Deck 8: Flexible Budgets, Overhead Cost Variances, and Management Control

Question 1

Jael Equipment uses a flexible budget for its indirect manufacturing costs. For 2015, the company anticipated that it would produce 18,000 units with 3,500 machine-hours and 7,200 employee days. The costs and cost drivers were to be as follows:
Required:
a. Prepare the static budget using the overhead items above and then compute the static-budget variances.
b. Prepare the flexible budget using the overhead items above and then compute the flexible-budget variances.

Answer 1

Question 2

Answer the following questions using the information below:
Wesam Corporation manufactures industrial-sized gas furnaces and uses budgeted machine-hours to allocate variable manufacturing overhead. The following information pertains to the company's manufacturing overhead data:


-What is the budgeted variable overhead cost rate per output unit?

A) $10.75
B) $48.40
C) $11.00
D) $32.25

Answer 2

$10.75

Question 3

Answer the following questions using the information below:
Khalif Corporation manufactures baseball uniforms and uses budgeted machine-hours to allocate variable manufacturing overhead. The following information pertains to the company's manufacturing overhead data:

-What is the budgeted variable overhead cost rate per output unit?

A) $12.21
B) $18.00
C) $12.00
D) $19.00

Answer 3

$18.00

Question 4

Answer the following questions using the information below:
Farouk's Fertilizer Farm produces fertilizer and distributes the product by using his tanker trucks. Farouk's uses budgeted fleet hours to allocate variable manufacturing overhead. The following information pertains to the company's manufacturing overhead data:


-What is the budgeted variable overhead cost rate per output unit?

A) $175.00
B) $120.00
C) $125.00
D) $166.67

Question 5

Answer the following questions using the information below:
Red Sea Corporation manufactured 16,000 air conditioners during November. The overhead cost-allocation base is $31.50 per machine-hour. The following variable overhead data pertain to November:


-What is the actual variable overhead cost?

A) $279,000
B) $244,125
C) $250,000
D) $248,063

Question 6

Answer the following questions using the information below:
Red Sea Corporation manufactured 16,000 air conditioners during November. The overhead cost-allocation base is $31.50 per machine-hour. The following variable overhead data pertain to November:


-What is the flexible-budget amount?

A) $248,000
B) $248,033
C) $279,000
D) $252,000

Question 7

Answer the following questions using the information below:
Red Sea Corporation manufactured 16,000 air conditioners during November. The overhead cost-allocation base is $31.50 per machine-hour. The following variable overhead data pertain to November:


-What is the variable overhead spending variance?

A) $4,500 favorable
B) $3,937.50 unfavorable
C) $4,500 unfavorable
D) $3,937.50 favorable

Question 8

Answer the following questions using the information below:
Red Sea Corporation manufactured 16,000 air conditioners during November. The overhead cost-allocation base is $31.50 per machine-hour. The following variable overhead data pertain to November:


-What is the variable overhead efficiency variance?

A) $3,937.50 unfavorable
B) $4,500 favorable
C) $3,937.50 favorable
D) $4,500 unfavorable

Question 9

Answer the following questions using the information below:
Red Sea Corporation manufactured 16,000 air conditioners during November. The overhead cost-allocation base is $31.50 per machine-hour. The following variable overhead data pertain to November:


-What is the total variable overhead variance?

A) $3,937.50 f unfavorable
B) $3,937.50 f favorable
C) $7,875 favorable
D) $7,875 unfavorable

Question 10

Qadir's Pillow Company manufactures pillows. The 2015 operating budget is based on production of 40,000 pillows with 0.5 machine-hour allowed per pillow. Variable manufacturing overhead is anticipated to be $440,000.
Actual production for 2015 was 36,000 pillows using 19,000 machine-hours. Actual variable costs were $20 per machine-hour.
Required:
Calculate the variable overhead spending and efficiency variances.

Question 11

Abdul's Rugs Company manufactures rugs. The 2015 operating budget is based on the production of 5,000 rugs with 1.25 machine-hour allowed per rug. Variable manufacturing overhead is anticipated to be $150,000.
Actual production for 2015 was 5,500 rugs using 6,050 machine-hours. Actual variable costs were $23.75 per machine-hour.
Required:
Calculate the variable overhead spending and the efficiency variances.

Question 12

Answer the following questions using the information below:
Jamila's Corporation manufactured 25,000 grooming kits for horses during March. The fixed-overhead cost-allocation rate is $20.00 per machine-hour. The following fixed overhead data pertain to March:


-What is the fixed overhead spending variance?

A) $1,000 unfavorable
B) $5,000 favorable
C) $2,000 favorable
D) $3,000 unfavorable

Question 13

Answer the following questions using the information below:
Ajman Corporation manufactured 54,000 door handles during September. The fixed-overhead cost-allocation rate is $50.00 per machine-hour. The following fixed overhead data pertain to September:


-What is the flexible-budget amount?

A) $51,750
B) $100,000
C) $57,500
D) $53,400

Question 14

Answer the following questions using the information below:
GNF Corporation manufactured 10,000 golf bags during April. The fixed overhead cost-allocation rate is $40.00 per machine-hour. The following fixed overhead data pertain to March:


-What is the flexible-budget amount?

A) $240,000
B) $204,000
C) $200,000
D) $244,000

Question 15

Answer the following questions using the information below:
GNF Corporation manufactured 10,000 golf bags during April. The fixed overhead cost-allocation rate is $40.00 per machine-hour. The following fixed overhead data pertain to March:


-Fixed overhead is:

A) overallocated by $44,000
B) underallocated by $44,000
C) overallocated by $4,000
D) underallocated by $4,000

Question 16

Aqil Company makes watches. The fixed overhead costs for 2015 total $324,000. The company uses direct labor-hours for fixed overhead allocation and anticipates 10,800 hours during the year for 540,000 units. An equal number of units are budgeted for each month.
During October, 48,000 watches were produced and $28,000 was spent on fixed overhead.
Required:
a. Determine the fixed overhead rate for 2015 based on the units of input.
b. Determine the fixed overhead static-budget variance for October.
c. Determine the production-volume overhead variance for October.

Question 17

Andy's Basketball Manufacturing Company reported:
Actual fixed overhead $500,000
Fixed manufacturing overhead spending variance $30,000 unfavorable
Fixed manufacturing production-volume variance $20,000 unfavorable
To isolate these variances at the end of the accounting period, Brandon would:

A) credit Fixed Manufacturing Control Allocated for $450,000
B) credit Fixed Manufacturing Production-Volume Variance for $20,000
C) debit Fixed Manufacturing Overhead Allocated for $500,000
D) debit Fixed Manufacturing Overhead Spending Variance for $30,000

Question 18

A) A $25,000 favorable flexible-budget variance was recorded.
B) Work-in-Process is currently understated.
C) A $30,000 unfavorable spending variance was recorded.
D) Tara underallocated variable manufacturing overhead.

Question 19

Lufti Builds has budgeted construction overhead for August of $260,000 for variable costs and $435,000 for fixed costs. Actual costs for the month totaled $275,000 for variable and $445,000 for fixed. Allocated fixed overhead totaled $440,000. The company tracks each item in an overhead control account before allocations are made to individual jobs. Spending variances for August were $10,000 unfavorable for variable and $10,000 unfavorable for fixed. The production-volume overhead variance was $5,000 favorable.
Required:
a. Make journal entries for the actual costs incurred.
b. Make journal entries to record the variances for August.