Deck 13: Flexible Budgets, Overhead Cost Variances and Management Control

Question 1

The planning of fixed overhead costs differs from the planning of variable overhead costs in one important respect: timing.

Answer 1

True

Question 2

Which of the following is not included in the effective planning of variable overheads?

A)Choosing the appropriate level of capacity
B)Redesigning products to use fewer resources
C)Eliminating nonvalue-adding costs
D)Redesigning the plant layout for more efficient processing

Answer 2

A

Question 3

The variable overhead flexible-budget variance measures the difference between:

A)actual variable overhead costs and the flexible budget for variable overhead costs.
B)actual variable overhead costs and the static budget for variable overhead costs.
C)the static budget for variable overhead costs and the flexible budget for variable overhead costs.
D)None of these answers are correct.

Answer 3

A

Question 4

Variable overhead costs are,by definition,a lump sum of costs that remain unchanged in total for a given period despite changes in the level of total activity or volume related to those overhead costs.

Question 5

A cost-allocation base links an indirect cost or group of ____________ costs to a cost object.

A)indirect
B)direct
C)overhead
D)direct labour

Question 6

Choosing the appropriate level of capacity:

A)may lead to idle capacity if underestimated.
B)is a key strategic decision.
C)may lead to loss of sales if overestimated.
D)All of these answers are correct.

Question 7

Answer the following questions using the information below:
Alice Springs Corporation manufactures industrial-sized water coolers and uses budgeted machine-hours to allocate variable manufacturing overhead.The following information pertains to the company's manufacturing overhead data:
$$\begin{array} { l r } \text { Budgeted output units } & 20000 \text { units } \\\text { Budgeted machine-hours } & 6000 \text { hours } \\\text { Budgeted variable manufacturing overhead costs for } 20000 \text { units } & \$ 161250 \\& \\\text { Actual output units produced } & 24000 \text { units } \\\text { Actual machine-hours used } & 7200 \text { hours } \\\text { Actual variable manufacturing overhead costs } & \$ 242000\end{array}$$

-What is the flexible-budget amount for variable manufacturing overhead?

A)$165 000
B)$193 500
C)$242 000
D)None of these answers are correct.

Question 8

What is the MAJOR challenge when planning fixed overheads?

A)Calculating total costs
B)Choosing the appropriate level of capacity
C)Calculating the cost-allocation rate
D)Choosing the appropriate planning period

Question 9

'Fixed overhead costs' include:

A)energy costs.
B)the cost of sales commissions.
C)indirect materials.
D)property taxes paid on plant facilities.

Question 10

The term cost-allocation base can be used interchangeably with __________ rate when dealing with indirect costs.

A)cost-driver
B)activity
C)allocation
D)target

Question 11

A $5000 unfavourable flexible-budget variance indicates that:

A)the standard variable manufacturing overhead exceeded the flexible-budget amount by $5000.
B)the actual variable manufacturing overhead exceeded the flexible-budget amount by $5000.
C)the flexible-budget amount exceeded actual variable manufacturing overhead by $5000.
D)the flexible-budget amount exceeded standard variable manufacturing overhead by $5000.

Question 12

To plan variable overhead costs effectively for a product or service,managers must eliminate the activities that do not add value to the product or service.

Question 13

To plan variable overhead costs effectively for a product or service,managers must eliminate the activities that do not add __________ to the product or service.

A)value
B)cost
C)profit
D)features

Question 14

Effective planning of fixed overhead costs is similar to effective planning for ______________ costs.

A)direct material
B)direct labour
C)variable overhead
D)salary

Question 15

Answer the following questions using the information below:
Alice Springs Corporation manufactures industrial-sized water coolers and uses budgeted machine-hours to allocate variable manufacturing overhead.The following information pertains to the company's manufacturing overhead data:
$$\begin{array} { l r } \text { Budgeted output units } & 20000 \text { units } \\\text { Budgeted machine-hours } & 6000 \text { hours } \\\text { Budgeted variable manufacturing overhead costs for } 20000 \text { units } & \$ 161250 \\& \\\text { Actual output units produced } & 24000 \text { units } \\\text { Actual machine-hours used } & 7200 \text { hours } \\\text { Actual variable manufacturing overhead costs } & \$ 242000\end{array}$$

-What is the flexible-budget variance for variable manufacturing overhead?

