Deck 13: Relevant Costs for Decision Making

Question 1

The variable overhead efficiency variance is most effective in measuring

A)the difference between actual variable overhead costs incurred during the period and the budget allowance based on actual input.
B)the difference between actual variable overhead costs incurred during the period and the budget amount based on the time that should have been expended in producing at a certain level of activity.
C)the difference between actual hours utilized in production and the standard hours allowed at a certain level of output.
D)excessive usage of overhead resources.

Answer 1

C

Question 2

The Euro Company wants to compare the performance of three business units. All the business units produce the same product with similar output per month. The company uses a flexible budget to plan and control manufacturing overhead costs. Overhead costs are applied to products on the basis of direct labour-hours. The standard cost card shows that 5 direct labour-hours are required per unit of product. Phelps Company had the following budgeted and actual data for March: $\begin{array}{lll}&\text { Actual }&\text { Budgeted }\\ \text { Units produced } & 11,000 & 10,000 \\\text { Directlabour-hours } & 65,000 & 60,000 \\\text { Variable overhead costs } & £ 84,000 &£ 80,000 \\\text { Fiked overhead costs } & £ 44,000 &£ 40,000\end{array}$
$\text { *Represents the denom inator activity for the month. }$
German Business Unit
$\begin{array}{lll}&\text { Actual }&\text { Budgeted }\\ \text { Units produced } & 11,000 & 10,000 \\\text { Directlabour-hours } & 65,000 & 60,000 \\\text { Variable overhead costs } & £ 84,000 &£ 80,000 \\\text { Fiked overhead costs } & £ 44,000 &£ 40,000\end{array}$
$\text { *Represents the denom inator activity for the month. }$
French Business Unit
$\begin{array}{lll}&\text { Actual }&\text { Budgeted }\\ \text { Units produced } & 11,000 & 10,000 \\\text { Directlabour-hours } & 65,000 & 60,000 \\\text { Variable overhead costs } & £ 84,000 &£ 80,000 \\\text { Fiked overhead costs } & £ 44,000 &£ 40,000\end{array}$
$\text { *Represents the denom inator activity for the month. }$

- The fixed overhead budget variance for March for the French Business Unit is

A)£4,000 favourable.
B)£ 4,500 favourable.
C)£2,000 favourable.
D)£2,000 unfavourable.

Answer 2

£2,000 favourable.

Question 3

The Euro Company wants to compare the performance of three business units. All the business units produce the same product with similar output per month. The company uses a flexible budget to plan and control manufacturing overhead costs. Overhead costs are applied to products on the basis of direct labour-hours. The standard cost card shows that 5 direct labour-hours are required per unit of product. Phelps Company had the following budgeted and actual data for March: $\begin{array}{lll}&\text { Actual }&\text { Budgeted }\\ \text { Units produced } & 11,000 & 10,000 \\\text { Directlabour-hours } & 65,000 & 60,000 \\\text { Variable overhead costs } & £ 84,000 &£ 80,000 \\\text { Fiked overhead costs } & £ 44,000 &£ 40,000\end{array}$
$\text { *Represents the denom inator activity for the month. }$
German Business Unit
$\begin{array}{lll}&\text { Actual }&\text { Budgeted }\\ \text { Units produced } & 11,000 & 10,000 \\\text { Directlabour-hours } & 65,000 & 60,000 \\\text { Variable overhead costs } & £ 84,000 &£ 80,000 \\\text { Fiked overhead costs } & £ 44,000 &£ 40,000\end{array}$
$\text { *Represents the denom inator activity for the month. }$
French Business Unit
$\begin{array}{lll}&\text { Actual }&\text { Budgeted }\\ \text { Units produced } & 11,000 & 10,000 \\\text { Directlabour-hours } & 65,000 & 60,000 \\\text { Variable overhead costs } & £ 84,000 &£ 80,000 \\\text { Fiked overhead costs } & £ 44,000 &£ 40,000\end{array}$
$\text { *Represents the denom inator activity for the month. }$

-The fixed overhead budget variance for March for the German Business Unit is

A)£4,000 favourable.
B)£4,500 favourable.
C)£5,000 favourable.
D)£5,000 unfavourable.

Answer 3

£5,000 unfavourable.

Question 4

The Euro Company wants to compare the performance of three business units. All the business units produce the same product with similar output per month. The company uses a flexible budget to plan and control manufacturing overhead costs. Overhead costs are applied to products on the basis of direct labour-hours. The standard cost card shows that 5 direct labour-hours are required per unit of product. Phelps Company had the following budgeted and actual data for March: $\begin{array}{lll}&\text { Actual }&\text { Budgeted }\\ \text { Units produced } & 11,000 & 10,000 \\\text { Directlabour-hours } & 65,000 & 60,000 \\\text { Variable overhead costs } & £ 84,000 &£ 80,000 \\\text { Fiked overhead costs } & £ 44,000 &£ 40,000\end{array}$
$\text { *Represents the denom inator activity for the month. }$
German Business Unit
$\begin{array}{lll}&\text { Actual }&\text { Budgeted }\\ \text { Units produced } & 11,000 & 10,000 \\\text { Directlabour-hours } & 65,000 & 60,000 \\\text { Variable overhead costs } & £ 84,000 &£ 80,000 \\\text { Fiked overhead costs } & £ 44,000 &£ 40,000\end{array}$
$\text { *Represents the denom inator activity for the month. }$
French Business Unit
$\begin{array}{lll}&\text { Actual }&\text { Budgeted }\\ \text { Units produced } & 11,000 & 10,000 \\\text { Directlabour-hours } & 65,000 & 60,000 \\\text { Variable overhead costs } & £ 84,000 &£ 80,000 \\\text { Fiked overhead costs } & £ 44,000 &£ 40,000\end{array}$
$\text { *Represents the denom inator activity for the month. }$

-The variable overhead spending variance for March for the French Business Unit is

A)£6,000 unfavourable.
B)£ 8,667 favourable.
C)£1,667 unfavourable.
D)£1,900 unfavourable.

