Question 1

What is the factory overhead efficiency variance for May under the assumption that Gerhan uses a four-variance breakdown (decomposition) of the total overhead variance?

Accepted Answer

A) $180 unfavorable. 
B) $380 favorable. 
C) $380 unfavorable. 
D) $480 unfavorable. 
E) $480 favorable.

Question 2

In deciding whether to further investigate a variance, an organization needs to weigh the costs of investigation against the:

Accepted Answer

A) Ongoing time constraints. 
B) Size of the variance. 
C) Nature of the variance. 
D) Difficulty of the investigation. 
E) Anticipated benefits from the investigation.

Question 3

Redtop Co. uses a standard cost system and flexible budgets. The following flexible budget was prepared at the 80% operating level for the year:  However, for purposes of calculating the fixed overhead application rate, the company defined the denominator volume as the 90% capacity level. The standard calls for four DLHs per unit manufactured. During the year, Redtop worked 33,600 DLHs to manufacture 8,500 units. The actual factory overhead was $12,000 greater than the flexible-budget amount for the units produced, of which $5,000 was due to fixed factory overhead.
Required: Calculate (and provide supporting details for) each of the following variances:
1. The standard variable overhead application rate.
2. The variable overhead efficiency variance.
3. The factory overhead spending variance.
4. The factory overhead production volume variance.
5. The variable overhead spending variance.
6. Provide an interpretation for each of the above variances you calculated

Accepted Answer

The answer of Redtop Co. uses a standard cost system...

Question 4

Assuming a four-variance breakdown (decomposition) of the total overhead variance, what is the fixed factory overhead efficiency variance for the period?

Accepted Answer

A) N/A-this variance does not exist. 
B) $225 favorable. 
C) $425 unfavorable. 
D) $650 unfavorable.

Question 5

The difference between the standard variable overhead cost for the actual quantity of the cost driver used for applying variable overhead and the standard variable overhead cost for the units manufactured during the period is the:

Accepted Answer

A) Total variable overhead variance. 
B) Variable overhead spending variance. 
C) Variable overhead rate variance. 
D) Variable overhead efficiency variance. 
E) Variable overhead flexible-budget variance.

Question 6

Under a three-way breakdown (decomposition) of the total overhead variance, what is the total factory overhead spending variance for Zero Company in December?

Accepted Answer

A) N/A-this variance doesn't exist under a three-way breakdown of the total overhead variance. 
B) $225 favorable. 
C) $425 unfavorable. 
D) $560 unfavorable. 
E) $600 unfavorable

Question 7

When implementing a standard cost system, one of the system-design choices that management must make is choice of the denominator volume level for the purpose of calculating the fixed overhead application rate, which is used to determine product costs. Various alternatives exist for the denominator volume.
Required:
1. List and briefly describe the various alternatives that exist for defining the denominator activity level for product-costing purposes.
2. What provisions of generally accepted accounting principles (GAAP) and current income tax requirements affect the decision as to choice of the denominator volume level when developing the standard fixed overhead application rate? Provide an overview of the requirements in this regard.

Accepted Answer

The answer of When implementing a standard cost system, one...

Question 8

The difference between the actual fixed overhead cost incurred during a period and the budgeted fixed overhead cost for the period is the:

Accepted Answer

A) Fixed overhead efficiency variance. 
B) Fixed overhead production-volume variance. 
C) Fixed overhead spending variance. 
D) Fixed overhead rate variance. 
E) Fixed overhead sales-volume variance.

Question 9

During the year the Machining Department produced 50,000 units, consuming 127,500 machine hours and incurring $433,500 of fixed overhead. For the current year the department has a production volume variance of:

Accepted Answer

A) $0. 
B) $3,400 unfavorable. 
C) $3,600 unfavorable. 
D) $7,000 unfavorable. 
E) $8,500 unfavorable.

Question 10

Under a three-variance breakdown (decomposition) of the total factory overhead variance, the total factory overhead spending variance is:

Accepted Answer

A) $0. 
B) $600 unfavorable. 
C) $1,400 favorable. 
D) $1,400 unfavorable. 
E) $2,000 favorable.

Question 11

What are the steps in determining the standard fixed factory overhead application rate? Does the procedure differ for product-costing versus cost-control purposes?

Accepted Answer

The answer of What are the steps in determining the...

Question 12

In firms using activity-based costing (ABC), budgeted total factory overhead varies with changes in:

Accepted Answer

A) A single cost driver for applying overhead. 
B) Several cost drivers. 
C) The selected denominator activity level. 
D) The quantity of input resources used in operations of the period.

Question 13

The variable overhead efficiency variance in 2013 for Bluecap Co. is:

Accepted Answer

A) $3,440 favorable. 
B) $8,000 unfavorable. 
C) $9,200 favorable. 
D) $11,440 unfavorable. 
E) $17,200 unfavorable.

Question 14

Which of the following is not a cost system proposed as an extension to ABC systems, with the overall goal of more accurately allocating manufacturing overhead costs to outputs?

Accepted Answer

A) Resource consumption accounting (RC
A) . 
B) Flexible standard costing. 
C) GPK (Grenzplankostenregnung). 
D) Variable costing.

Question 15

Systematic variances, as this term is used in the text, are persistent and most likely:

Accepted Answer

A) Will disappear over time. 
B) Average out to a steady-state amount over time. 
C) Will recur unless corrected. 
D) Are small in amount. 
E) Are large in amount.

Question 16

What is the fixed factory overhead spending variance in December for Gerhan Company?

Accepted Answer

A) $0. 
B) $180 unfavorable. 
C) $300 favorable. 
D) $480 unfavorable. 
E) $680 unfavorable.

Question 17

If Zero Company uses a two-way breakdown (decomposition) of the total overhead variance, what is the total factory overhead flexible-budget variance for December?

Accepted Answer

A) N/A-this variance doesn't exist under a two-way breakdown of the total overhead variance. 
B) $225 favorable. 
C) $425 unfavorable. 
D) $650 unfavorable. 
E) $690 unfavorable.

Question 18

The variable factory overhead efficiency variance is:

Accepted Answer

A) $600 unfavorable. 
B) $1,000 favorable. 
C) $1,400 unfavorable. 
D) $1,500 favorable. 
E) $2,100 favorable.

Question 19

The standard fixed overhead application rate is:

Accepted Answer

A) $1.00 per machine hour. 
B) $2.00 per machine hour. 
C) $3.00 per machine hour. 
D) $4.00 per machine hour. 
E) $5.00 per machine hour.

Question 20

In terms of allocating fixed overhead cost to products, generally accepted accounting principles:

Accepted Answer

A) Require that such allocations be based on normal capacity. 
B) Allow for the use of either practical capacity or theoretical capacity. 
C) Don't apply since the resulting data are used only internally (for control purposes). 
D) Specify only that such costs be "reasonably allocated" to outputs. 
E) Require that these costs be expensed in the period incurred.

Exam 15: Operational Performance Measurement: Indirect-Cost Variances and Resource-Capacity Management