A)$5500 favourable
B)$5500 unfavourable
C)$4300 favourable
D)None of these answers are correct.

Question 16

Answer the following questions using the information below:
Alice Springs Corporation manufactures industrial-sized water coolers and uses budgeted machine-hours to allocate variable manufacturing overhead.The following information pertains to the company's manufacturing overhead data:
$$\begin{array} { l r } \text { Budgeted output units } & 20000 \text { units } \\\text { Budgeted machine-hours } & 6000 \text { hours } \\\text { Budgeted variable manufacturing overhead costs for } 20000 \text { units } & \$ 161250 \\& \\\text { Actual output units produced } & 24000 \text { units } \\\text { Actual machine-hours used } & 7200 \text { hours } \\\text { Actual variable manufacturing overhead costs } & \$ 242000\end{array}$$

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

A)$8.06
B)$11.00
C)$48.40
D)$32.25

Question 17

At the start of a budget period,management will have made most of the decisions that determine the level of ________________ to be incurred.

A)direct labour costs
B)direct materials
C)fixed overhead costs
D)variable overhead costs

Question 18

For calculating the costs of products and services,a standard costing system:

A)does not have to keep track of actual costs.
B)uses standard costs to determine the cost of products.
C)only requires a simple recording system.
D)All of these answers are correct.

Question 19

Overhead costs are a major part of costs for most companies.

Question 20

Day-to-day,ongoing operating decisions mainly determine the level of ___________________ costs incurred in that period.

A)fixed overhead
B)variable overhead
C)direct labour
D)direct materials

Question 21

Which of the following costs do not automatically increase or decrease with the level of activity within the relevant range?

A)Variable
B)Fixed
C)Direct materials
D)Direct labour

Question 22

What may the variable overhead flexible-budget variance be further subdivided into?

A)Static-budget variance and sales-volume variance
B)Spending variance and the efficiency variance
C)Sales-volume variance and the spending variance
D)Price variance and the efficiency variance

Question 23

In the long run,the amount of labour-hours used is the only cost driver of fixed overhead costs.

Question 24

Managers can reduce fixed overhead costs by,say,selling equipment or laying off employees.

Question 25

Answer the following questions using the information below:
Fearless Frank's Fertiliser Farm produces fertiliser and distributes the product by using his tanker trucks.Frank's uses budgeted fleet hours to allocate variable manufacturing overhead.The following information pertains to the company's manufacturing overhead data:
$\begin{array}{lr}\text { Budgeted output urits } & 450 \text { truckloads } \\\text { Budgeted fleet hours } & 350 \text { hours } \\\text { Budgeted kilos of fertiliser } & 12000000 \text { kilos } \\\text { Budgeted variable manufacturing overhead costs for } 450 \text { loads } & \$ 50000\\\\\text { Actual output units produced and delivered } & 470 \text { truckloads } \\\text { Actual fleet hours } & 327 \text { hours } \\\text { Actual kilos of fertiliser produced and delivered } & 12600000 \text { kilos } \\\text { Actual variable manufacturing overhead costs } & \$ 52250\end{array}$

-What is the flexible-budget variance for variable manufacturing overhead?

A)$27.78 favourable
B)$27.78 unfavourable
C)zero
D)None of these answers are correct.

Question 26

Answer the following questions using the information below:
Alice Springs Corporation manufactures industrial-sized water coolers and uses budgeted machine-hours to allocate variable manufacturing overhead.The following information pertains to the company's manufacturing overhead data:
$$\begin{array} { l r } \text { Budgeted output units } & 20000 \text { units } \\\text { Budgeted machine-hours } & 6000 \text { hours } \\\text { Budgeted variable manufacturing overhead costs for } 20000 \text { units } & \$ 161250 \\& \\\text { Actual output units produced } & 24000 \text { units } \\\text { Actual machine-hours used } & 7200 \text { hours } \\\text { Actual variable manufacturing overhead costs } & \$ 242000\end{array}$$

-Once standards have been set,the costs of using _____________ costing are low relative to the costs of using actual costing or normal costing.

