

Question 6

The sales-volume variance measures the effect on sales revenue of sales price deviations.

Question 7

Both normal- and standard-costing systems use a predetermined overhead rate.

Question 8

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.

Question 9

From a traditional perspective, dollars of raw material have been a popular activity measure in manufacturing firms.

Question 10

The overhead cost performance report presents itemized variances along with actual and budgeted costs for each overhead item.

Question 11

The right (credit) side of the production-overhead account accumulates actual overhead costs incurred.

Question 12

The formula flexible budget is more general than the columnar flexible budget, because the formula allows managers to compute budgeted overhead costs at any activity level.

Question 13

The units of output are meaningful measures in multiproduct firms.

Question 14

In an activity-based flexible budget, each overhead item has the same cost driver, identified by flexible overhead budget for that cost item.

Question 15

The overhead cost performance report includes spending and efficiency variances for both variable and fixed items.

Question 16

In a standard-costing system, the standard costs are used for product costing as well as for cost control.

Question 17

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.

Question 18

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 $210,000.

Question 19

The sales-price variance is the difference between the actual and budgeted sales prices multiplied by the actual sales volume.

Question 20

Flexible budgets reflect a company's anticipated costs based on variations in activity levels.

Question 21

Use the following information to answer the following Questions
Seven Falls Cuisines has the following flexible-budget formula:
Y = $13PH + $450,000 where PH is defined as process hours.


-Dealer Enterprises (DE) anticipated that 84,000 process hours would be worked during an upcoming accounting period when, in fact, 92,000 hours were actually worked. One of the company's cost functions is expressed as follows:
Y = $16PH + $640,000 where PH is defined as process hours
What budgeted dollar amount would appear in DE's static budget and flexible budget for the preceding cost function?

Question 22

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

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 23

Nerve Pain Innovations anticipated that 84,000 process hours would be worked during an upcoming accounting period when, in fact, 90,000 hours were actually worked. One of the company's cost functions is expressed as follows:
Y = $16PH + $640,000 where PH is defined as process hours
What is Nerve Pain's flexible budget (Y) for the preceding cost function?

A) $1,280,000
B) $2,080,000
C) $1,984,000
D) $1,221,000
E) $2,112,000

Question 24

Use the following information to answer the following Questions
Seven Falls Cuisines has the following flexible-budget formula:
Y = $13PH + $450,000 where PH is defined as process hours.


-Which of the following statements is (are) true?

A) Seven Falls has $450,000 of fixed costs.
B) Each additional hour of process time is expected to cost Seven Falls $13.
C) Y would equal the amount shown as "total cost" in the company's flexible budget.
D) Both Seven Falls has $450,000 of fixed costs and each additional hour of process time is expected to cost Seven Falls $13.
E) All of the answers are correct.

Question 25

A flexible budget:

A) parallels a static budget with respect to format and advantages of use.
B) is preferred over a static budget in the evaluation of performance.
C) gives management flexibility in terms of meeting budget goals.
D) can be used to compare actual and budgeted costs at various levels of activity.
E) is both preferred over a static budget in the evaluation of performance and can be used to compare actual and budgeted costs at various levels of activity.

Question 26

Which of the following should have the strongest cause and effect relationship with overhead costs?

A) Cost followers.
B) Non-value-added costs.
C) Cost drivers.
D) Value-added costs.
E) Units of output.

Question 27

Use the following information to answer the following Questions
Commerce 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:


-If Commerce operated at 35,000 hours, its total budgeted cost would be:

A) $877,500.
B) $945,000.
C) $787,500.
D) $997,500.
E) $810,000.

Question 28

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:

A) $210,000.
B) $270,000.
C) $290,000.
D) $350,000.
E) None of the answers is correct.

Question 29

Barrington Industries anticipated selling 29,000 units of a major product and paying sales commissions of $6 per unit. Actual sales and sales commissions totaled 31,500 units and $182,700, respectively. If the company used a static budget for performance evaluations, Barrington would report a cost variance of:

A) $6,300U.
B) $6,300F.
C) $8,700U.
D) $8,700F.
E) None of the answers is correct.