Question 5

The Euro Company wants to compare the performance of three business units. All the business units produce the same product with similar output per month. The company uses a flexible budget to plan and control manufacturing overhead costs. Overhead costs are applied to products on the basis of direct labour-hours. The standard cost card shows that 5 direct labour-hours are required per unit of product. Phelps Company had the following budgeted and actual data for March: $\begin{array}{lll}&\text { Actual }&\text { Budgeted }\\ \text { Units produced } & 11,000 & 10,000 \\\text { Directlabour-hours } & 65,000 & 60,000 \\\text { Variable overhead costs } & £ 84,000 &£ 80,000 \\\text { Fiked overhead costs } & £ 44,000 &£ 40,000\end{array}$
$\text { *Represents the denom inator activity for the month. }$
German Business Unit
$\begin{array}{lll}&\text { Actual }&\text { Budgeted }\\ \text { Units produced } & 11,000 & 10,000 \\\text { Directlabour-hours } & 65,000 & 60,000 \\\text { Variable overhead costs } & £ 84,000 &£ 80,000 \\\text { Fiked overhead costs } & £ 44,000 &£ 40,000\end{array}$
$\text { *Represents the denom inator activity for the month. }$
French Business Unit
$\begin{array}{lll}&\text { Actual }&\text { Budgeted }\\ \text { Units produced } & 11,000 & 10,000 \\\text { Directlabour-hours } & 65,000 & 60,000 \\\text { Variable overhead costs } & £ 84,000 &£ 80,000 \\\text { Fiked overhead costs } & £ 44,000 &£ 40,000\end{array}$
$\text { *Represents the denom inator activity for the month. }$

- The fixed overhead budget variance for March for the Italian Business Unit is

A)£4,000 favourable.
B)£ 4,500 favourable.
C)£4,000 unfavourable.
D)£2,500 favourable.

Question 6

The Euro Company wants to compare the performance of three business units. All the business units produce the same product with similar output per month. The company uses a flexible budget to plan and control manufacturing overhead costs. Overhead costs are applied to products on the basis of direct labour-hours. The standard cost card shows that 5 direct labour-hours are required per unit of product. Phelps Company had the following budgeted and actual data for March: $\begin{array}{lll}&\text { Actual }&\text { Budgeted }\\ \text { Units produced } & 11,000 & 10,000 \\\text { Directlabour-hours } & 65,000 & 60,000 \\\text { Variable overhead costs } & £ 84,000 &£ 80,000 \\\text { Fiked overhead costs } & £ 44,000 &£ 40,000\end{array}$
$\text { *Represents the denom inator activity for the month. }$
German Business Unit
$\begin{array}{lll}&\text { Actual }&\text { Budgeted }\\ \text { Units produced } & 11,000 & 10,000 \\\text { Directlabour-hours } & 65,000 & 60,000 \\\text { Variable overhead costs } & £ 84,000 &£ 80,000 \\\text { Fiked overhead costs } & £ 44,000 &£ 40,000\end{array}$
$\text { *Represents the denom inator activity for the month. }$
French Business Unit
$\begin{array}{lll}&\text { Actual }&\text { Budgeted }\\ \text { Units produced } & 11,000 & 10,000 \\\text { Directlabour-hours } & 65,000 & 60,000 \\\text { Variable overhead costs } & £ 84,000 &£ 80,000 \\\text { Fiked overhead costs } & £ 44,000 &£ 40,000\end{array}$
$\text { *Represents the denom inator activity for the month. }$

-
The variable overhead efficiency variance for March for the German Business Unit is

A)£8,100 favourable.
B)£6,667 favourable.
C)£8,100 unfavourable.
D)£4,667 unfavourable.

Question 7

Franklin Glass Works uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of direct labour-hours. Each unit requires two standard hours of labour for completion. The denominator activity for the year was based on budgeted production of 200,000 units. Total overhead was budgeted at £900,000 for the year, and the fixed overhead rate was £3.00 per unit. The actual data pertaining to the manufacturing overhead for the year are presented below: $$\begin{array} { l l } \text { Actual production } & 198,000 \text { units } \\\text { Actual direct labour-hours } & 440,000 \text { direct labour-hours } \\\text { Actual variable overhead } & £ 352,000 \\\text { Actual fixed overhead } & £ 575,000\end{array}$$

-
The fixed overhead applied to Franklin's production for the year is

A)£484,200.
B)£575,000.
C)£594,000.
D)£600,000.

