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Exam 8: Flexible Budgets, overhead Cost Variances, and Management Control

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Question 61

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Answer the following questions using the information below: Roberson Corporation manufactured 30,000 ice chests during September. The variable overhead cost-allocation base is $11.25 per machine-hour. The following variable overhead data pertain to September: $\begin{array}{lrr}&\text { Actual } &\text { Budgeted }\\\text { Production } & 30,000 \text { units } & 24,000 \text { units } \\\text { Machine-hours } & 15,000 \text { hours } & 10,800 \text { hours } \\\text { Variable overhead cost per machine-hour: } & \$ 11.00 & \$ 11.25\end{array}$ -What is the variable overhead spending variance?

A) $3,750 favorable
B) $16,875 unfavorable
C) $13,125 unfavorable
D) $30,375 unfavorable

E) A) and D)
F) C) and D)

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Question 62

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Compared to variable overhead costs planning,fixed overhead costs planning have an additional strategic issue of ________.

A) eliminating activities that do not add value
B) increasing the linearity between total costs and volume of production
C) choosing the appropriate level of investment
D) identifying essential value-adding activities

E) A) and C)
F) B) and D)

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Question 63

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An unfavorable production-volume variance always infers that management made a bad planning decision regarding the plant capacity.

One possible reason for unfavorable variable overhead efficiency variance for materials handling is ________.

The fixed overhead cost variance can be further subdivided into the ________.

Abby Company has just implemented a new cost accounting system that provides two variances for fixed manufacturing overhead.While the company's managers are familiar with the concept of spending variances,they are unclear as to how to interpret the production-volume overhead variances.Currently,the company has a production capacity of 54,000 units a month,although it generally produces only 46,000 units.However,in any given month the actual production is probably something other than 46,000. Required: a.Does the production-volume overhead variance measure the difference between the 54,000 and 46,000,or the difference between the 46,000 and the actual monthly production? Explain. b.What advice can you provide the managers that will help them interpret the production-volume overhead variances?

Radon Corporation manufactured 25,000 grooming kits for horses during March.The following fixed overhead data pertain to March: $\begin{array}{lrr}&\text { Actual }&\text { Static Budget }\\\text { Production } & 33,000 \text { units } & 30,000 \text { units } \\\text { Machine-hours } & 6,100 \text { hours } & 6,000 \text { hours } \\\text { Fixed overhead costs for March } & \$ 153,000 & \$ 144,000\end{array}$ - What is the fixed overhead production-volume variance?

Which of the following statements is true of fixed overhead cost variances?

Answer the following questions using the information below: Neocomfort Corporation manufactured 3,000 chairs during June. The following variable overhead data relates to June: $\begin{array}{ll}\text { Budgeted variable overhead cost per unit } & \$ 12.00 \\\text { Actual variable manufacturing overhead cost } & \$ 49,900 \\\text { Flexible-budget amount for variable manufacturing overhead } & \$ 47,800 \\\text { Variable manufacturing overhead efficiency variance } & \$ 720 \text { unfavorable }\end{array}$ -What is the variable overhead flexible-budget variance?

Under activity-based costing,the flexible-budget amount equals the static-budget amount for fixed overhead costs.

When fixed overhead spending variance is unfavorable,it can be safely assumed that ________.

Answer the following questions using the information below: Skizone Company's 4-Variance Analysis: $\begin{array} { | l | l | l | l | } \hline & & & \text { Production-Volume } \\ & \text { Spending Variance } & \text { Efficiency Variance } & \text { Variance } \\\hline \text { Variable overhead } & \$ 6,500 \mathrm {~F} & \$ 12,000 \mathrm { U } & \text { No variance } \\\hline \text { Fixed overhead } & \text { (a) } & \text { No variance } & \$ 46,000 \mathrm { U } \\\hline\end{array}$ -If Skizone's combined 4-Variance Analysis shows an unfavorable spending variance of $2,300,what is the fixed overhead spending variance (a) ?

Which of the following is the correct mathematical expression to calculate the fixed overhead production-volume variance?

Use the below information to answer the following questions: Bekits Corporation manufactured 25,000 grooming kits for horses during March. The following fixed overhead data relates to March: $\begin{array}{lrr}&\text { Actual }&\text { Static Budget }\\\text { Production } & 37,500 \text { units } & 36,000 \text { units } \\\text { Machine-hours } & 6,100 \text { hours } & 5,940 \text { hours } \\\text { Fixed overhead costs for March } & \$ 133,000 & \$ 124,740\end{array}$ -What is the amount of fixed overhead allocated to production?

The variable overhead flexible-budget variance can be further subdivided into the ________.

What are the two components of sales-volume variance? Explain why sales-volume variance could be helpful to managers.

Effective planning of variable overhead costs includes ________.

Standard costing can provide managers with reliable and timely information on variable distribution overhead ________.

Christine 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: $\begin{array}{lr}\text { Budgeted output units } & 10,000 \text { units } \\\text { Budgeted machine-hours } & 15,000 \text { hours } \\\text { Budgeted variable manufacturing overhead costs for } 20,000 \text { units } & \$ 180,000 \\& \\\text { Actual output units produced } & 9,000 \text { units } \\\text { Actual machine-hours used } & 14,000 \text { hours } \\\text { Actual variable manufacturing overhead costs } & \$ 171,000\end{array}$ What is the budgeted variable overhead cost rate per output unit?

What is a standard costing system?