Flexible Budgets and Overhead Analysis

Chapter 9 Flexible Budgets and Overhead Analysis True/False 1. Fixed costs should not be included in a flexible budget since such costs are not likely to be controllable by managers. Level: Medium LO: 1 Ans: F 2. It is not important that the activity base and overhead costs be causally related when developing a flexible budget. Level: Easy LO: 1 Ans: F 3. The activity base for a flexible budget should usually be expressed in units of activity rather than in dollars. Level: Easy LO: 1 Ans: T 4. The static budget should be used primarily to determine whether cost control is being maintained. Level: Easy LO: 1 Ans: F 5. A company that wants to report both spending and efficiency variances for overhead must compute budget allowances for both the actual amount of activity that occurred and the standard level of activity allowed for the level of output achieved. Level: Medium LO: 4 Ans: T 6. Responsibility for the overhead efficiency variance should be assigned to whoever is responsible for control of the activity base underlying the flexible budget. Level: Easy LO: 4 Ans: T 7. A favorable variable overhead efficiency variance indicates that overhead has been used efficiently. Level: Medium LO: 4 Ans: F 8. A company has a standard cost system in which fixed and variable manufacturing overhead costs are applied to products on the basis of direct labor-hours. The company’s choice of the denominator level of activity has no effect on the fixed overhead budget variance. Level: Medium LO: 5,6 Ans: T 9. In a standard cost system, overhead is applied on the basis of the actual level of activity rather than the standard level of activity allowed for the output of a period. Level: Medium LO: 5 Ans: F 10. A company has a standard cost system in which fixed and variable manufacturing overhead costs are applied to products on the basis of direct labor-hours. The company’s choice of the denominator level of activity has no effect on the fixed portion of the predetermined overhead rate. Level: Easy LO: 5 Ans: F 11. The budget variance for fixed overhead represents the difference between actual fixed overhead costs incurred and the amount of fixed overhead applied to work in process. Level: Medium LO: 6 Ans: F 12. There can be no volume variance for variable overhead. Level: Medium LO: 6 Ans: T 13. An unfavorable volume variance means that a company operated at an activity level greater than that planned for the period. Level: Medium LO: 6 Ans: F 14. The volume variance for fixed overhead is an activity-related variance based on the difference between the denominator level of activity and the standard level of activity allowed for the output of a period. Level: Medium LO: 6 Ans: T 15. A company has a standard cost system in which fixed and variable manufacturing overhead costs are applied to products on the basis of direct labor-hours. A fixed overhead volume variance will NOT necessarily occur in a month in which production volume differs from sales volume. Level: Hard LO: 6 Ans: T Multiple Choice 16. When using a flexible budget, what will occur to fixed costs as the activity level increases within the relevant range? A) fixed costs per unit will decrease. B) fixed costs per unit will remain unchanged. C) fixed costs per unit will increase. D) fixed costs are not considered in flexible budgeting. Source: CPA, adapted Level: Easy LO: 1 Ans: A 17. A major disadvantage of static budgets is: A) the difficulty in developing such budgets due to the high cost of gathering the necessary information. B) the cost behavior pattern of manufacturing overhead, which is primarily fixed. C) that the variances between actual and budget on a static budget result from comparing actual costs at one level of activity to budgeted costs at a different level of activity. D) their length and complexity. Level: Medium LO: 1 Ans: C 18. Comparing actual results to a budget based on actual activity for the period is possible with the use of a: A) monthly budget. B) master budget. C) flexible budget. D) rolling budget. Level: Easy LO: 1 Ans: C 19. A static budget is: A) a budget for a single level of activity. B) a budget that ignores inflation. C) used only for fixed costs. D) used when the mix of products does not change. Level: Easy LO: 1 Ans: A 20. Last year, a department’s standard costing system reported an unfavorable variable overhead spending variance and an unfavorable volume variance. The denominator activity level selected for allocating overhead to the product was based on 80% of capacity. If 100% of capacity had been selected instead as the denominator level, how would the reported unfavorable spending and volume variances be affected? A) A above B) B above C) C above D) D above Source: CPA, adapted Level: Hard LO: 3,5 Ans: C 21. The overhead spending variance: A) measures the variance in amount spent for fixed overhead items. B) includes elements of waste or excessive usage as well as elements of price variance. C) is generally considered to be the least useful of all overhead variances. D) measures the difference between denominator activity and standard hours allowed. Level: Easy LO: 3 Ans: B 22. If the price a company paid for overhead items, such as utilities, decreased during the year, the company would probably report a(n): A) favorable efficiency variance. B) favorable spending variance. C) unfavorable efficiency variance. D) unfavorable spending variance. Level: Medium LO: 3 Ans: B 23. Variable overhead is applied on the basis of standard direct labor-hours. If the direct labor efficiency variance is unfavorable, the variable overhead efficiency variance will be: A) favorable. B) unfavorable. C) zero. D) indeterminable since it is not related to the labor efficiency variance. Source: CMA, adapted Level: Medium LO: 4 Ans: B 24. Alex Company has a large underapplied overhead balance in the manufacturing overhead account. This could be explained by: A) an unfavorable volume variance, assuming all other variances are zero. B) a favorable volume variance, assuming all other variances are zero. C) standard hours allowed for the period’s output being greater than denominator hours for the period. D) none of these. Level: Hard LO: 5,6 Ans: A 25. In a standard cost system, overhead is applied to production on the basis of: A) the denominator hours chosen for the period. B) the actual hours required to complete the output of the period. C) the standard hours allowed to complete the output of the period. D) none of these. Level: Medium LO: 5 Ans: C 26. The fixed overhead budget variance is measured by: A) the difference between budgeted fixed overhead cost and actual fixed overhead cost. B) the difference between actual fixed overhead cost and applied fixed overhead cost. C) the difference between budgeted fixed overhead cost and applied fixed overhead cost. D) none of these. Level: Medium LO: 6 Ans: A 27. The Santos Company erred in selecting a denominator level of activity and chose a much lower level than was realistic. This error would most likely result in a large: A) favorable variable overhead efficiency variance. B) favorable fixed overhead budget variance. C) favorable fixed overhead volume variance. D) unfavorable fixed overhead budget variance. Level: Medium LO: 6 Ans: C 28. A fixed overhead volume variance based on standard direct labor-hours measures: A) deviation from standard direct labor hour capacity. B) deviation from the denominator level of direct labor hours. C) fixed overhead efficiency. D) fixed overhead spending. Source: CMA, adapted Level: Medium LO: 6 Ans: B 29. Papenfuss Family Inn is a bed and breakfast establishment in a converted 100-year-old mansion. The Inn’s guests appreciate its gourmet breakfasts and individually decorated rooms. The Inn’s overhead budget for the most recent month appears below: The Inn’s variable overhead costs are driven by the number of guests. What would be the total budgeted overhead cost for a month if the activity level is 76 guests? Assume