Question 8

The Euro Company wants to compare the performance of three business units. All the business units produce the same product with similar output per month. The company uses a flexible budget to plan and control manufacturing overhead costs. Overhead costs are applied to products on the basis of direct labour-hours. The standard cost card shows that 5 direct labour-hours are required per unit of product. Phelps Company had the following budgeted and actual data for March: $\begin{array}{lll}&\text { Actual }&\text { Budgeted }\\ \text { Units produced } & 11,000 & 10,000 \\\text { Directlabour-hours } & 65,000 & 60,000 \\\text { Variable overhead costs } & £ 84,000 &£ 80,000 \\\text { Fiked overhead costs } & £ 44,000 &£ 40,000\end{array}$
$\text { *Represents the denom inator activity for the month. }$
German Business Unit
$\begin{array}{lll}&\text { Actual }&\text { Budgeted }\\ \text { Units produced } & 11,000 & 10,000 \\\text { Directlabour-hours } & 65,000 & 60,000 \\\text { Variable overhead costs } & £ 84,000 &£ 80,000 \\\text { Fiked overhead costs } & £ 44,000 &£ 40,000\end{array}$
$\text { *Represents the denom inator activity for the month. }$
French Business Unit
$\begin{array}{lll}&\text { Actual }&\text { Budgeted }\\ \text { Units produced } & 11,000 & 10,000 \\\text { Directlabour-hours } & 65,000 & 60,000 \\\text { Variable overhead costs } & £ 84,000 &£ 80,000 \\\text { Fiked overhead costs } & £ 44,000 &£ 40,000\end{array}$
$\text { *Represents the denom inator activity for the month. }$

-The fixed overhead volume variance for March for the German Business Unit is

A)£1,500 favourable.
B)£7,333 unfavourable.
C)£2,500 unfavourable.
D)£5,333 unfavourable.

Question 9

The Euro Company wants to compare the performance of three business units. All the business units produce the same product with similar output per month. The company uses a flexible budget to plan and control manufacturing overhead costs. Overhead costs are applied to products on the basis of direct labour-hours. The standard cost card shows that 5 direct labour-hours are required per unit of product. Phelps Company had the following budgeted and actual data for March: $\begin{array}{lll}&\text { Actual }&\text { Budgeted }\\ \text { Units produced } & 11,000 & 10,000 \\\text { Directlabour-hours } & 65,000 & 60,000 \\\text { Variable overhead costs } & £ 84,000 &£ 80,000 \\\text { Fiked overhead costs } & £ 44,000 &£ 40,000\end{array}$
$\text { *Represents the denom inator activity for the month. }$
German Business Unit
$\begin{array}{lll}&\text { Actual }&\text { Budgeted }\\ \text { Units produced } & 11,000 & 10,000 \\\text { Directlabour-hours } & 65,000 & 60,000 \\\text { Variable overhead costs } & £ 84,000 &£ 80,000 \\\text { Fiked overhead costs } & £ 44,000 &£ 40,000\end{array}$
$\text { *Represents the denom inator activity for the month. }$
French Business Unit
$\begin{array}{lll}&\text { Actual }&\text { Budgeted }\\ \text { Units produced } & 11,000 & 10,000 \\\text { Directlabour-hours } & 65,000 & 60,000 \\\text { Variable overhead costs } & £ 84,000 &£ 80,000 \\\text { Fiked overhead costs } & £ 44,000 &£ 40,000\end{array}$
$\text { *Represents the denom inator activity for the month. }$

-The variable overhead spending variance for March for the German Business Unit is

A)£2,667 favourable.
B)£ 8,667 favourable.
C)£1,667 unfavourable.
D)£1,900 unfavourable.

Question 10

The Judd Company uses a standard cost system in which it applies manufacturing overhead to units of product on the basis of machine-hours. During May, the company budgeted £320,000 in manufacturing overhead cost at a denominator activity of 20,000 machine-hours. At standard, each unit of finished product requires 4 machine-hours. The following cost and activity was recorded during May: $\begin{array}{ll}\text { Total actual manufacturing ov erhead cost incurred } & £ 335,500 \\\text { Units of product completed } & 4,700 \\\text { Actual machine-hours worked } & 21,000\end{array}$
The amount of overhead cost that the company applied to Work in Process for May was

A)£336,000.
B)£335,500.
C)£300,800.
D)£315,370.

Question 11

The Euro Company wants to compare the performance of three business units. All the business units produce the same product with similar output per month. The company uses a flexible budget to plan and control manufacturing overhead costs. Overhead costs are applied to products on the basis of direct labour-hours. The standard cost card shows that 5 direct labour-hours are required per unit of product. Phelps Company had the following budgeted and actual data for March: $\begin{array}{lll}&\text { Actual }&\text { Budgeted }\\ \text { Units produced } & 11,000 & 10,000 \\\text { Directlabour-hours } & 65,000 & 60,000 \\\text { Variable overhead costs } & £ 84,000 &£ 80,000 \\\text { Fiked overhead costs } & £ 44,000 &£ 40,000\end{array}$
$\text { *Represents the denom inator activity for the month. }$
German Business Unit
$\begin{array}{lll}&\text { Actual }&\text { Budgeted }\\ \text { Units produced } & 11,000 & 10,000 \\\text { Directlabour-hours } & 65,000 & 60,000 \\\text { Variable overhead costs } & £ 84,000 &£ 80,000 \\\text { Fiked overhead costs } & £ 44,000 &£ 40,000\end{array}$
$\text { *Represents the denom inator activity for the month. }$
French Business Unit
$\begin{array}{lll}&\text { Actual }&\text { Budgeted }\\ \text { Units produced } & 11,000 & 10,000 \\\text { Directlabour-hours } & 65,000 & 60,000 \\\text { Variable overhead costs } & £ 84,000 &£ 80,000 \\\text { Fiked overhead costs } & £ 44,000 &£ 40,000\end{array}$
$\text { *Represents the denom inator activity for the month. }$

- The fixed overhead volume variance for March for the French Business Unit is

A)£1,555 favourable.
B)£7,333 unfavourable.
C)£2,667 unfavourable.
D)£5,667 unfavourable.