Question 30

A flexible budget for 15,000 hours revealed variable manufacturing overhead of $90,000 and fixed manufacturing overhead of $120,000. The budget for 20,000 hours would reveal total overhead costs of:

A) $240,000.
B) $270,000.
C) $290,000.
D) $350,000.
E) $210,000.

Question 31

Chong Corporation recently prepared a manufacturing cost budget for an output of 50,000 units, as follows:

Actual units produced amounted to 60,000. Actual costs incurred were: direct materials, $110,000; direct labor, $60,000; variable overhead, $100,000; and fixed overhead, $97,000. If Chong evaluated performance by the use of a flexible budget, a performance report would reveal a total variance of:

A) $3,000 favorable.
B) $23,000 favorable.
C) $27,000 unfavorable.
D) $42,000 unfavorable.
E) None of the answers is correct.

Question 32

Which of the following mathematical expressions is found in a typical flexible-budget formula for overhead?

A) Total activity units + budgeted fixed overhead cost per unit.
B) Budgeted variable overhead cost per unit + budgeted fixed overhead cost.
C) (Budgeted variable overhead cost per unit *total activity units) + budgeted fixed overhead costs.
D) (Budgeted fixed overhead cost per unit *total activity units) + (budgeted variable overhead cost per unit*total activity units).
E) None of the answers is correct.

Question 33

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

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 34

Use the following information to answer the following Questions
Seven Falls Cuisines has the following flexible-budget formula:
Y = $13PH + $450,000 where PH is defined as process hours.


-What is Seven Falls' budgeted total cost if its process hours equal 25,000?

A) $325,000.
B) $450,000.
C) $775,000.
D) $1,225,000.
E) Answer cannot be determined from the information provided.

Question 35

Zhou, Inc. is planning its cash needs for an upcoming period when 85,000 machine hours are expected to be worked. Activity may drop as low as 78,000 hours if some overdue equipment maintenance procedures are performed; on the other hand, activity could jump to 94,000 hours if one of Zhou's major competitors likely goes bankrupt. A flexible cash budget to determine cash needs would best be based on:

A) 78,000 hours.
B) 85,000 hours.
C) 94,000 hours.
D) 78,000 hours and 94,000 hours.
E) 78,000 hours, 85,000 hours, and 94,000 hours.

Question 36

Use the following information to answer the following Questions
Commerce 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:


-Commerce's flexible-budget formula, where Y is defined as total cost and AH represents activity hours, is:

A) Y = $4.50AH + $24AH.
B) Y = $4.50AH + $720,000.
C) Y = $22.50AH.
D) Y = $180,000 + $18AH.
E) Y = $945,000.

Question 37

Which of the following is not an overhead variance?

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

Question 38

With respect to overhead, what is the difference between normal costing and standard costing?

A) Use of a predetermined overhead rate.
B) Use of standard hours versus actual hours.
C) Use of a standard rate versus an actual rate.
D) The choice of an activity measure.
E) There is no difference.

Question 39

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

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.

Question 40

Strongheart Enterprises anticipated selling 27,000 units of a major product and paying sales commissions of $6 per unit. Actual sales and sales commissions totaled 27,500 units and $171,400, respectively. If the company used a flexible budget for performance evaluations, Strongheart would report a cost variance of:

A) $6,400U.
B) $6,400F.
C) $9,400U.
D) $9,400F.
E) None of the answers is correct.

Question 41

The difference between budgeted fixed manufacturing overhead and the fixed overhead applied to production is the:

A) sum of the spending and efficiency variances.
B) controllable variance.
C) efficiency variance.
D) spending variance.
E) volume variance.

Question 42

Use the following information to answer the following Questions
Admac Technologies 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


-Admac's variable-overhead efficiency variance is:

A) $20,000 favorable.
B) $20,000 unfavorable.
C) $27,000 favorable.
D) $27,000 unfavorable.
E) None of the answers is correct.