that the activity levels of 86 guests and 76 guests are within the same relevant range. A) $52,848.40 B) $8,343.40 C) $8,274.40 D) $7,373.24 Level: Easy LO: 1 Ans: C 30. Hatzenbuhler Manufacturing Corporation has prepared the following overhead budget for next month. The company’s variable overhead costs are driven by machine-hours. What would be the total budgeted overhead cost for next month if the activity level is 6,600 machinehours rather than 6,800 machine-hours? Assume that the activity levels of 6,800 machine-hours and 6,600 machine-hours are within the same relevant range. A) $107,824.00 B) $110,600.00 C) $108,300.00 D) $107,347.06 Level: Easy LO: 1 Ans: C 31. Mcgahen Medical Clinic measures its activity in terms of patient-visits. Last month, the budgeted level of activity was 1,080 patient-visits and the actual level of activity was 990 patient-visits. The clinic’s director budgets for variable overhead costs of $3.30 per patient-visit and fixed overhead costs of $10,600 per month. The actual variable overhead cost last month was $3,380 and the actual fixed overhead cost was $8,780. In the clinic’s flexible budget performance report for last month, what would have been the variance for the total overhead cost? A) $113 U B) $297 F C) $1,707 F D) $2,004 F Level: Medium LO: 2 Ans: C 32. Sesareo Tile Installation Corporation measures its activity in terms of square feet of tile installed. Last month, the budgeted level of activity was 1,130 square feet and the actual level of activity was 1,180 square feet. The company’s owner budgets for supply costs, a variable overhead cost, at $2.60 per square foot. The actual supply cost last month was $2,130. In the company’s flexible budget performance report for last month, what would have been the variance for supply costs? A) $808 F B) $938 F C) $90 U D) $130 U Level: Easy LO: 2 Ans: B 33. Eng Natural Dying Corporation measures its activity in terms of skeins of yarn dyed. Last month, the budgeted level of activity was 16,800 skeins and the actual level of activity was 16,600 skeins. The company’s owner budgets for dye costs, a variable overhead cost, at $0.44 per skein. The actual dye cost last month was $7,690. In the company’s flexible budget performance report for last month, what would have been the variance for dye costs? A) $298 U B) $93 F C) $88 F D) $386 U Level: Easy LO: 2 Ans: D 34. Mcneeley Footwear Corporation’s flexible budget cost formula for supplies, a variable overhead cost, is $2.94 per unit of output. The company’s flexible budget performance report for last month showed a $4,998 favorable variance for supplies. During that month, 11,900 units were produced. Budgeted activity for the month had been 12,300 units. The actual costs incurred for indirect materials must have been closest to: A) $2.94 B) $2.03 C) $2.10 D) $2.52 Level: Hard LO: 2 Ans: D 35. Goy Corporation’s flexible budget performance report for last month shows that actual indirect materials cost, a variable overhead cost, was $28,194 and that the variance for indirect materials cost was $1,887 unfavorable. During that month, the company worked 11,100 machine-hours. Budgeted activity for the month had been 11,200 machine-hours. The cost formula per machine-hour for indirect materials cost must have been closest to: A) $2.69 B) $2.71 C) $2.35 D) $2.37 Level: Hard LO: 2 Ans: D 36. At Cady Company, maintenance is a variable cost that varies directly with machine-hours. The performance report for June showed that actual maintenance costs totaled $9,600 and that the associated spending variance was $400 unfavorable. If 8,000 machine-hours were actually worked during June, the budgeted maintenance cost per machine-hour was: A) $1.30 B) $1.25 C) $1.20 D) $1.15 Level: Hard LO: 3 Ans: D 37. Suski Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company has provided the following data for the most recent month: What was the variable overhead spending variance for the month? A) $1,500 favorable B) $590 unfavorable C) $910 favorable D) $1,000 unfavorable Level: Medium LO: 3 Ans: A 38. Masek Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company has provided the following data for the most recent month: What was the fixed overhead budget variance for the month? A) $2,360 unfavorable B) $1,000 unfavorable C) $2,360 favorable D) $1,000 favorable Level: Medium LO: 3 Ans: D 39. Omary Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company has provided the following data for the most recent month: What was the total of the variable overhead spending and fixed overhead budget variances for the month? A) $1,520 unfavorable B) $3,180 favorable C) $4,820 unfavorable D) $6,340 unfavorable Level: Medium LO: 3 Ans: C 40. Coblentz Fabrication Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company’s cost formula for variable manufacturing overhead is $6.20 per MH. The company had budgeted its fixed manufacturing overhead cost at $40,000 for the month. During the month, the actual total variable manufacturing overhead was $48,970 and the actual total fixed manufacturing overhead was $43,000. The actual level of activity for the period was 8,300 MHs. What was the total of the variable overhead spending and fixed overhead budget variances for the month? A) $2,490 favorable B) $510 favorable C) $510 unfavorable D) $2,490 unfavorable Level: Easy LO: 3 Ans: C 41. Sholette Manufacturing Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company’s cost formula for variable manufacturing overhead is $5.00 per MH. During the month, the actual total variable manufacturing overhead was $22,540 and the actual level of activity for the period was 4,600 MHs. What was the variable overhead spending variance for the month? A) $92 favorable B) $92 unfavorable C) $460 unfavorable D) $460 favorable Level: Easy LO: 3 Ans: D 42. Tropiano Electronics Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company had budgeted its fixed manufacturing overhead cost at $62,100 for the month and its level of activity at 3,200 MHs. The actual total fixed manufacturing overhead was $61,600 for the month and the actual level of activity was 3,000 MHs. What was the fixed overhead budget variance for the month to the nearest dollar? A) $3,381 unfavorable B) $500 favorable C) $500 unfavorable D) $3,381 favorable Level: Medium LO: 3 Ans: B 43. Merle Corporation applies manufacturing overhead to products on the basis of standard machinehours. For the most recent month, the company based its budget on 4,000 machine-hours. Budgeted and actual overhead costs for the month appear below: The company actually worked 3,690 machine-hours during the month. The standard hours allowed for the actual output were 3,620 machine-hours for the month. What was the overall variable overhead efficiency variance for the month? A) $721 unfavorable B) $467 favorable C) $254 unfavorable D) $880 favorable Level: Hard LO: 4 Ans: A 44. Schley Corporation applies manufacturing overhead to products on the basis of standard machinehours. Budgeted and actual overhead costs for the most recent month appear below: The original budget was based on 3,200 machine-hours. The company actually worked 3,510 machinehours during the month and the standard hours allowed for the actual output were 3,660 machine-hours. What was the overall variable overhead efficiency variance for the month? A) $550 favorable B) $1,208 unfavorable C) $22 favorable D) $1,230 favorable Level: Medium LO: 4 Ans: D 45. Machain Corporation applies manufacturing overhead to products on the basis of standard machinehours. The company’s cost formula for variable overhead cost is $2.90 per machine-hour. The actual variable overhead cost for the month was $15,270. The original budget for the month was based on 5,000 machine-hours. The company actually worked 5,090 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 5,200 machine-hours. What was the variable overhead efficiency variance for the month? A) $580 unfavorable B) $190 unfavorable C) $509 unfavorable D) $319 favorable