Question 12

At the end of the year, a company's Manufacturing Overhead account contained the following data:Manufacturing Overhead
Actual $£ 82,140 \quad £ 78,260 \quad$ Applied
If the denominator activity for the year was 40,000 machine-hours, and if 36,400 machine-hours were allowed for the year's production, then the predetermined overhead rate per machine-hour was

A)£2.15.
B)£1.96.
C)£2.26.
D)£2.05.

Question 13

At the end of the year, actual manufacturing overhead costs were £110,000 and applied manufacturing overhead costs were £118,800. If the denominator activity for the year was 20,000 machine-hours, and if 22,000 standard machine-hours were allowed for the year's production, the predetermined overhead rate per machine-hour was

A)£5.00.
B)£5.94.
C)£5.50.
D)£5.40.

Question 14

The Euro Company wants to compare the performance of three business units. All the business units produce the same product with similar output per month. The company uses a flexible budget to plan and control manufacturing overhead costs. Overhead costs are applied to products on the basis of direct labour-hours. The standard cost card shows that 5 direct labour-hours are required per unit of product. Phelps Company had the following budgeted and actual data for March: $\begin{array}{lll}&\text { Actual }&\text { Budgeted }\\ \text { Units produced } & 11,000 & 10,000 \\\text { Directlabour-hours } & 65,000 & 60,000 \\\text { Variable overhead costs } & £ 84,000 &£ 80,000 \\\text { Fiked overhead costs } & £ 44,000 &£ 40,000\end{array}$
$\text { *Represents the denom inator activity for the month. }$
German Business Unit
$\begin{array}{lll}&\text { Actual }&\text { Budgeted }\\ \text { Units produced } & 11,000 & 10,000 \\\text { Directlabour-hours } & 65,000 & 60,000 \\\text { Variable overhead costs } & £ 84,000 &£ 80,000 \\\text { Fiked overhead costs } & £ 44,000 &£ 40,000\end{array}$
$\text { *Represents the denom inator activity for the month. }$
French Business Unit
$\begin{array}{lll}&\text { Actual }&\text { Budgeted }\\ \text { Units produced } & 11,000 & 10,000 \\\text { Directlabour-hours } & 65,000 & 60,000 \\\text { Variable overhead costs } & £ 84,000 &£ 80,000 \\\text { Fiked overhead costs } & £ 44,000 &£ 40,000\end{array}$
$\text { *Represents the denom inator activity for the month. }$

- The fixed overhead volume variance for March for the Italian Business Unit is

A)£1,500 favourable.
B)£3,333 unfavourable.
C)£2,500 unfavourable.
D)£5,000 unfavourable.

Question 15

Franklin Glass Works uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of direct labour-hours. Each unit requires two standard hours of labour for completion. The denominator activity for the year was based on budgeted production of 200,000 units. Total overhead was budgeted at £900,000 for the year, and the fixed overhead rate was £3.00 per unit. The actual data pertaining to the manufacturing overhead for the year are presented below: $$\begin{array} { l l } \text { Actual production } & 198,000 \text { units } \\\text { Actual direct labour-hours } & 440,000 \text { direct labour-hours } \\\text { Actual variable overhead } & £ 352,000 \\\text { Actual fixed overhead } & £ 575,000\end{array}$$

-
Franklin's fixed overhead volume variance for the year is

A)£6,000 unfavourable.
B)£19,000 favourable.
C)£25,000 favourable.
D)£55,000 unfavourable.

Question 16

The Euro Company wants to compare the performance of three business units. All the business units produce the same product with similar output per month. The company uses a flexible budget to plan and control manufacturing overhead costs. Overhead costs are applied to products on the basis of direct labour-hours. The standard cost card shows that 5 direct labour-hours are required per unit of product. Phelps Company had the following budgeted and actual data for March: $\begin{array}{lll}&\text { Actual }&\text { Budgeted }\\ \text { Units produced } & 11,000 & 10,000 \\\text { Directlabour-hours } & 65,000 & 60,000 \\\text { Variable overhead costs } & £ 84,000 &£ 80,000 \\\text { Fiked overhead costs } & £ 44,000 &£ 40,000\end{array}$
$\text { *Represents the denom inator activity for the month. }$
German Business Unit
$\begin{array}{lll}&\text { Actual }&\text { Budgeted }\\ \text { Units produced } & 11,000 & 10,000 \\\text { Directlabour-hours } & 65,000 & 60,000 \\\text { Variable overhead costs } & £ 84,000 &£ 80,000 \\\text { Fiked overhead costs } & £ 44,000 &£ 40,000\end{array}$
$\text { *Represents the denom inator activity for the month. }$
French Business Unit
$\begin{array}{lll}&\text { Actual }&\text { Budgeted }\\ \text { Units produced } & 11,000 & 10,000 \\\text { Directlabour-hours } & 65,000 & 60,000 \\\text { Variable overhead costs } & £ 84,000 &£ 80,000 \\\text { Fiked overhead costs } & £ 44,000 &£ 40,000\end{array}$
$\text { *Represents the denom inator activity for the month. }$

-The variable overhead efficiency variance for March for the French Business Unit is

A)£8,000 unfavourable.
B)£6,667 favourable.
C)£8,100 unfavourable.
D)£4,667 unfavourable.