A)activity
B)inventory
C)standard
D)budgeted

Question 27

As with variable overhead costs,the budget period for fixed overhead costs is typically three months to help smooth out seasonal effects.

Question 28

Fixed costs are usually included in flexible budgets,but they remain the same total amount within the relevant range of activity regardless of the output level chosen to 'flex' the variable costs and revenues.

Question 29

Answer the following questions using the information below:
Chappell Brothers Corporation manufactures promotional cricket hoodies and uses budgeted machine-hours to allocate variable manufacturing overhead.The following information pertains to the company's manufacturing overhead data:
$$\begin{array} { l r } \text { Budgeted output units } & 25000 \text { units } \\\text { Budgeted machine-hours } & 30000 \text { hours } \\\text { Budgeted variable manufacturing overhead costs for } 25000 \text { units } & \$ 360000 \\& \\\text { Actual output units produced } & 20000 \text { units } \\\text { Actual machine-hours used } & 28000 \text { hours } \\\text { Actual variable manufacturing overhead costs } & \$ 342000\end{array}$$

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

A)$12.00
B)$12.21
C)$14.40
D)$19.00

Question 30

A 'cost-allocation base' links an indirect cost or group of indirect costs to a cost object;the term can be used interchangeably with 'cost-driver rate' when dealing with indirect costs.

Question 31

Which of the following is NOT a step in developing budgeted variable overhead rates?

A)Selecting the cost-allocation bases to use
B)Estimating the budgeted denominator level based on expected utilisation of available capacity
C)Identifying the variable overhead costs associated with each cost-allocation base
D)Choosing the period to be used for the budget

Question 32

Variable-manufacturing overhead costs were ________ for actual output.

A)higher than expected
B)lower than expected
C)the same as expected
D)indeterminable

Question 33

Fixed costs are usually included in ________ budgets,but they remain the same total amount within the relevant range of activity regardless of the output level chosen to 'flex' the variable costs and revenues.

A)static
B)activity
C)flexible
D)monthly

Question 34

Answer the following questions using the information below:
Chappell Brothers Corporation manufactures promotional cricket hoodies and uses budgeted machine-hours to allocate variable manufacturing overhead.The following information pertains to the company's manufacturing overhead data:
$$\begin{array} { l r } \text { Budgeted output units } & 25000 \text { units } \\\text { Budgeted machine-hours } & 30000 \text { hours } \\\text { Budgeted variable manufacturing overhead costs for } 25000 \text { units } & \$ 360000 \\& \\\text { Actual output units produced } & 20000 \text { units } \\\text { Actual machine-hours used } & 28000 \text { hours } \\\text { Actual variable manufacturing overhead costs } & \$ 342000\end{array}$$

-What is the flexible-budget variance for variable manufacturing overhead?

A)zero
B)$54 000 unfavourable
C)$54 000 favourable
D)None of these answers are correct.

Question 35

Managers can reduce ______________ costs by,say,selling equipment or laying off employees.

A)variable overhead
B)production
C)fixed overhead
D)head office

Question 36

Answer the following questions using the information below:
Fearless Frank's Fertiliser Farm produces fertiliser and distributes the product by using his tanker trucks.Frank's uses budgeted fleet hours to allocate variable manufacturing overhead.The following information pertains to the company's manufacturing overhead data:
$\begin{array}{lr}\text { Budgeted output urits } & 450 \text { truckloads } \\\text { Budgeted fleet hours } & 350 \text { hours } \\\text { Budgeted kilos of fertiliser } & 12000000 \text { kilos } \\\text { Budgeted variable manufacturing overhead costs for } 450 \text { loads } & \$ 50000\\\\\text { Actual output units produced and delivered } & 470 \text { truckloads } \\\text { Actual fleet hours } & 327 \text { hours } \\\text { Actual kilos of fertiliser produced and delivered } & 12600000 \text { kilos } \\\text { Actual variable manufacturing overhead costs } & \$ 52250\end{array}$