Question 43

Campaign 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 fixed overhead incurred: $730,000
Actual machine hours worked: 60,000
Budgeted fixed overhead: $720,000
Planned level of machine-hour activity: 50,000
If Campaign estimates four hours to manufacture a completed unit, the company's standard fixed overhead rate per machine hour would be:

A) $12.00.
B) $14.40.
C) $14.60.
D) $15.00.
E) None of the answers is correct.

Question 44

The budget variance arises from a comparison of:

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 45

A fixed-overhead volume variance would normally arise when:

A) actual hours of activity coincide with actual units of production.
B) budgeted fixed overhead is less than (or greater than) applied fixed overhead.
C) there is a fixed-overhead budget variance.
D) actual fixed overhead exceeds budgeted fixed overhead.
E) there is a variable-overhead efficiency variance.

Question 46

Use the following information to answer the following Questions
Admac Technologies 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


-Admac's variable-overhead spending variance is:

A) $20,000 favorable.
B) $20,000 unfavorable.
C) $27,000 favorable.
D) $27,000 unfavorable.
E) None of the answers is correct.

Question 47

Auditory Company, which applies overhead to production on the basis of machine hours, reported the following data for the period just ended:
Actual units produced: 13,000
Actual fixed overhead incurred: $742,000
Standard fixed overhead rate: $15 per hour
Budgeted fixed overhead: $720,000
Planned level of machine-hour activity: 48,000
If Auditory estimates four hours to manufacture a completed unit, the company's fixed-overhead budget variance would be:

A) $22,000 favorable.
B) $22,000 unfavorable.
C) $60,000 favorable.
D) $60,000 unfavorable.
E) None of the answers is correct.

Question 48

Which of the following is not an overhead 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 49

Orlando 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 Orlando estimates 1.5 hours to manufacture a completed unit, the company's variable-overhead spending variance is:

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

Question 50

Use the following information to answer the following Questions
Bannister Motors 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 Bannister desires to analyze variances that arose primarily from managers' expenditures in excess of anticipated amounts, the company should focus on variances that total:

A) $50,000U.
B) $70,000U.
C) $120,000U.
D) $178,000U.
E) None of the answers is correct.

Question 51

What will cause the variable-overhead efficiency variance?

A) Efficient or inefficient use of a specific component of variable overhead (e.g., electricity).
B) Full or partial utilization of major equipment resources.
C) Production of units in excess of the number of units sold.
D) Efficient or inefficient use of the cost driver (e.g., machine hours) for variable overhead.
E) Changes in the salary cost of manufacturing supervisors.

Question 52

Canister Industries uses labor hours to apply variable overhead to production. If the company's workers were very inefficient during the period, which of the following statements would be true about the variable-overhead efficiency variance?

A) The variance would be favorable.
B) The variance would be unfavorable.
C) The nature of the variance (favorable or unfavorable) would be unknown based on the facts presented.
D) The variance would be the same amount as the labor efficiency variance.
E) None of the answers is correct.

Question 53

The difference between the total actual factory overhead and the total factory overhead applied to production is the:

A) sum of the spending, efficiency, budget, and volume variances.
B) controllable variance.
C) efficiency variance.
D) spending variance.
E) volume variance.

Question 54

Which of the following elements is (are) needed in a straightforward calculation of the variable-overhead spending variance?

A) Variable overhead incurred during the period.
B) Budgeted variable overhead based on actual hours worked.
C) Standard variable overhead applied to production.
D) Both variable overhead incurred during the period and budgeted variable overhead based on actual hours worked.
E) Both variable overhead incurred during the period and standard variable overhead applied to production.

Question 55

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

A) The variable-overhead spending variance.
B) The variable-overhead efficiency variance.
C) The fixed-overhead budget variance.
D) The fixed-overhead volume variance.
E) The total fixed-overhead variance.

Question 56

Use the following information to answer the following Questions
Bannister Motors 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 Bannister prepared an overhead cost performance report, which of these overhead variances is likely to be excluded from the report?