Question 17

In a standard cost system, the volume variance will be unfavourable when

A)actual hours are greater than the denominator hours.
B)the standard hours allowed for the output of the period are less than the denominator hours.
C)the standard hours allowed for the output of the period are greater than the actual hours incurred.
D)actual hours are less than the denominator hours.

Question 18

The Euro Company wants to compare the performance of three business units. All the business units produce the same product with similar output per month. The company uses a flexible budget to plan and control manufacturing overhead costs. Overhead costs are applied to products on the basis of direct labour-hours. The standard cost card shows that 5 direct labour-hours are required per unit of product. Phelps Company had the following budgeted and actual data for March: $\begin{array}{lll}&\text { Actual }&\text { Budgeted }\\ \text { Units produced } & 11,000 & 10,000 \\\text { Directlabour-hours } & 65,000 & 60,000 \\\text { Variable overhead costs } & £ 84,000 &£ 80,000 \\\text { Fiked overhead costs } & £ 44,000 &£ 40,000\end{array}$
$\text { *Represents the denom inator activity for the month. }$
German Business Unit
$\begin{array}{lll}&\text { Actual }&\text { Budgeted }\\ \text { Units produced } & 11,000 & 10,000 \\\text { Directlabour-hours } & 65,000 & 60,000 \\\text { Variable overhead costs } & £ 84,000 &£ 80,000 \\\text { Fiked overhead costs } & £ 44,000 &£ 40,000\end{array}$
$\text { *Represents the denom inator activity for the month. }$
French Business Unit
$\begin{array}{lll}&\text { Actual }&\text { Budgeted }\\ \text { Units produced } & 11,000 & 10,000 \\\text { Directlabour-hours } & 65,000 & 60,000 \\\text { Variable overhead costs } & £ 84,000 &£ 80,000 \\\text { Fiked overhead costs } & £ 44,000 &£ 40,000\end{array}$
$\text { *Represents the denom inator activity for the month. }$

- The variable overhead spending variance for March for the Italian Business Unit is

A)£ 2,667 favourable.
B)£ 6,666 unfavourable.
C)£1,000 unfavourable.
D)£1,200 unfavourable.

Question 19

The Euro Company wants to compare the performance of three business units. All the business units produce the same product with similar output per month. The company uses a flexible budget to plan and control manufacturing overhead costs. Overhead costs are applied to products on the basis of direct labour-hours. The standard cost card shows that 5 direct labour-hours are required per unit of product. Phelps Company had the following budgeted and actual data for March: $\begin{array}{lll}&\text { Actual }&\text { Budgeted }\\ \text { Units produced } & 11,000 & 10,000 \\\text { Directlabour-hours } & 65,000 & 60,000 \\\text { Variable overhead costs } & £ 84,000 &£ 80,000 \\\text { Fiked overhead costs } & £ 44,000 &£ 40,000\end{array}$
$\text { *Represents the denom inator activity for the month. }$
German Business Unit
$\begin{array}{lll}&\text { Actual }&\text { Budgeted }\\ \text { Units produced } & 11,000 & 10,000 \\\text { Directlabour-hours } & 65,000 & 60,000 \\\text { Variable overhead costs } & £ 84,000 &£ 80,000 \\\text { Fiked overhead costs } & £ 44,000 &£ 40,000\end{array}$
$\text { *Represents the denom inator activity for the month. }$
French Business Unit
$\begin{array}{lll}&\text { Actual }&\text { Budgeted }\\ \text { Units produced } & 11,000 & 10,000 \\\text { Directlabour-hours } & 65,000 & 60,000 \\\text { Variable overhead costs } & £ 84,000 &£ 80,000 \\\text { Fiked overhead costs } & £ 44,000 &£ 40,000\end{array}$
$\text { *Represents the denom inator activity for the month. }$

- The variable overhead efficiency variance for March for the Italian Business Unit is

A)£8,000 unfavourable.
B)£6,667 favourable.
C)£8,000 unfavourable
D)£4,667 unfavourable.

Question 20

The higher the denominator level of activity

A)the higher the cost per unit of product.
B)the lower the cost per unit of product.
C)the less likely is the occurrence of a volume variance.
D)the more profitable operations likely will be.

Question 21

With a flexible budget a manager can determine what costs should have been attained at a given level of activity.