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

A)$120.00
B)$111.11
C)$175.00
D)$166.67

Question 37

Answer the following questions using the information below:
Chappell Brothers Corporation manufactures promotional cricket hoodies and uses budgeted machine-hours to allocate variable manufacturing overhead.The following information pertains to the company's manufacturing overhead data:
$$\begin{array} { l r } \text { Budgeted output units } & 25000 \text { units } \\\text { Budgeted machine-hours } & 30000 \text { hours } \\\text { Budgeted variable manufacturing overhead costs for } 25000 \text { units } & \$ 360000 \\& \\\text { Actual output units produced } & 20000 \text { units } \\\text { Actual machine-hours used } & 28000 \text { hours } \\\text { Actual variable manufacturing overhead costs } & \$ 342000\end{array}$$

-Variable-manufacturing overhead costs were ________ for actual output.

A)lower than expected
B)higher than expected
C)the same as expected
D)indeterminable

Question 38

Answer the following questions using the information below:
Fearless Frank's Fertiliser Farm produces fertiliser and distributes the product by using his tanker trucks.Frank's uses budgeted fleet hours to allocate variable manufacturing overhead.The following information pertains to the company's manufacturing overhead data:
$\begin{array}{lr}\text { Budgeted output urits } & 450 \text { truckloads } \\\text { Budgeted fleet hours } & 350 \text { hours } \\\text { Budgeted kilos of fertiliser } & 12000000 \text { kilos } \\\text { Budgeted variable manufacturing overhead costs for } 450 \text { loads } & \$ 50000\\\\\text { Actual output units produced and delivered } & 470 \text { truckloads } \\\text { Actual fleet hours } & 327 \text { hours } \\\text { Actual kilos of fertiliser produced and delivered } & 12600000 \text { kilos } \\\text { Actual variable manufacturing overhead costs } & \$ 52250\end{array}$

-What is the flexible-budget amount for variable manufacturing overhead?

A)$52 250
B)$52 222
C)$50 000
D)$40 000

Question 39

Answer the following questions using the information below:
Chappell Brothers Corporation manufactures promotional cricket hoodies and uses budgeted machine-hours to allocate variable manufacturing overhead.The following information pertains to the company's manufacturing overhead data:
$$\begin{array} { l r } \text { Budgeted output units } & 25000 \text { units } \\\text { Budgeted machine-hours } & 30000 \text { hours } \\\text { Budgeted variable manufacturing overhead costs for } 25000 \text { units } & \$ 360000 \\& \\\text { Actual output units produced } & 20000 \text { units } \\\text { Actual machine-hours used } & 28000 \text { hours } \\\text { Actual variable manufacturing overhead costs } & \$ 342000\end{array}$$

-What is the flexible-budget amount for variable manufacturing overhead?

A)$288 000
B)$342 000
C)$380 000
D)None of these answers are correct.

Question 40

The budget period for fixed overhead costs is typically ____ months to help smooth out seasonal effects.

A)6
B)3
C)24
D)12

Question 41

When machine-hours are used as an overhead cost-allocation base and the unexpected purchase of a new machine results in fewer expenditures for machine maintenance,the MOST likely result would be to report a(n):

A)unfavourable variable overhead efficiency variance.
B)unfavourable production-volume variance.
C)favourable variable overhead spending variance.
D)favourable fixed overhead flexible-budget variance.

Question 42

Answer the following questions using the information below:
Hobart Corporation manufactured 20 000 heaters during November.The overhead cost-allocation base is $15.75 per machine-hour.The following variable overhead data pertain to November:
$$\begin{array} { l r r } & \text { Actual } & \text { Budgeted } \\\text { Production } & 20000 \text { units } & 22000 \text { units } \\\text { Machine-hours } & 7875 \text { hours } & 9000 \text { hours } \\\text { Variable overhead cost per machine-hour: } & \$ 15.50 & \$ 15.75\end{array}$$

-What is the flexible-budget amount?