Level: Easy LO: 4 Ans: D 46. Pizzi, Inc. had the following fixed overhead variances last year: Pizzi uses machine-hours as an activity base for overhead and used 48,000 machine-hours as the denominator activity level for the year. Total actual fixed overhead was $150,000. The actual number of machine-hours incurred was 50,000. What were Pizzi’s standard hours allowed for actual output? A) 40,000 B) 42,000 C) 50,400 D) 52,500 Level: Hard LO: 5,6 Ans: C 47. Ferro Enterprises, Inc., uses a standard cost system in which it applies manufacturing overhead to units of product on the basis of standard direct labor-hours. During the month of September, the company applied $52,000 in fixed manufacturing overhead cost to units of product. At the end of the month, manufacturing overhead was overapplied by $3,000. If there was no volume variance in September, then the budgeted fixed manufacturing overhead cost for the month was: A) $49,000 B) $52,000 C) $55,000 D) $58,000 Level: Hard LO: 5,6 Ans: B 48. Hall Company’s standards call for 750 direct labor-hours to produce 500 units. During May 400 units were produced. The company worked 650 direct labor-hours. The standard hours allowed for May production would be: A) 750 hours B) 650 hours C) 600 hours D) 100 hours Level: Easy LO: 5 Ans: C 49. Dexter Company uses a standard cost system and applies manufacturing overhead cost to units of product on the basis of standard direct labor-hours (DLHs). Information on Dexter Company’s manufacturing overhead costs for last period is given below: Given these data, the under- or overapplied overhead cost for the period would be: A) $10,000 overapplied B) $2,000 overapplied C) $10,000 underapplied D) $8,000 underapplied Level: Medium LO: 5 Ans: B 50. At the end of April, the Manufacturing Overhead account of Askey Company showed a debit balance of $6,000 after overhead had been applied for the month. If the actual total manufacturing overhead cost incurred in April was $108,600, and if 8,550 units were produced in April, then the total (combined) rate for applying manufacturing overhead cost per unit is: A) $13.40 B) $13.00 C) $12.80 D) $12.00 Level: Hard LO: 5 Ans: D 51. Semaan Corporation applies manufacturing overhead to products on the basis of standard machinehours. Budgeted and actual overhead costs for the month appear below: The company based its original budget on 2,700 machine-hours. The company actually worked 2,960 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 3,030 machine-hours. What was the overall fixed overhead budget variance for the month? A) $3,130 unfavorable B) $340 unfavorable C) $340 favorable D) $3,130 favorable Level: Medium LO: 6 Ans: C 52. Acuff Corporation applies manufacturing overhead to products on the basis of standard machinehours. Budgeted and actual overhead costs for the most recent month appear below: The company based its original budget on 6,200 machine-hours. The company actually worked 6,560 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 6,420 machine-hours. What was the overall fixed overhead budget variance for the month? A) $320 favorable B) $320 unfavorable C) $972 favorable D) $972 unfavorable Level: Medium LO: 6 Ans: B 53. Reidenbach Corporation applies manufacturing overhead to products on the basis of standard machine-hours. The budgeted fixed overhead cost for the most recent month was $17,100 and the actual fixed overhead cost for the month was $17,450. The company based its original budget on 4,500 machine-hours. The standard hours allowed for the actual output of the month totaled 4,810 machinehours. What was the overall fixed overhead budget variance for the month? A) $1,178 unfavorable B) $350 unfavorable C) $350 favorable D) $1,178 favorable Level: Easy LO: 6 Ans: B 54. Steinhagen Corporation applies manufacturing overhead to products on the basis of standard machinehours. Budgeted and actual overhead costs for the most recent month appear below: The company based its original budget on 2,600 machine-hours. The company actually worked 2,790 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 2,960 machine-hours. What was the overall fixed overhead volume variance for the month? A) $5,148 favorable B) $5,148 unfavorable C) $2,717 favorable D) $2,717 unfavorable Level: Hard LO: 6 Ans: A 55. Denby Corporation applies manufacturing overhead to products on the basis of standard machinehours. Budgeted and actual fixed overhead costs for the most recent month appear below: The company based its original budget on 6,400 machine-hours. The company actually worked 6,710 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 6,540 machine-hours. What was the overall fixed overhead volume variance for the month? A) $3,286 favorable B) $1,484 unfavorable C) $3,286 unfavorable D) $1,484 favorable Level: Medium LO: 6 Ans: D 56. Diseth Corporation applies manufacturing overhead to products on the basis of standard machinehours. The company bases its predetermined overhead rate on 5,300 machine-hours. The company’s total budgeted fixed manufacturing overhead is $12,720. In the most recent month, the total actual fixed manufacturing overhead was $12,370. The company actually worked 5,350 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 5,540 machine-hours. What was the overall fixed overhead volume variance for the month? A) $350 favorable B) $120 favorable C) $120 unfavorable D) $576 favorable Level: Easy LO: 6 Ans: D 57. Bruley Corporation applies manufacturing overhead to products on the basis of standard machinehours. The company’s predetermined overhead rate for fixed manufacturing overhead is $3.30 per machine-hour and the denominator level of activity is 3,500 machine-hours. In the most recent month, the total actual fixed manufacturing overhead was $11,570 and the company actually worked 3,430 machinehours during the month. The standard hours allowed for the actual output of the month totaled 3,450 machine-hours. What was the overall fixed overhead volume variance for the month? A) $66 favorable B) $231 favorable C) $231 unfavorable D) $165 unfavorable Level: Easy LO: 6 Ans: D 58. Akey Hospital bases its budgets on patient-visits. The hospital’s static budget for March appears below: The total overhead cost at an activity level of 3,000 patient-visits per month should be: A) $97,800 B) $92,100 C) $88,020 D) $92,640 Level: Easy LO: 1 Ans: B 59. Fuhrer Hotel bases its budgets on guest-days. The hotel’s static budget for December appears below: The total overhead cost at an activity level of 7,500 guest-days per month should be: A) $227,250 B) $215,140 C) $216,140 D) $206,040 Level: Easy LO: 1 Ans: B 60. Welcome Corporation produces metal telephone poles. In the most recent month, the company budgeted production of 4,100 poles. Actual production was 4,400 poles. According to standards, each pole requires 7.0 machine-hours. The actual machine-hours for the month were 31,140 machine-hours. The budgeted indirect labor is $2.50 per machine-hour. The actual indirect labor cost for the month was $83,787. The variable overhead efficiency variance for indirect labor is: A) $6,787 F B) $6,787 U C) $850 F D) $850 U Level: Easy LO: 4 Ans: D 61. Sperazza Corporation produces large commercial doors for warehouses and other facilities. In the most recent month, the company budgeted production of 4,900 doors. Actual production was 5,300 doors. According to standards, each door requires 6.4 machine-hours. The actual machine-hours for the month were 34,340 machine-hours. The budgeted supplies cost is $3.10 per machine-hour. The actual supplies cost for the month was $99,331. The variable overhead efficiency variance for supplies cost is: A) $5,821 F B) $5,821 U C) $1,302 U D) $1,302 F Level: Easy LO: 4 Ans: C 62. The following data have been provided by Gerlach Corporation, a company that produces forklift trucks: The variable overhead efficiency variance for supplies cost is: A) $966 U B) $5,897 U C) $5,897 F D) $966 F Level: Easy LO: 4 Ans: D 63. Cuhel Corporation’s abbreviated flexible budget for two levels of activity appears below: If the denominator level of activity is 6,700 machine-hours, the variable element in the predetermined overhead rate would be: A) $140.70 B) $129.20 C) $13.40 D) $142.60 Level: Easy LO: 5 Ans: C 64. Oldham Corporation’s summary flexible budget for two levels of activity appears below: If the denominator level of activity is 4,100 machine-hours, the fixed element in the predetermined overhead rate would be: A) $25.42 B) $4.00 C) $21.42 D) $400.00 Level: Easy LO: 5 Ans: C 65. Hairr Corporation’s abbreviated flexible budget for two levels of activity appears below: If the denominator level of activity is 8,900 machine-hours, the predetermined overhead rate would be: A) $9.50 B) $115.98 C) $106.48 D) $950.00 Level: Easy LO: 5 Ans: B Use the following information to answer 66-69 The Steimer Company bases its flexible budget for manufacturing overhead on direct labor-hours (DLH). The company uses the following information in its flexible budget: The company uses standard costing and uses 50,000 DLHs as its denominator activity. 