Question 22

Franklin Glass Works uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of direct labour-hours. Each unit requires two standard hours of labour for completion. The denominator activity for the year was based on budgeted production of 200,000 units. Total overhead was budgeted at £900,000 for the year, and the fixed overhead rate was £3.00 per unit. The actual data pertaining to the manufacturing overhead for the year are presented below: $$\begin{array} { l l } \text { Actual production } & 198,000 \text { units } \\\text { Actual direct labour-hours } & 440,000 \text { direct labour-hours } \\\text { Actual variable overhead } & £ 352,000 \\\text { Actual fixed overhead } & £ 575,000\end{array}$$

-
Franklin's variable overhead spending variance for the year is

A)£20,000 unfavourable.
B)£22,000 favourable.
C)£22,000 unfavourable.
D)£20,000 favourable.

Question 23

Franklin Glass Works uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of direct labour-hours. Each unit requires two standard hours of labour for completion. The denominator activity for the year was based on budgeted production of 200,000 units. Total overhead was budgeted at £900,000 for the year, and the fixed overhead rate was £3.00 per unit. The actual data pertaining to the manufacturing overhead for the year are presented below: $$\begin{array} { l l } \text { Actual production } & 198,000 \text { units } \\\text { Actual direct labour-hours } & 440,000 \text { direct labour-hours } \\\text { Actual variable overhead } & £ 352,000 \\\text { Actual fixed overhead } & £ 575,000\end{array}$$

-Franklin's fixed overhead budget variance for the year is

A)£19,000 favourable.
B)£25,000 favourable.
C)£25,000 unfavourable.
D)£19,000 unfavourable.

Question 24

A manufacturing company has a standard costing system based on direct labour-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: $\begin{array}{lrr} \text { Denominator level of activity } &3,700&\text { DLHs }\\ \text { Overhead costs at the denominator activity level: } &\\ \text { Variable overhead cost } &£ 28,490\\ \text { Fixed owerhead cost } &£ 47,545\\ \text { The following data pertain to operations for the most recent period:} &\\ \text { Actual hours } &3,900&\text { DLHs }\\ \text { Standard hours 3,900allowed for the actual output } &3,850&\text { DLHs }\\ \text { Actual total variable overhead cost } &£ 29,445\\ \text {Actual total fixed overhead cost } &£47,995 \\\end{array}$



-
What is the predetermined overhead rate to the nearest cent

A)£20.93
B)£19.86
C)£19.50
D)£20.55

Question 25

A manufacturing company has a standard costing system based on direct labour-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: $\begin{array}{lrr} \text { Denominator level of activity } &3,700&\text { DLHs }\\ \text { Overhead costs at the denominator activity level: } &\\ \text { Variable overhead cost } &£ 28,490\\ \text { Fixed owerhead cost } &£ 47,545\\ \text { The following data pertain to operations for the most recent period:} &\\ \text { Actual hours } &3,900&\text { DLHs }\\ \text { Standard hours 3,900allowed for the actual output } &3,850&\text { DLHs }\\ \text { Actual total variable overhead cost } &£ 29,445\\ \text {Actual total fixed overhead cost } &£47,995 \\\end{array}$



-
What was the variable overhead spending variance for the period to the nearest pound

A)£585 U
B)£585 F
C)£955 U
D)£955 F

Question 26

Barrick Company has established a flexible budget for manufacturing overhead based on direct labour-hours. Total budgeted costs at 200,000 direct labour-hours are as follows $\text { Variable costs (total): }$
$\begin{array}{ll}\text { Packing supplies } & £ 120,000 \\\text { Indirect labour } & £ 180,000 \\\text { Fixed costs (total): } & \\\text { Utilities } & £ 100,000 \\\text { Rent } & £ 40,000 \\\text { Insurance } & £ 20,000\end{array}$

-The flexible budget for factory overhead would show that the variable factory overhead cost per direct labour-hour is

A)£1.80.
B)£1.50.
C)£0.90.
D)£0.60.

Question 27

Franklin Glass Works uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of direct labour-hours. Each unit requires two standard hours of labour for completion. The denominator activity for the year was based on budgeted production of 200,000 units. Total overhead was budgeted at £900,000 for the year, and the fixed overhead rate was £3.00 per unit. The actual data pertaining to the manufacturing overhead for the year are presented below: $$\begin{array} { l l } \text { Actual production } & 198,000 \text { units } \\\text { Actual direct labour-hours } & 440,000 \text { direct labour-hours } \\\text { Actual variable overhead } & £ 352,000 \\\text { Actual fixed overhead } & £ 575,000\end{array}$$

-
The standard hours allowed for actual production for the year total

A)247,500.
B)396,000.
C)400,000.
D)495,000.

Question 28

The flexible budget is a dynamic tool, in that a budget can be constructed to compare to any level of actual costs within the relevant range

Question 29

Dean Company uses a standard cost system in which it applies manufacturing overhead to units of product on the basis of direct labour-hours. The company is preparing a flexible budget for next year and the following data are available: $\begin{array}{ll}&\text { At capacity }\\\text { Direct labour-hours } & 60,000 \\\text { Variable factory overhead } & £ 150,000 \\\text { Fixed factory overhead } & £ 240,000\end{array}$
Assume that Dean's denominator activity for the year is set at 80% of capacity. What would be the total predetermined overhead rate, based on direct labour-hours, for the year

A)£6.00.
B)£6.50.
C)£7.50.
D)£8.13.