A)$124 031.30
B)$128 863.64
C)$139 500.00
D)$124 000.00

Question 43

Answer the following questions using the information below:
Wagga Wagga Corporation manufactured 30 000 eskies during September.The overhead cost-allocation base is $12.50 per machine-hour.The following variable overhead data pertain to September:
$$\begin{array} { l r r } & \text { Actual } & \text { Budgeted } \\\text { Production } & 30000 \text { units } & 24000 \text { units } \\\text { Machine-hours } & 15000 \text { hours } & 10800 \text { hours } \\\text { Variable overhead cost per machine-hour: } & \$ 12.00 & \$ 12.50\end{array}$$

-What is the variable overhead efficiency variance?

A)$13 125 unfavourable
B)$18 750 unfavourable
C)$30 375 unfavourable
D)$7500 favourable

Question 44

Answer the following questions using the information below:
Harvey Corporation manufactured 1500 chairs during June.The following variable overhead data pertain to June:
$\begin{array}{ll}\text { Budgeted variable overhead cost per unit } & \$ 12.00 \\\text { Actual variable manufacturing overhead cost } & \$ 20800 \\\text { Flexible-bud get amount for variable manufacturing overhead } & \$ 18000 \\\text { Variable manufacturing overhead efficiency variance } & \$ 360 \text { unfavourable }\end{array}$


-What is the variable overhead flexible-budget variance?

A)$2800 unfavourable
B)$2800 favourable
C)$1560 favourable
D)$360 unfavourable

Question 45

Answer the following questions using the information below:
PlasticsRus Pty Ltd manufactured 100 000 buckets during February.The overhead cost-allocation base is $5.00 per machine-hour.The following variable overhead data pertain to February:
$$\begin{array} { l r r } & \text { Actual } & \text { Budgeted } \\\text { Production } & 100000 \text { units } & 100000 \text { units } \\\text { Machine-hours } & 9800 \text { hours } & 10000 \text { hours } \\\text { Variable overhead cost per machine-hour } & \$ 5.25 & \$ 5.00\end{array}$$

-What is the variable overhead spending variance?

A)$1000 favourable
B)$1450 unfavourable
C)$2450 unfavourable
D)None of these answers are correct.

Question 46

Answer the following questions using the information below:
Harvey Corporation manufactured 1500 chairs during June.The following variable overhead data pertain to June:
$\begin{array}{ll}\text { Budgeted variable overhead cost per unit } & \$ 12.00 \\\text { Actual variable manufacturing overhead cost } & \$ 20800 \\\text { Flexible-bud get amount for variable manufacturing overhead } & \$ 18000 \\\text { Variable manufacturing overhead efficiency variance } & \$ 360 \text { unfavourable }\end{array}$


-What is the variable overhead spending variance?

A)$1560 favourable
B)$840 unfavourable
C)$2440 unfavourable
D)$3160 favourable

Question 47

Answer the following questions using the information below:
PlasticsRus Pty Ltd manufactured 100 000 buckets during February.The overhead cost-allocation base is $5.00 per machine-hour.The following variable overhead data pertain to February:
$$\begin{array} { l r r } & \text { Actual } & \text { Budgeted } \\\text { Production } & 100000 \text { units } & 100000 \text { units } \\\text { Machine-hours } & 9800 \text { hours } & 10000 \text { hours } \\\text { Variable overhead cost per machine-hour } & \$ 5.25 & \$ 5.00\end{array}$$

-What is the variable overhead efficiency variance?

A)$1000 favourable
B)$1450 unfavourable
C)$2450 unfavourable
D)None of these answers are correct.