66. The variable manufacturing overhead rate per direct labor-hour is: A) $0.45 B) $0.55 C) $1.00 D) $1.25 Level: Easy LO: 1 Ans: C 67. The fixed manufacturing overhead rate per direct labor-hour is: A) $0.55 B) $0.90 C) $1.00 D) $1.30 Level: Easy LO: 1 Ans: B 68. At an activity level of 40,000 direct labor-hours, the total budgeted manufacturing overhead for a month would be: A) $45,000 B) $60,000 C) $67,000 D) $85,000 Level: Easy LO: 1 Ans: D 69. Suppose that 48,000 actual direct labor-hours are worked during one month. If 45,000 standard direct labor-hours are allowed for the month’s output, then the variable overhead efficiency variance for supplies for the month would be: A) $400 U B) $400 F C) $1,350 U D) $1,350 F Level: Medium LO: 4 Ans: C Use the following information to answer 70-72 The Minard Company uses the following condensed flexible budget for manufacturing overhead: 70. At an activity level of 600,000 direct labor-hours per year, the budgeted manufacturing overhead cost would be: A) $3,840,000 B) $3,900,000 C) $1,020,000 D) $420,000 Level: Easy LO: 1 Ans: B 71. At an activity level of 400,000 direct labor-hours, the budgeted variable manufacturing overhead cost would be: A) $2,740,000 B) $2,320,000 C) $820,000 D) $420,000 Level: Easy LO: 1 Ans: B 72. At a denominator activity level of 700,000 direct labor-hours, the predetermined overhead rate (per direct labor-hour) would be: A) $7.00 B) $6.40 C) $6.00 D) $5.80 Level: Easy LO: 5 Ans: B Use the following information to answer 73-78 A manufacturing company has a standard costing system based on standard machine-hours (MHs) as the measure of activity. Data from the company’s flexible budget for manufacturing overhead are given below: The following data pertain to operations for the most recent period: 73. What is the predetermined overhead rate to the nearest cent? A) $22.79 B) $24.60 C) $25.52 D) $23.65 Level: Medium LO: 5 Ans: B 74. How much overhead was applied to products during the period to the nearest dollar? A) $154,980 B) $157,046 C) $167,280 D) $160,790 Level: Medium LO: 5 Ans: B 75. What was the variable overhead spending variance for the period to the nearest dollar? A) $4,060 F B) $4,060 U C) $1,360 U D) $1,360 F Level: Medium LO: 3 Ans: C 76. What was the variable overhead efficiency variance for the period to the nearest dollar? A) $2,330 U B) $2,246 U C) $4,060 U D) $1,277 F Level: Medium LO: 4 Ans: B 77. What was the fixed overhead budget variance for the period to the nearest dollar? A) $137 F B) $1,750 U C) $7,850 U D) $7,507 F Level: Medium LO: 6 Ans: B 78. What was the fixed overhead volume variance for the period to the nearest dollar? A) $9,600 F B) $7,987 U C) $1,613 F D) $1,615 U Level: Medium LO: 6 Ans: C Use the following information to answer 79-82 Pohl Company uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of standard machine-hours. For June, the company’s manufacturing overhead flexible budget showed the following total budgeted costs at a denominator activity level of 20,000 machine-hours: During June, 17,000 machine-hours were used to complete 13,000 units of product, and the following actual total overhead costs were incurred: At standard, each unit of finished product requires 1.4 hours of machine time. 79. The variable overhead spending variance for maintenance cost for June was A) $1,020 F B) $1,020 U C) $3,230 F D) $3,230 U Level: Medium LO: 3 Ans: B 80. The variable overhead efficiency variance for utilities cost for June was A) $400 F B) $400 U C) $600 F D) $600 U Level: Medium LO: 4 Ans: C 81. The total predetermined overhead rate per machine-hour for June was: A) $2.57 B) $1.30 C) $2.80 D) $3.15 Level: Medium LO: 5 Ans: C 82. The fixed overhead budget variance (in total) for June was: A) $3,230 F B) $3,230 U C) $1,180 F D) $1,180 U Level: Medium LO: 6 Ans: C Use the following information to answer 83-86 Standard Company has developed standard manufacturing overhead costs based on a capacity of 180,000 direct labor-hours (DLHs) as follows: Standard overhead costs per unit: The following data pertain to operations in April: 83. The variable overhead spending variance for April was: A) $15,000 unfavorable B) $23,000 unfavorable C) $38,000 favorable D) $38,000 unfavorable Source: CMA, adapted Level: Medium LO: 3 Refer To: 09_05 Ans: B 84. The variable overhead efficiency variance for April was: A) $15,000 unfavorable B) $23,000 unfavorable C) $38,000 favorable D) $38,000 unfavorable Source: CMA, adapted Level: Medium LO: 4 Ans: A 85. The fixed overhead budget variance for April was: A) $40,000 unfavorable B) $40,000 favorable C) $60,000 favorable D) $60,000 unfavorable Source: CMA, adapted Level: Medium LO: 6 Ans: B 86. The fixed overhead volume variance for April was: A) $60,000 unfavorable B) $60,000 favorable C) $100,000 favorable D) $100,000 unfavorable Source: CMA, adapted Level: Medium LO: 6 Ans: D Use the following information to answer 87-89 Sulema, Inc. repairs and refinishes antique furniture. Manufacturing overhead at Sulema is applied to production on the basis of standard direct labor-hours. 87. Which overhead variance(s) at Sulema would be favorably affected if the actual direct labor-hours incurred are less than the standard direct labor-hours allowed for output? A) variable overhead spending variance B) variable overhead efficiency variance C) fixed overhead budget variance D) fixed overhead volume variance Level: Medium LO: 3,4,6 Ans: B 88. Which overhead variance(s) at Sulema would be unfavorably affected if the cost of solvents used to strip the old paint and varnish from the furniture unexpectedly doubles in price? A) variable overhead spending variance B) variable overhead efficiency variance C) fixed overhead budget variance D) fixed overhead volume variance Level: Medium LO: 3,4,6 Ans: A 89. Which overhead variance(s) at Sulema would be unfavorably affected if a significant amount of glue is being wasted by inexperienced direct labor workers? A) variable overhead spending variance B) variable overhead efficiency variance C) fixed overhead budget variance D) fixed overhead volume variance Level: Medium LO: 3,4,6 Ans: A Use the following information to answer 90-91 A manufacturing company that has only one product has established the following standards for its variable manufacturing overhead. The company uses direct labor-hours (DLHs) as its measure of activity. The following data pertain to operations for the last month: 90. What is the variable overhead spending variance for the month? A) $385 F B) $17,324 U C) $385 U D) $17,324 F Level: Medium LO: 3 Ans: A 91. What is the variable overhead efficiency variance for the month? A) $17,655 F B) $17,655 U C) $17,709 U D) $332 U Level: Medium LO: 4 Ans: C Use the following information to answer 92-94 Cuda Manufacturing Company uses a standard cost system with machine-hours (MHs) as the activity base for overhead. The following information