Question 30

Barrick Company has established a flexible budget for manufacturing overhead based on direct labour-hours. Total budgeted costs at 200,000 direct labour-hours are as follows $\text { Variable costs (total): }$
$\begin{array}{ll}\text { Packing supplies } & £ 120,000 \\\text { Indirect labour } & £ 180,000 \\\text { Fixed costs (total): } & \\\text { Utilities } & £ 100,000 \\\text { Rent } & £ 40,000 \\\text { Insurance } & £ 20,000\end{array}$

-At an activity level of 170,000 direct labour-hours, the flexible budget for factory overhead would show the budgeted amount for utilities as

A)£85,000.
B)£140,000.
C)£160,000.
D)£100,000.

Question 31

At Eady Company, maintenance is a variable cost that varies directly with machine-hours. The performance report for July showed that actual maintenance costs totaled £8,650 and that the associated spending variance was £250 unfavourable. If 5,000 machine-hours were actually worked during July, the budgeted maintenance cost per machine-hour was

A)£1.73.
B)£1.78.
C)£1.68.
D)£1.83.

Question 32

A manufacturing company has a standard costing system based on direct labour-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: $\begin{array}{lrr} \text { Denominator level of activity } &3,700&\text { DLHs }\\ \text { Overhead costs at the denominator activity level: } &\\ \text { Variable overhead cost } &£ 28,490\\ \text { Fixed owerhead cost } &£ 47,545\\ \text { The following data pertain to operations for the most recent period:} &\\ \text { Actual hours } &3,900&\text { DLHs }\\ \text { Standard hours 3,900allowed for the actual output } &3,850&\text { DLHs }\\ \text { Actual total variable overhead cost } &£ 29,445\\ \text {Actual total fixed overhead cost } &£47,995 \\\end{array}$



-
What was the fixed overhead budget variance for the period to the nearest pound

A)£615 F
B)£2,120 U
C)£1,478 U
D)£450 U

Question 33

A manufacturing company has a standard costing system based on direct labour-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: $\begin{array}{lrr} \text { Denominator level of activity } &3,700&\text { DLHs }\\ \text { Overhead costs at the denominator activity level: } &\\ \text { Variable overhead cost } &£ 28,490\\ \text { Fixed owerhead cost } &£ 47,545\\ \text { The following data pertain to operations for the most recent period:} &\\ \text { Actual hours } &3,900&\text { DLHs }\\ \text { Standard hours 3,900allowed for the actual output } &3,850&\text { DLHs }\\ \text { Actual total variable overhead cost } &£ 29,445\\ \text {Actual total fixed overhead cost } &£47,995 \\\end{array}$



-
How much overhead was applied to products during the period to the nearest pound

A)£79,118
B)£76,035
C)£77,440
D)£80,145

Question 34

A manufacturing company has a standard costing system based on direct labour-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: $\begin{array}{lrr} \text { Denominator level of activity } &3,700&\text { DLHs }\\ \text { Overhead costs at the denominator activity level: } &\\ \text { Variable overhead cost } &£ 28,490\\ \text { Fixed owerhead cost } &£ 47,545\\ \text { The following data pertain to operations for the most recent period:} &\\ \text { Actual hours } &3,900&\text { DLHs }\\ \text { Standard hours 3,900allowed for the actual output } &3,850&\text { DLHs }\\ \text { Actual total variable overhead cost } &£ 29,445\\ \text {Actual total fixed overhead cost } &£47,995 \\\end{array}$



-The overhead spending variance contains price but not quantity elements

Question 35

A manufacturing company has a standard costing system based on direct labour-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: $\begin{array}{lrr} \text { Denominator level of activity } &3,700&\text { DLHs }\\ \text { Overhead costs at the denominator activity level: } &\\ \text { Variable overhead cost } &£ 28,490\\ \text { Fixed owerhead cost } &£ 47,545\\ \text { The following data pertain to operations for the most recent period:} &\\ \text { Actual hours } &3,900&\text { DLHs }\\ \text { Standard hours 3,900allowed for the actual output } &3,850&\text { DLHs }\\ \text { Actual total variable overhead cost } &£ 29,445\\ \text {Actual total fixed overhead cost } &£47,995 \\\end{array}$



-
What was the fixed overhead volume variance for the period to the nearest pound

A)£1,870 F
B)£1,928 F
C)£643 U
D)£2,570 F

Question 36

Waste or excessive usage of overhead items will show up as part of the variable overhead efficiency variance

Question 37

A company has a standard cost system in which fixed and variable manufacturing overhead costs are applied to products on the basis of direct labour-hours. The company's choice of the denominator level of activity affects the fixed portion of the predetermined overhead rate

Question 38

Barrick Company has established a flexible budget for manufacturing overhead based on direct labour-hours. Total budgeted costs at 200,000 direct labour-hours are as follows $\text { Variable costs (total): }$
$\begin{array}{ll}\text { Packing supplies } & £ 120,000 \\\text { Indirect labour } & £ 180,000 \\\text { Fixed costs (total): } & \\\text { Utilities } & £ 100,000 \\\text { Rent } & £ 40,000 \\\text { Insurance } & £ 20,000\end{array}$

-
If Barrick Company plans to operate at 190,000 direct labour-hours during the next period, the flexible budget would show indirect labour costs of

A)£171,000.
B)£180,000.
C)£114,000.
D)£270,000.