Question 48

Alvarado Company made the following journal entry: $\begin{array}{lr}\text { Variable Manufacturing Overhead Allocated } & 100000 \\\text { Variable Manufacturing Overhead Efficiency Variance } & 30000 \\\text { Variable Manufacturing Overhead Control } &&125000 \\\text { Variable Manufacturing Overhead Spending Variance }&&5000\end{array}$

A)Work-in-Process is currently overstated.
B)This entry may be recorded yearly to provide timely feedback to managers.
C)Alvarado over-allocated variable manufacturing overhead.
D)A $5000 favourable spending variance was recorded.

Question 49

Answer the following questions using the information below:
Wagga Wagga Corporation manufactured 30 000 eskies during September.The overhead cost-allocation base is $12.50 per machine-hour.The following variable overhead data pertain to September:
$$\begin{array} { l r r } & \text { Actual } & \text { Budgeted } \\\text { Production } & 30000 \text { units } & 24000 \text { units } \\\text { Machine-hours } & 15000 \text { hours } & 10800 \text { hours } \\\text { Variable overhead cost per machine-hour: } & \$ 12.00 & \$ 12.50\end{array}$$

-What is the variable overhead spending variance?

A)$7500 favourable
B)$13 125 unfavourable
C)$16 875 unfavourable
D)$30 375 unfavourable

Question 50

Answer the following questions using the information below:
PlasticsRus Pty Ltd manufactured 100 000 buckets during February.The overhead cost-allocation base is $5.00 per machine-hour.The following variable overhead data pertain to February:
$$\begin{array} { l r r } & \text { Actual } & \text { Budgeted } \\\text { Production } & 100000 \text { units } & 100000 \text { units } \\\text { Machine-hours } & 9800 \text { hours } & 10000 \text { hours } \\\text { Variable overhead cost per machine-hour } & \$ 5.25 & \$ 5.00\end{array}$$

-What is the flexible-budget amount?

A)$49 000
B)$50 000
C)$51 450
D)None of these answers are correct.

Question 51

Answer the following questions using the information below:
Hobart Corporation manufactured 20 000 heaters during November.The overhead cost-allocation base is $15.75 per machine-hour.The following variable overhead data pertain to November:
$$\begin{array} { l r r } & \text { Actual } & \text { Budgeted } \\\text { Production } & 20000 \text { units } & 22000 \text { units } \\\text { Machine-hours } & 7875 \text { hours } & 9000 \text { hours } \\\text { Variable overhead cost per machine-hour: } & \$ 15.50 & \$ 15.75\end{array}$$

-What is the variable overhead spending variance?

A)$1968.75 unfavourable
B)$2250 unfavourable
C)$2250 favourable
D)$1968.75 favourable

Question 52

Answer the following questions using the information below:
Wagga Wagga Corporation manufactured 30 000 eskies during September.The overhead cost-allocation base is $12.50 per machine-hour.The following variable overhead data pertain to September:
$$\begin{array} { l r r } & \text { Actual } & \text { Budgeted } \\\text { Production } & 30000 \text { units } & 24000 \text { units } \\\text { Machine-hours } & 15000 \text { hours } & 10800 \text { hours } \\\text { Variable overhead cost per machine-hour: } & \$ 12.00 & \$ 12.50\end{array}$$

-What is the flexible-budget amount?

A)$121 500
B)$151 875
C)$180 000
D)$168 750

Question 53

When machine-hours are used as an overhead cost-allocation base,the MOST likely cause of a favourable variable overhead spending variance is:

A)the production scheduler efficiently scheduled jobs.
B)a decline in the cost of energy.
C)strengthened demand for the product.
D)excessive machine breakdowns.

Question 54

Answer the following questions using the information below:
Hobart Corporation manufactured 20 000 heaters during November.The overhead cost-allocation base is $15.75 per machine-hour.The following variable overhead data pertain to November:
$$\begin{array} { l r r } & \text { Actual } & \text { Budgeted } \\\text { Production } & 20000 \text { units } & 22000 \text { units } \\\text { Machine-hours } & 7875 \text { hours } & 9000 \text { hours } \\\text { Variable overhead cost per machine-hour: } & \$ 15.50 & \$ 15.75\end{array}$$

-What is the actual variable overhead cost?