relates to Cuda’s operations last year: 92. What was Cuda’s variable overhead spending variance? A) $6,000 unfavorable B) $15,000 favorable C) $20,000 unfavorable D) $21,000 favorable Level: Medium LO: 3 Ans: A 93. What was Cuda’s fixed overhead budget variance? A) $9,000 favorable B) $15,000 unfavorable C) $45,000 favorable D) $45,000 unfavorable Level: Medium LO: 4 Ans: B 94. What total amount of manufacturing overhead cost (variable and fixed) did Cuda apply to production? A) $950,000 B) $985,000 C) $988,000 D) $1,045,000 Level: Medium LO: 5 Ans: D Use the following information to answer 95-97 Vette Tie Corporation has developed the following manufacturing overhead standards to use in applying overhead to the production of its hand-painted silk ties. Manufacturing overhead at Vette is applied to production on the basis of standard direct labor-hours (DLHs). Standard Cost Per Tie The above standards were based on an expected annual volume of 60,000 ties. The actual results for last year were as follows: 95. What was Vette’s variable overhead spending variance? A) $2,800 unfavorable B) $13,200 favorable C) $16,000 favorable D) $68,000 unfavorable Level: Medium LO: 3 Ans: C 96. What was Vette’s fixed overhead budget variance? A) $1,600 unfavorable B) $3,000 favorable C) $13,000 unfavorable D) $17,600 unfavorable Level: Medium LO: 6 Ans: B 97. What total amount of manufacturing overhead cost (variable and fixed) did Vette apply to the 58,000 ties produced during the year? A) $1,276,000 B) $1,403,600 C) $1,421,200 D) $1,452,000 Level: Medium LO: 5 Ans: B Use the following information to answer 98-100 Tantanka Manufacturing Company uses a standard cost system with machine-hours as the activity base for overhead. The following information relates to production for last year: The standard machine-hours allowed for actual output during the year were 7,600. The actual machinehours incurred were 7,500. 98. What did Tantanka use as a predetermined overhead rate for fixed overhead? A) $85.50 per machine-hour B) $86.64 per machine-hour C) $87.40 per machine-hour D) $90.00 per machine-hour Level: Hard LO: 5 Ans: A 99. What was Tantanka’s fixed overhead volume variance? A) $5,700 unfavorable B) $14,440 unfavorable C) $28,500 favorable D) $34,200 unfavorable Level: Hard LO: 6 Ans: D 100. What was Tantanka’s variable overhead efficiency variance? A) $5,400 favorable B) $5,472 unfavorable C) $21,600 unfavorable D) $51,000 unfavorable Level: Hard LO: 4 Ans: A Use the following information to answer 101-104 Norman Enterprises has a standard cost system in which manufacturing overhead is applied to units of product on the basis of standard direct labor-hours (DLHs). The company has provided the following data concerning its fixed manufacturing overhead costs for last year: 101. The fixed portion of the predetermined overhead rate last year was: A) $1.80 per DLH B) $2.40 per DLH C) $2.88 per DLH D) $3.84 per DLH Level: Hard LO: 5 Ans: B 102. The budgeted fixed overhead cost last year was: A) $41,000 B) $42,000 C) $44,400 D) $51,600 Level: Hard LO: 5 Ans: D 103. The budget variance for fixed overhead last year was: A) $9,600 F B) $9,600 U C) $2,400 F D) $2,400 U Level: Hard LO: 6 Ans: A 104. The denominator activity level in direct labor-hours last year was: A) 20,000 B) 21,500 C) 22,000 D) 23,500 Level: Hard LO: 5 Ans: B Use the following information to answer 105-106 The Chuba Company uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of standard direct labor-hours (DLHs). During December, the company actually used 7,200 direct labor-hours and made 1,900 units of finished product. The standard cost card for one unit of product includes the following data concerning manufacturing overhead: For December, the company incurred $16,550 in fixed overhead costs and recorded an $800 unfavorable volume variance. 105. The budgeted fixed overhead cost was: A) $15,200 B) $16,000 C) $16,550 D) $13,700 E) $14,400 Level: Hard LO: 5,6 Ans: B 106. The denominator activity level in direct labor-hours used by Chuba in setting the predetermined overhead rate was: A) 7,600 hours B) 7,800 hours C) 8,000 hours D) 7,200 hours Level: Hard LO: 5,6 Ans: C Use the following information to answer 107-110 Zotta Enterprises uses standard costing and applies manufacturing overhead cost to products on the basis of standard direct labor-hours (DLHs). Budgeted and actual data relating to manufacturing overhead for last year appear below: 107. The budgeted fixed manufacturing overhead cost was: A) $24,000 B) $38,900 C) $40,200 D) $37,600 Level: Medium LO: 5,6 Ans: D 108. The standard direct labor-hours allowed for the output was: A) 14,167 hrs B) 19,600 hrs C) 20,000 hrs D) 20,400 hrs Level: Medium LO: 5,6 Ans: D 109. The fixed manufacturing overhead cost applied to products was: A) $31,960 B) $37,250 C) $38,352 D) $39,846 Level: Medium LO: 5,6 Ans: C 110. The volume variance was: A) $5,640 U B) $5,640 F C) $752 U D) $752 F Level: Medium LO: 5,6 Ans: D Use the following information to answer 111-114 A furniture manufacturer has a standard costing system based on direct labor-hours (DLHs) as the measure of activity. Data from the company’s flexible budget for manufacturing overhead are given below: The following data pertain to operations for the most recent period: 111. What is the predetermined overhead rate to the nearest cent? A) $12.35 B) $10.98 C) $12.00 D) $11.31 Level: Medium LO: 5 Ans: C 112. How much overhead was applied to products during the period to the nearest dollar? A) $64,800 B) $68,400 C) $66,715 D) $70,800 Level: Medium LO: 5 Ans: B 113. What was the fixed overhead budget variance for the period to the nearest dollar? A) $4,675 U B) $2,805 U C) $1,712 F D) $0 Level: Medium LO: 6 Ans: D 114. What was the fixed overhead volume variance for the period to the nearest dollar? A) $2,805 F B) $4,675 F C) $1,870 U D) $2,657 F Level: Medium LO: 6 Ans: A Use the following information to answer 115-118 A manufacturer of playground equipment has a standard costing system based on direct labor-hours (DLHs) as the measure of activity. Data from the company’s flexible budget for manufacturing overhead are given below: The following data pertain to operations for the most recent period: 115. What is the predetermined fixed overhead rate to the nearest cent? A) $9.41 B) $9.65 C) $9.52 D) $9.75 Level: Medium LO: 5 Ans: D 116. How much fixed overhead was applied to products during the period to the nearest dollar? A) $80,233 B) $80,925 C) $78,975 D) $78,125 Level: Medium LO: 5 Ans: A 117. What was the fixed overhead budget variance for the period to the nearest dollar? A) $668 F B) $850 F C) $2,800 U D) $2,108 U Level: Medium LO: 6 Ans: B 118. What was the fixed overhead volume variance for the period to the nearest dollar? A) $1,258 F B) $1,225 F C) $1,950 F D) $692 U Level: Medium LO: 6 Ans: A Use the following information to answer 119-120 A manufacturer of industrial equipment has a standard costing system based on direct labor-hours (DLHs) as the measure of activity. Data from the company’s flexible budget for manufacturing overhead are given below: The following data pertain to operations for the most recent period: 119. What is the predetermined overhead rate to the nearest cent? A) $22.62 B) $18.50 C) $20.55 D) $20.36 Level: Medium LO: 5 Ans: C 120. How much overhead was applied to products during the period to the nearest dollar? A) $18,495 B) $18,248 C) $20,550 D) $20,355 Level: Medium LO: 5 Ans: B Use the following information to answer 121-122 Homer Company has a standard cost system in which manufacturing overhead is applied to units of product on the basis of standard machine-hours (MHs). The company has provided the following data concerning its manufacturing overhead costs for last year: 121. The fixed overhead budget variance was: A) $200 F B) $400 U C) $300 F D) $240 U Level: Easy LO: 6 Ans: A 122. The volume variance was: A) $200 F B) $400 U C) $300 F D) $240 U Level: Medium LO: 6 Ans: B Use the following information to answer 