A) Variable-overhead spending variance.
B) Variable-overhead efficiency variance.
C) Fixed-overhead budget variance.
D) Fixed-overhead volume variance.
E) None of the variances would be excluded.

Question 57

Messenger, 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 Messenger's actual variable overhead during the period?

A) $262,500.
B) $280,500.
C) $304,500.
D) $322,500.
E) None of the answers is correct.

Question 58

Hope, 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 Hope actually produce during the period?

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

Question 59

Priority 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 Priority estimates two hours to manufacture a completed unit, the company's variable-overhead efficiency variance is:

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

Question 60

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

A) volume variance.
B) production variance.
C) efficiency variance.
D) sum of the spending and efficiency variances.
E) spending variance.

Question 61

Use the following information to answer Questions
Match Point, 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


-Match Point's variable-overhead spending variance is:

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

Question 62

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

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 63

Use the following information to answer Questions
Match Point, 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


-Match Point's variable-overhead efficiency variance is:

A) $550 favorable.
B) $550 unfavorable.
C) $4,800 favorable.
D) $4,800 unfavorable.
E) None of the answers is correct.

Question 64

Use the following information to answer the following Questions
Sigmo 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


-Sigmo's variable-overhead efficiency variance is:

A) $10,200U.
B) $10,200F.
C) $15,300U.
D) $15,300F.
E) None of the answers is correct.

Question 65

The City Symphony Orchestra presents a series of concerts throughout the year. Budgeted fixed costs total $300,000 for the concert season; variable costs are expected to average $5 per patron. The orchestra uses flexible budgeting.
Required:
A. Prepare a flexible budget that shows the expected costs of 8,000, 8,500, and 9,000 patrons.
B. Construct the orchestra's flexible budget formula.
C. Assume that 8,700 patrons attended concerts during the year just ended, and actual costs were: variable, $42,000; fixed, $307,500. Evaluate the orchestra's financial performance by computing variances for variable costs and fixed costs.

Question 66

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?

A) The sales-volume variance and the fixed-overhead volume variance.
B) The sales-volume variance and the fixed-overhead budget variance.
C) The sales-price variance and the fixed-overhead volume variance.
D) The sales-price variance and sales-volume variance.
E) The sales-price variance and fixed-overhead budget variance.

Question 67

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?

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

Question 68

Use the following information to answer the following Questions
Forward Venture Company, which uses a standard cost system, budgeted $600,000 of fixed overhead when 40,000 machine hours were anticipated. Other data for the period were:
Actual units produced: 10,000
Standard production time per unit: 3.9 machine hours
Fixed overhead incurred: $620,000
Actual machine hours worked: 42,000


-Forward Venture Company's fixed-overhead budget variance is:

A) $10,000 favorable.
B) $15,000 favorable.
C) $15,000 unfavorable.
D) $20,000 favorable.
E) $20,000 unfavorable.

Question 69

The sales-volume variance equals:

A) (actual sales volume - budgeted sales volume) * actual sales price.
B) (actual sales volume - budgeted sales volume) * actual contribution margin.
C) (actual sales volume - budgeted sales volume) *budgeted sales price.
D) (actual sales price - budgeted sales price) *budgeted sales volume.
E) (actual sales price - budgeted sales price)*fixed-overhead volume variance.

Question 70

Super Fast 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 Super Fast 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.

Question 71

Use the following information to answer the following Questions
Sigmo 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


-Sigmo's fixed-overhead budget variance is:

A) $9,900U.
B) $9,900F.
C) $28,800U.
D) $28,800F.
E) None of the answers is correct.

Question 72

The International Students Club at Eastern University recently held an end-of-year dinner and swim party, which the treasurer declared to be a financial success. "Attendance was an all-time high, 60 members, and the results were much better than expected." The treasurer presented the following performance report at the executive board's June meeting:

The budget was based on the assumptions that follow.
· Forty-five members would attend at a fixed ticket price of $35.
· Food and beverage costs were anticipated to be $15 and $7 per attendee, respectively.
· A disc jockey was hired via a written contract at $50 per hour.
Required:
A. Briefly evaluate the meaningfulness of the treasurer's performance report.
B. Prepare a performance report by using flexible budgeting and determine whether the end-of-year party was as successful as originally reported.
C. Based on your answer in requirement "B," present a possible explanation for the variances in revenue, food costs, beverage costs, and the disc jockey.