A)$122 063
B)$124 031
C)$125 000
D)$139 500

Question 55

Answer the following questions using the information below:
PlasticsRus Pty Ltd manufactured 100 000 buckets during February.The overhead cost-allocation base is $5.00 per machine-hour.The following variable overhead data pertain to February:
$$\begin{array} { l r r } & \text { Actual } & \text { Budgeted } \\\text { Production } & 100000 \text { units } & 100000 \text { units } \\\text { Machine-hours } & 9800 \text { hours } & 10000 \text { hours } \\\text { Variable overhead cost per machine-hour } & \$ 5.25 & \$ 5.00\end{array}$$

-What is the actual variable overhead cost?

A)$49 000
B)$50 000
C)$51 450
D)None of these answers are correct.

Question 56

Answer the following questions using the information below:
Hobart Corporation manufactured 20 000 heaters during November.The overhead cost-allocation base is $15.75 per machine-hour.The following variable overhead data pertain to November:
$$\begin{array} { l r r } & \text { Actual } & \text { Budgeted } \\\text { Production } & 20000 \text { units } & 22000 \text { units } \\\text { Machine-hours } & 7875 \text { hours } & 9000 \text { hours } \\\text { Variable overhead cost per machine-hour: } & \$ 15.50 & \$ 15.75\end{array}$$

-What is the variable overhead efficiency variance?

A)$4832.39 favourable
B)$4832.39 unfavourable
C)$2250 unfavourable
D)$2250 favourable

Question 57

Answer the following questions using the information below:
Patel Corporation manufactured 1000 coolers during October.The following variable overhead data pertain to October:
$\begin{array}{ll}\text { Budgeted variable overhead cost per unit } & \$ 9.00 \\\text { Actual variable manufacturing overhead cost } & \$ 8400 \\\text { Flexible-bud get amount for variable manufacturing overhead } & \$ 9000 \\\text { Variable manufacturing overhead efficiency variance } & \$ 180 \text { unfavourable }\end{array}$


-What is the variable overhead flexible-budget variance?

A)$600 favourable
B)$600 unfavourable
C)$780 favourable
D)$420 unfavourable

Question 58

Answer the following questions using the information below:
Wagga Wagga Corporation manufactured 30 000 eskies during September.The overhead cost-allocation base is $12.50 per machine-hour.The following variable overhead data pertain to September:
$$\begin{array} { l r r } & \text { Actual } & \text { Budgeted } \\\text { Production } & 30000 \text { units } & 24000 \text { units } \\\text { Machine-hours } & 15000 \text { hours } & 10800 \text { hours } \\\text { Variable overhead cost per machine-hour: } & \$ 12.00 & \$ 12.50\end{array}$$

-What is the actual variable overhead cost?

A)$121 500
B)$151 875
C)$180 000
D)$168 750

Question 59

Answer the following questions using the information below:
Hobart Corporation manufactured 20 000 heaters during November.The overhead cost-allocation base is $15.75 per machine-hour.The following variable overhead data pertain to November:
$$\begin{array} { l r r } & \text { Actual } & \text { Budgeted } \\\text { Production } & 20000 \text { units } & 22000 \text { units } \\\text { Machine-hours } & 7875 \text { hours } & 9000 \text { hours } \\\text { Variable overhead cost per machine-hour: } & \$ 15.50 & \$ 15.75\end{array}$$

-What is the total variable overhead variance?

A)$1968.75 favourable
B)$6801.14 unfavourable
C)$6801.14 favourable
D)$1968.75 unfavourable

Question 60

Answer the following questions using the information below:
Patel Corporation manufactured 1000 coolers during October.The following variable overhead data pertain to October:
$\begin{array}{ll}\text { Budgeted variable overhead cost per unit } & \$ 9.00 \\\text { Actual variable manufacturing overhead cost } & \$ 8400 \\\text { Flexible-bud get amount for variable manufacturing overhead } & \$ 9000 \\\text { Variable manufacturing overhead efficiency variance } & \$ 180 \text { unfavourable }\end{array}$


-What is the variable overhead spending variance?