123-124 Difazzio Manufacturing Company uses a standard cost system with machine-hours as the activity base for overhead. Difazzio budgeted its fixed overhead costs at $728,000 for the year but ended up incurring only $691,600. The following data relate to machine-hours for the year: 123. What was Difazzio’s fixed overhead budget variance? A) $8,400 favorable B) $9,408 favorable C) $36,400 favorable D) $41,600 unfavorable Level: Easy LO: 6 Ans: C 124. What was Difazzio’s fixed overhead volume variance? A) $9,408 favorable B) $26,000 favorable C) $56,000 favorable D) $84,000 favorable Level: Medium LO: 6 Ans: C Use the following information to answer 125-126 An outdoor barbecue grill manufacturer has a standard costing system based on standard machine-hours (MHs) as the measure of activity. Data from the company’s flexible budget for manufacturing overhead are given below: The following data pertain to operations for the most recent period: 125. What was the fixed overhead budget variance for the period to the nearest dollar? A) $340 F B) $1,450 U C) $540 F D) $200 F Level: Medium LO: 6 Ans: B 126. What was the fixed overhead volume variance for the period to the nearest dollar? A) $1,110 F B) $200 U C) $910 F D) $915 F Level: Medium LO: 6 Ans: C Use the following information to answer 127-129 Hettinger Hospital bases its budgets on patient-visits. The hospital’s static budget for March appears below: 127. The total variable overhead cost at an activity level of 7,200 patient-visits per month should be: A) $82,800 B) $78,200 C) $109,480 D) $115,920 Level: Easy LO: 1 Ans: A 128. The total fixed overhead cost at an activity level of 7,700 patient-visits per month should be: A) $123,970 B) $187,680 C) $212,520 D) $109,480 Level: Easy LO: 1 Ans: D 129. The total overhead cost at an activity level of 7,300 patient-visits per month should be: A) $187,680 B) $194,200 C) $201,480 D) $193,430 Level: Easy LO: Ans: D Use the following information to answer 130-132 Bard Hotel bases its budgets on guest-days. The hotel’s static budget for January appears below: 130. The total variable overhead cost at an activity level of 10,200 guest-days per month should be: A) $123,420 B) $99,960 C) $94,080 D) $116,160 Level: Easy LO: 1 Ans: B 131. The total fixed overhead cost at an activity level of 10,600 guest-days per month should be: A) $210,240 B) $232,140 C) $116,160 D) $128,260 Level: Easy LO: 1 Ans: C 132. The total overhead cost at an activity level of 10,300 guest-days per month should be: A) $225,570 B) $217,100 C) $217,640 D) $210,240 Level: Easy LO: 1 Ans: B Use the following information to answer 133-135 Privett Hospital bases its budgets on patient-visits. The hospital’s static budget for November appears below: Actual results for the month were: 133. The variance for supplies costs in the flexible budget performance report for the month is: A) $120 F B) $860 U C) $860 F D) $120 U Level: Easy LO: 2 Ans: C 134. The variance for laundry costs in the flexible budget performance report for the month is: A) $480 F B) $480 U C) $500 F D) $500 U Level: Easy LO: 2 Ans: A 135. The variance for occupancy costs in the flexible budget performance report for the month is: A) $160 U B) $940 U C) $940 F D) $160 F Level: Easy LO: 2 Ans: B Use the following information to answer 136-138 Diemert Corporation bases its budgets on machine-hours. The company’s static budget for June appears below: Actual results for the month were: 136. The variance for supplies costs in the flexible budget performance report for the month should be: A) $5,180 F B) $2,420 U C) $5,180 U D) $2,420 F Level: Easy LO: 2 Ans: A 137. The variance for power costs in the flexible budget performance report for the month should be: A) $6,550 U B) $6,550 F C) $3,760 F D) $3,760 U Level: Easy LO: 2 Ans: D 138. The variance for equipment depreciation in the flexible budget performance report for the month should be: A) $4,250 U B) $620 F C) $4,250 F D) $620 U Level: Easy LO: 2 Ans: B Use the following information to answer 139-141 Zike Corporation’s static budget for October appears below. The company bases its budgets on machinehours. In October, the actual number of machine-hours was 6,000, the actual supplies cost was $14,740, the actual power cost was $49,170, the actual salaries cost was $15,390, and the actual equipment depreciation was $63,670. 139. The variance for supplies cost in the flexible budget performance report for the month should be: A) $940 F B) $1,630 U C) $940 U D) $1,630 F Level: Easy LO: 2 Ans: C 140. The variance for power cost in the flexible budget performance report for the month should be: A) $3,570 U B) $1,170 U C) $3,570 F D) $1,170 F Level: Easy LO: 2 Ans: B 141. The variance for equipment depreciation in the flexible budget performance report for the month should be: A) $970 F B) $970 U C) $2,330 U D) $2,330 F Level: Easy LO: 2 Ans: B Use the following information to answer 142-143 Berquist Corporation has provided the following data for a recent month: Budgeted variable overhead cost per machine-hour: Actual total variable overhead costs: 142. The variable overhead spending variance for indirect labor is: A) $6,209 U B) $2,538 U C) $6,209 F D) $3,671 F Level: Easy LO: 3 Ans: C 143. The variable overhead spending variance for power is: A) $3,124 F B) $864 U C) $3,988 F D) $3,124 U Level: Easy LO: 3 Ans: C Use the following information to answer 144-145 The following data have been provided by Petri Corporation: 144. The variable overhead spending variance for indirect labor is: A) $1,725 F B) $3,590 F C) $3,590 U D) $5,315 F Level: Easy LO: 3 Ans: B 145. The variable overhead spending variance for power is: A) $1,380 F B) $862 F C) $2,242 F D) $2,242 U Level: Easy LO: 3 Ans: B Use the following information to answer 146-147 Laney Corporation has provided the following data for a recent period: Budgeted variable overhead cost per machine-hour: Actual total variable overhead costs: 146. The variable overhead spending variance for lubricants is: A) $3,599 F B) $12,789 U C) $12,789 F D) $16,388 F Level: Easy LO: 3 Ans: C 147. The variable overhead spending variance for supplies is: A) $1,738 U B) $274 F C) $274 U D) $1,464 F Level: Easy LO: 3 Ans: A Use the following information to answer 148-149 The following data have been provided by Mathews Corporation: 148. The variable overhead spending variance for lubricants is: A) $1,376 F B) $516 U C) $860 F D) $1,376 U Level: Easy LO: 3 Ans: A 149. The variable overhead spending variance for supplies is: A) $430 U B) $736 F C) $306 U D) $736 U Level: Easy LO: 3 Ans: C Use the following information to answer 150-151 Albertine Corporation, which produces cellular transmission towers, has provided the following data: Budgeted variable overhead cost per machine-hour: Actual total variable overhead costs: 150. The variable overhead efficiency variance for indirect labor is: A) $1,092 F B) $5,330 F C) $5,330 U D) $1,092 U Level: Easy LO: 4 Ans: D 151. The variable overhead efficiency variance for power is: A) $312 U B) $750 U C) $438 U D) $750 F Level: Easy LO: 4 Ans: A Use the following information to answer 152-153 Orloff Corporation, which produces highway lighting poles, has provided the following data: 152. The variable overhead efficiency variance for indirect labor is: A) $196 F B) $196 U C) $209 F D) $209 U Level: Easy LO: 4 Ans: D 153. The variable overhead efficiency variance for supplies is: A) $238 F B) $62 U C) $176 U D) $62 F Level: Easy LO: 4 Ans: C Use the following information to answer 154-155 Yglesias Corporation, which produces commercial windows, has provided the following data: 154. The variable overhead spending variance for supplies is: A) $3,257 F B) $3,257 U C) $2,203 F D) $2,203 U Level: Easy LO: 4 Ans: B 155. The variable overhead efficiency variance for supplies is: A) $1,054 U B) $2,203 U C) $1,054 F D) $2,203 F Level: Easy LO: 4 Ans: C Use the following information to answer 156-157 Wall Corporation, which produces commercial safes, has provided the following data: 