Question 73

Use the following information to answer the following Questions
The Step Company has the following information for the year just ended:



-The Step Company's sales-price variance is:

A) $3,000 unfavorable.
B) $7,000 unfavorable.
C) $7,000 favorable.
D) $7,500 unfavorable.
E) $7,500 favorable.

Question 74

Pizzazz Pizza Inc.’s activity based flexible budget is as follows:

Pizzazz’s activity for September is as follows:
Required:
1. Determine the flexible budgeted cost for each of the following:

a. Indirect material
b. Utilities
c. Inspection
d. Test kitchen
e. Material handling
f. Total overhead cost


2.Compute the variance for setup cost during the month, assuming that the actual setup cost was $3,000: Using the activity-based flexible budget.

Question 75

Prevlar's budget for variable overhead and fixed overhead revealed the following information for an anticipated 40,000 hours of activity: variable overhead, $348,000; fixed overhead, $600,000.
The company actually worked 43,000 hours and actual overhead incurred was: variable, $365,500; fixed, $608,000.
Required:
A. Compute the company's total cost variance for variable overhead and fixed overhead if the firm uses a static budget to help assess performance.
B. Repeat part "A" assuming the use of a flexible budget.
C. Which of the two budgets (static or flexible) is preferred for performance evaluations? Why?

Question 76

Use the following information to answer the following Questions
Forward Venture Company, which uses a standard cost system, budgeted $600,000 of fixed overhead when 40,000 machine hours were anticipated. Other data for the period were:
Actual units produced: 10,000
Standard production time per unit: 3.9 machine hours
Fixed overhead incurred: $620,000
Actual machine hours worked: 42,000


-Forward Venture Company's fixed-overhead volume variance is:

A) $10,000 favorable.
B) $15,000 favorable.
C) $15,000 unfavorable.
D) $20,000 favorable.
E) $20,000 unfavorable.

Question 77

Use the following information to answer Questions
Match Point, 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 Match Point applied to production is:

A) $158,400.
B) $160,000.
C) $163,200.
D) $167,750.
E) None of the answers is correct.

Question 78

Solution Enterprises incurred $828,000 of fixed overhead during the period. During that same period, the company applied $845,000 of fixed overhead to production and reported an unfavorable budget variance of $41,000. How much was Solution's budgeted fixed overhead?

A) $787,000.
B) $804,000.
C) $869,000.
D) $886,000.
E) Not enough information to judge.

Question 79

Use the following information to answer the following Questions
The Step Company has the following information for the year just ended:



-The Step Company's sales-volume variance is:

A) $3,000 unfavorable.
B) $4,000 unfavorable.
C) $4,400 favorable.
D) $10,000 unfavorable.
E) $10,000 favorable.

Question 80

Practical Products plans to manufacture 8,000 units over the next month at the following costs: direct materials, $480,000; direct labor, $60,000; variable manufacturing overhead, $150,000; straight-line depreciation, $24,000, and other fixed manufacturing overhead, $272,000. The result is total budgeted cost of $990,000.
Shortly after the conclusion of the month, Practical Products reported the following costs:

Supervisor, Calvin Moore and his crews turned out 7,200 units-a remarkable feat given that the company's manufacturing plant was closed for several days because of blizzards and impassable roads. Moore was especially pleased with the fact that total actual costs were less than budget. He was thus very surprised when Practical's general manager expressed unhappiness about the plant's financial performance.
Required:
A. Prepare a performance report that fairly compares budgeted and actual costs for the period just ended-namely, the report that the general manager likely used when assessing performance.
B. Should Moore be praised for "having met the budget" or is the general manager's unhappiness justified? Explain, citing any apparent problems for the firm.