A)$420 unfavourable
B)$600 unfavourable
C)$600 favourable
D)$780 favourable

Question 61

Why is a favourable variable overhead spending variance not always desirable?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Question 62

Swandow Pillow Company manufactures pillows.The 2018 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 $220 000.Actual production for 2018 was 36 000 pillows using 19 000 machine-hours.Actual variable costs were $10 per machine-hour.
Required:
Calculate the variable overhead spending and efficiency variances.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Question 63

Explain the meanings of the variable overhead efficiency variance and the variable overhead spending variance.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Question 64

The variable overhead efficiency variance is computed in a different way than the efficiency variance for direct-cost items.

Question 65

The variable overhead flexible-budget variance measures the difference between actual variable overhead costs incurred and flexible-budget variable overhead amounts.

Question 66

A favourable variable overhead spending variance is not always desirable.

Question 67

The efficiency variance for variable overhead cost is based on the efficiency with which the cost-allocation base is used.

Question 68

An unfavourable variable overhead efficiency variance indicates that variable overhead costs were wasted and inefficiently used.

Question 69

The variable overhead flexible-budget variance measures the difference between standard variable overhead costs and flexible-budget variable overhead costs.

Question 70

Which of the following is TRUE about fixed overhead cost?

A)Fixed overhead cost should be unitised for planning purposes.
B)Fixed overhead costs are unaffected by the degree of operating efficiency in a given budget period.
C)Fixed overhead costs never have any unused capacity.
D)Both A and B are correct.

Question 71

Generally Accepted Accounting Principles require that unitised fixed manufacturing costs be used for:

A)pricing decisions.
B)external reporting.
C)costing decisions.
D)All of these answers are correct.

Question 72

Leongatha Rustic Letterboxes Company manufactures rustic letterboxes.The 2018 operating budget is based on the production of 10 000 rustic letterboxes with 1.5 machine-hours allowed per weathervane.Variable manufacturing overhead is anticipated to be $300 000.
Actual production for 2018 was 11 000 rustic letterboxes using 12 100 machine-hours.Actual variable costs were $18.50 per machine-hour.
Required:
Calculate the variable overhead spending and the efficiency variances.

Question 73

Can the variable overhead efficiency variance be:
a.computed the same way as the efficiency variance for direct-cost items?
b.interpreted the same way as the efficiency variance for direct-cost items? Explain.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Question 74

The budget period for variable-overhead costs is typically less than three months.

Question 75

When machine-hours are used as a cost-allocation base,the item MOST likely to contribute to a favourable variable overhead efficiency variance is:

A)excessive machine breakdowns.
B)strengthened demand for the product.
C)the production scheduler's impressive scheduling of machines.
D)a decline in the cost of energy.

Question 76

The variable overhead efficiency variance can be interpreted the same way as the efficiency variance for direct-cost items.

Question 77

If the production planners set the budgeted machine hours standards too tight,one could anticipate there would be an unfavourable variable overhead efficiency variance.

Question 78

Causes of a favourable variable overhead efficiency variance might include using lower-skilled workers than expected.

Question 79

Which of the following is TRUE about variable overhead costs?

A)Variable overhead costs never have any unused capacity.
B)Variable overhead costs allocated are always the same as the flexible-budget amount.
C)Variable overhead costs have no production-volume variance.
D)All of these answers are correct.

Question 80

Tate Company makes the following journal entry:
$\begin{array}{lrr}\text { Variable Manufacturing Overhead Allocated } & 150000 & \\\text { Variable Manufacturing Overhead Efficiency Variance } & 5000 & \\\quad \text { Variable Manufacturing Overhead Control } & & 125000 \\\text { Variable Manufacturing Overhead Spending Variance } && 30000\end{array}$

A)A $25 000 favourable flexible-budget variance was recorded.
B)Tate under-allocated variable manufacturing overhead.
C)A $30 000 unfavourable spending variance was recorded.
D)Work-in-Process is currently understated.