156. The variable overhead spending variance for supplies is: A) $52,966 U B) $49,870 F C) $52,966 F D) $49,870 U Level: Easy LO: 4 Ans: D 157. The variable overhead efficiency variance for supplies is: A) $3,096 F B) $52,966 U C) $52,966 F D) $3,096 U Level: Easy LO: 4 Ans: D Use the following information to answer 158-160 Tillinghast Corporation’s flexible budget for two levels of activity appears below: 158. If the denominator level of activity is 1,000 machine-hours, the variable element in the predetermined overhead rate would be: A) $22.90 B) $14.63 C) $24.23 D) $9.60 Level: Easy LO: 5 Ans: D 159. If the denominator level of activity is 1,000 machine-hours, the fixed element in the predetermined overhead rate would be: A) $24.23 B) $14.63 C) $960.00 D) $9.60 Level: Easy LO: 5 Ans: B 160. If the denominator level of activity is 1,100 machine-hours, the predetermined overhead rate would be: A) $960.00 B) $9.60 C) $13.30 D) $22.90 Level: Easy LO: 5 Ans: D Use the following information to answer 161-163 Odonell Corporation’s flexible budget for two levels of activity appears below: 161. If the denominator level of activity is 6,000 machine-hours, the variable element in the predetermined overhead rate would be: A) $93.94 B) $11.20 C) $105.14 D) $103.60 Level: Easy LO: 5 Ans: B 162. If the denominator level of activity is 6,000 machine-hours, the fixed element in the predetermined overhead rate would be: A) $1,120.00 B) $11.20 C) $93.94 D) $105.14 Level: Easy LO: 5 Ans: C 163. If the denominator level of activity is 6,100 machine-hours, the predetermined overhead rate would be: A) $11.20 B) $1,120.00 C) $92.40 D) $103.60 Level: Easy LO: 5 Ans: D Use the following information to answer 164-165 Saffold Corporation has provided the following data for December. 164. The budget variance for December is: A) $10,050 U B) $6,540 U C) $6,540 F D) $10,050 F Level: Easy LO: 6 Ans: A 165. The volume variance for December is: A) $6,540 F B) $6,540 U C) $16,350 F D) $16,350 U Level: Easy LO: 6 Ans: C Use the following information to answer 166-167 The following data for February has been provided by Gillard Corporation. 166. The budget variance for February is: A) $7,440 F B) $7,440 U C) $1,140 F D) $1,140 U Level: Easy LO: 6 Ans: D 167. The volume variance for February is: A) $5,580 F B) $5,580 U C) $7,440 U D) $7,440 F Level: Easy LO: 6 Ans: A Essay 168. Lindon Company’s flexible budget for variable manufacturing overhead is given below: During a recent period, the company produced 2,500 units of product using 7,600 direct labor-hours (DLHs). The standard allows 3 direct labor-hours per unit. Actual variable overhead costs incurred were: The company had originally budgeted to produce 2,600 units during the period using 7,800 direct laborhours. Required: Prepare a performance report for the period showing only the spending variances for each overhead cost category. Level: Easy LO: 1,2 Ans: * 3 DLHs per unit × 2,500 units = 7,500 DLHs 169. The following overhead data are for a department in a large company. Required: Prepare a report that would be useful in assessing how well costs were controlled in this department. Level: Easy LO: 1,2 Ans: 170. The following overhead data are for a department in a large company. Required: Prepare a report that would be useful in assessing how well costs were controlled in this department. Level: Easy LO: 1,2 Ans: 171. Layt Clock Company has developed the following flexible budget for its overhead costs. Manufacturing overhead at Layt is applied to production on the basis of standard machine-hours: Layt was expecting to produce 22,000 clocks last year. The actual results for the year were as follows: Required: Compute all four manufacturing overhead variances for Layt. Level: Medium LO: 3,4,5,6 Ans: Variable Overhead Spending Variance = (AH x AR) - (AH x SR) = $145,899 - [($155,760/26,400) x 24,940] = $1,247 F Variable Overhead Efficiency Variance = (AH x SR) - (SH x SR) = [24,940 x ($155,760/26,400)] - [21,500 × (26,400/22,000) x ($155,760/26,400)] = $5,074 F Fixed Overhead Budget Variance = Actual fixed overhead cost - Budgeted fixed overhead cost = $170,540 - $171,072 = $532F Fixed Overhead Volume Variance = Fixed portion of the predetermined overhead rate × (Denominator hours – Standard hours allowed) = $171,072 - [($171,072/26,400) x 21,500 × (26,400/22,000)] = $3,888 U 172. Parker Company uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of standard direct labor-hours. The company’s total budgeted variable and fixed manufacturing overhead costs at the denominator level of activity are $14,000 for variable overhead and $6,000 for fixed overhead. The predetermined overhead rate, including both fixed and variable components, is $4 per direct labor-hour. The standards call for 2 direct labor-hours per unit of output produced. Last year, the company produced 3,000 units of product and worked 6,200 direct labor-hours. Actual costs were $15,500 for variable overhead and $6,300 for fixed overhead. Required: (a.) What is the denominator level of activity? (b.) What were the standard hours allowed for the output last year? (c.) What was the variable overhead spending variance? (d.) What was the variable overhead efficiency variance? (e.) What was the fixed overhead budget variance? (f.) What was the fixed overhead volume variance? Level: Medium LO: 3,4,5,6 Ans: 173. Cajun Candy Corporation manufactures giant gourmet suckers. The cost standards developed by Cajun appear below. Manufacturing overhead at Cajun is applied to production on the basis of standard direct labor-hours: The standards above were based on an expected annual volume of 8,000 suckers. The actual results for last year were as follows: Required: Compute the following variances for Cajun. (a.) Materials price variance. (b.) Materials quantity variance. (c.) Labor rate variance. (d.) Variable overhead spending variance. (e.) Variable overhead efficiency variance. (f.) Fixed overhead budget variance. Level: Medium LO: 3,4,6,7 Ans: (a.) Materials price variance = $156,815 - (7,900 × $20.00) = $1,185 F (b.) Materials quantity variance = (6,070 × $20.00) - (8,200 × 0.75 × $20.00) = $1,600 F (c.) Labor rate variance = $122,800 - (10,000 × $12.00) = $2,800 U (d.) Variable overhead spending variance = $28,600 - (10,000 × $3.00) = $1,400 F (e.) Variable overhead efficiency variance = (10,000 × $3.00) - (8,200 × 1.2 × $3.00) = $480 U (f.) Fixed overhead budget variance = $47,500 - (8,000 × $6.00) = $500 F 174. Eastern Company uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of standard direct labor-hours (DLHs). The denominator activity level is 60,000 direct labor-hours, or 300,000 units. A standard cost card for the company’s product follows: Actual data for the year follow: Required: (a.) Compute the variable manufacturing overhead spending and efficiency variances. (b.) Compute the fixed manufacturing overhead budget and volume variances. Level: Medium LO: 3,4,6 Ans: (a.) Variable overhead variances: Spending variance = AH(AR - SR) = 64,800($5.05* - $5.00) = $3,240 U * $327,240 ÷ 64,800 = $5.05 Efficiency variance = SR(AH - SH) = $5.00(64,800 - 66,000*) = $6,000 F * 330,000 × 0.20 DLH = 66,000 DLHs (b.) Fixed overhead variances: Budget variance = Actual fixed overhead - Budgeted Fixed overhead = $612,000 - $600,000 = $12,000 U Volume variance = Fixed rate (Denominator hours - Standard hours) = $10.00(60,000 - 66,000) = $60,000 F 175. Pierce Company uses a standard cost system in which it applies manufacturing overhead to its product on the basis of standard direct labor-hours (DLHs). Below is the standard cost card for the product: Last year, the company produced 6,000 units of product using 17,000 direct labor-hours. The actual total fixed overhead cost for the year was $140,000 and the volume variance was $12,000, favorable. Required: (a.) Compute the total fixed overhead cost that was originally budgeted. (b.) Compute the denominator activity figure that the company used in computing predetermined overhead rates. Level: Hard LO: 5,6 Ans: 176. Moozi Dairy Products processes and sells two products: milk and butter. Last year, Moozi budgeted $1,200,000 of fixed manufacturing overhead and chose a denominator level of activity of 80,000 machine-hours. Each unit of milk at Moozi has a standard of 0.1 machine-hours and each unit of butter has a standard of 0.08 machine-hours. Last year, Moozi processed 560,000 units of milk and 340,000 units of butter. Moozi’s total fixed overhead incurred last year was $1,256,000. Actual machine-hours incurred for the year were 82,000. Moozi applies manufacturing overhead to its products on the basis of standard machine-hours. Required: Compute Moozi’s fixed manufacturing overhead variances for last year. Level: Medium LO: 5,6 Ans: Fixed overhead budget variance = $1,256,000 - $1,200,000 = $56,000 U Fixed overhead volume variance = $1,200,000 - {[(560,000 × 0.1) + (340,000 × 0.08)] × ($1,200,000/80,000)} = $48,000 F 177. Bracamonte Hospital bases its budgets on patient-visits. The hospital’s static budget for November appears below: Required: Prepare a flexible budget in good form for an activity level of 8,900 patient-visits per month. Level: Easy LO: 1 Ans: 178. Sinopoli Corporation bases its budgets on machine-hours. The company’s static budget for September appears below: Required: Prepare a flexible budget in good form for an activity level of 8,600 machine-hours per month. Level: Easy LO: 1 Ans: 179. Curro Hospital bases its budgets on patient-visits. The hospital’s static budget for August appears below: Actual results for the month were: Required: Prepare a flexible budget performance report in good form. Level: Easy LO: 2 Ans: 180. Prine Corporation bases its budgets on machine-hours. The company’s static budget for March appears below: Actual results for the month were: Required: Prepare a flexible budget performance report in good form. Level: Easy LO: 2 Ans: 181. Thierman Corporation, which produces only a single product, bases its budgets on units produced. The company’s static budget for November appears below: Actual results for the month were: Required: Prepare a flexible budget performance report in good form. Level: Easy LO: 2 Ans: 182. Cardero Corporation, which makes sophisticated industrial valves, has provided the following data from its standard costing system and for its actual operations in July: Required: Compute the variable overhead spending variances for indirect labor and for power for July. Indicate whether each of the variances is favorable (F) or unfavorable (U). Show your work! Level: Easy LO: 3 Ans: 183. The following data for March have been provided by Fickling Corporation, a producer of precision drills for oil exploration: Required: Compute the variable overhead spending variances for indirect labor and for power for March. Indicate whether each of the variances is favorable (F) or unfavorable (U). Show your work! Level: Easy LO: 3 Ans: 184. Guice Corporation has provided the following data for August: Required: Compute the variable overhead spending variances for lubricants and for supplies for August. Indicate whether each of the variances is favorable (F) or unfavorable (U). Show your work! Level: Easy LO: 3 Ans: 185. The following data have been provided by Leason Corporation: Required: Compute the variable overhead spending variances for lubricants and for supplies. Indicate whether each of the variances is favorable (F) or unfavorable (U). Show your work! Level: Easy LO: 3 Ans: 186. Bartoszek Corporation, which makes helicopter rotors, has provided the following data for February: Required: Prepare a variable overhead performance report in good form showing the total variances, the spending variances, and the efficiency variances. Level: Easy LO: 4 Ans: 187. Emison Corporation, which makes skylights, has provided the following data for March: Required: Prepare a variable overhead performance report in good form showing the total variances, the spending variances, and the efficiency variances. Level: Easy LO: 4 Ans: 188. Vath Corporation, which makes landing gears, has provided the following data for a recent month: Required: Determine the total variance, the spending variance, and the efficiency variance for the variable overhead item supplies cost that would appear on the company’s variable overhead performance report. Show your work! Level: Easy LO: 4 Ans: 189. Pearle Corporation makes automotive engines. For the most recent month, budgeted production was 3,300 engines. The budgeted power cost is $9.20 per machine-hour. The company’s standards indicate that each engine requires 2.1 machine-hours. Actual production was 3,400 engines. Actual machine-hours were 7,160 machine-hours. Actual power cost totaled $61,815. Required: Determine the total variance, the spending variance, and the efficiency variance for the variable overhead item power cost that would appear on the company’s variable overhead performance report. Show your work! Level: Easy LO: 4 Ans: 190. Aslett Corporation’s flexible budget for two levels of activity appears below: Required: Determine the predetermined overhead rate if the denominator level of activity is 6,800 machine-hours. Show your work! Level: Easy LO: 5 Ans: Predetermined overhead rate = Overhead from the flexible budget/Denominator level of activity = $846,532/6,800 machine-hours = $124.49 per machine-hour 191. Kingdon Corporation has provided its flexible budget for two levels of activity: Required: Determine the predetermined overhead rate for the denominator level of activity of 4,600 machine-hours. Show your work! Level: Easy LO: 5 Ans: Predetermined overhead rate = Overhead from the flexible budget/Denominator level of activity = $239,660/4,600 machine-hours = $52.10 per machine-hour 192. Dixie Corporation has provided the following data for June. Denominator level of activity 2,000 machine-hours Budgeted fixed overhead costs $39,200 Fixed portion of the predetermined overhead rate $19.60 per machine-hour Actual level of activity 2,300 machine-hours Standard machine-hours allowed for the actual output 2,200 machine-hours Actual fixed overhead costs $40,550 Required: (a.) Compute the budget variance for June. Show your work! (b.) Compute the volume variance for June. Show your work! Level: Easy LO: 6 Ans: (a.) Budget variance = Actual fixed overhead cost - Budgeted fixed overhead cost = $40,550 - $39,200 = $1,350 U (b.) Volume variance = Fixed portion of the predetermined overhead rate × (Denominator hours Standard hours allowed) = $19.60 × (2,000 - 2,200) = $3,920 F 193. Stenquist Corporation has provided the following data for January. Required: (a.) Compute the budget variance for January. Show your work! (b.) Compute the volume variance for January. Show your work! Level: Easy LO: 6 Ans: (a.) Budget variance = Actual fixed overhead cost - Budgeted fixed overhead cost = $98,710 - $95,590 = $3,120 U (b.) Fixed portion of the predetermined overhead rate = $95,590/7,900 machine-hours = $12.10 per machine-hour Volume variance = Fixed portion of the predetermined overhead rate × (Denominator hours - Standard hours allowed) = $12.10 × (7,900 - 8,300) = $4,840 F 194. Faessler Corporation applies overhead to products based on machine-hours. The denominator level of activity is 6,500 machine-hours. The budgeted fixed overhead costs are $242,450. In July, the actual fixed overhead costs were $242,490 and the standard machine-hours allowed for the actual output were 7,000 machine-hours. Required: (a.) Compute the budget variance for July. Show your work! (b.) Compute the volume variance for July. Show your work! Level: Easy LO: 6 Ans: (a.) Budget variance = Actual fixed overhead cost - Budgeted fixed overhead cost = $242,490 - $242,450 = $40 U (b.) Fixed portion of the predetermined overhead rate = $242,450/6,500 machine-hours = $37.30 per machine-hour Volume variance = Fixed portion of the predetermined overhead rate × (Denominator hours - Standard hours allowed) = $37.30 × (6,500 - 7,000) = $18,650 F