Question 39

Franklin Glass Works uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of direct labour-hours. Each unit requires two standard hours of labour for completion. The denominator activity for the year was based on budgeted production of 200,000 units. Total overhead was budgeted at £900,000 for the year, and the fixed overhead rate was £3.00 per unit. The actual data pertaining to the manufacturing overhead for the year are presented below: $$\begin{array} { l l } \text { Actual production } & 198,000 \text { units } \\\text { Actual direct labour-hours } & 440,000 \text { direct labour-hours } \\\text { Actual variable overhead } & £ 352,000 \\\text { Actual fixed overhead } & £ 575,000\end{array}$$

-
Franklin's variable overhead efficiency variance for the year is

A)£33,000 unfavourable.
B)£35,200 favourable.
C)£35,200 unfavourable.
D)£33,000 favourable.

Question 40

A manufacturing company has a standard costing system based on direct labour-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: $\begin{array}{lrr} \text { Denominator level of activity } &3,700&\text { DLHs }\\ \text { Overhead costs at the denominator activity level: } &\\ \text { Variable overhead cost } &£ 28,490\\ \text { Fixed owerhead cost } &£ 47,545\\ \text { The following data pertain to operations for the most recent period:} &\\ \text { Actual hours } &3,900&\text { DLHs }\\ \text { Standard hours 3,900allowed for the actual output } &3,850&\text { DLHs }\\ \text { Actual total variable overhead cost } &£ 29,445\\ \text {Actual total fixed overhead cost } &£47,995 \\\end{array}$



-What was the variable overhead efficiency variance for the period to the nearest pound

A)£578 U
B)£385 U
C)£378 U
D)£955 U

Question 41

An unfavourable volume variance means that a firm operated at an activity level that was above the activity level planned for the period

Question 42

A fixed overhead budget variance occurs as the result of a difference between the denominator level of activity (in hours) and the standard hours allowed for the actual output of the period

Question 43

Which of the following overhead variances would be useful in calling attention to a possible short-term problem in the control of overhead costs:
$\begin{array} { l l } \text { Spending variance } & \text { Volume variance } \\\end{array}$
A. $\begin{array} { l l } &&\text { No } &&&&&&& \text { No } \\\end{array}$
B. $\begin{array} { l l }&& \text { No } &&&&&&& \text { Yes } \\\end{array}$
C. $\begin{array} { l l } &&\text {Yes } &&&&&&& \text { No } \\\end{array}$
D. $\begin{array} { l l }&& \text { Yes } &&&&&&& \text { Yes }\end{array}$

A)Option A
B)Option B
C)Option C
D)Option D

Question 44

Which of the following are problems in overhead cost control?
I. Overhead is us ually made up of many separate costs.
II. The separate overhead costs are often small in pound amount.
III. The separate overhead costs are often the responsibility of different managers.

A)Only I.
B)Only I and II.
C)Only I and III.
D)I, II and III.

Question 45

In a standard costing system where the denominator activity for the predetermined overhead rate is labour-hours, overhead costs are applied to work in process on the basis of actual hours worked

Question 46

The fixed overhead volume variance will be unfavourable if production volume is less than sales volume

Question 47

Baxter Corporation's master budget calls for the production of 5,000 units of its product monthly. The master budget includes indirect labour of £144,000 annually; Baxter considers indirect labour to be a variable cost. During the month of April, 4,500 units of product were produced, and indirect labour costs of £10,100 were incurred. A performance report utilizing flexible budgeting would report a spending variance for indirect labour of

A)£1,900 unfavourable.
B)£700 favourable.
C)£1,900 favourable.
D)£700 unfavourable.

Question 48

Traveller Company sells one product and uses a standard cost system. Last year the overhead volume variance was zero. Which of the following is correct?

A)Actual variable overhead cost was equal to standard variable overhead cost.
B)Total applied overhead was equal to total actual overhead.
C)The denominator activity was equal to actual activity.
D)The budgeted fixed costs were equal to the applied fixed costs.

Question 49

Overhead is applied to work in process in a standard costing system by

A)multiplying actual hours times the predetermined rate.
B)multiplying standard hours allowed for the output of the period times the predetermined rate.
C)multiplying actual hours times the actual rate.
D)multiplying standard hours allowed for the output of the period times the actual rate.

Question 50

The Ammon Company uses a standard cost system in which manufacturing overhead is applied to units on the basis of machine-hours. During July, the company budgeted £350,000 in manufacturing overhead cost at a denominator activity of 25,000 machine-hours. At standard, each unit of finished product requires 5 machine-hours. The follow cost and activity were recorded during July $\begin{array}{ll}\text { Total actual manufacturing ov erhead cost incurred } & £ 325,000 \\\text { Units of product completed } & 4,500 \\\text { Actual machine-hours worked } & 23,000\end{array}$
The amount of overhead cost that the company applied to work in process for July was

A)£292,500.
B)£315,000.
C)£322,000.
D)£325,000.

Question 51

The Rowe Company uses a standard cost system in which it applies manufacturing overhead to units of product on the basis of machine-hours. During January, the company budgeted to incur £225,000 in manufacturing overhead cost and to operate at a denominator activity level of 25,000 machine-hours. At standard, each unit of finished product requires 3 machine-hours. The following cost and activity were recorded during January. $\begin{array}{ll}\text { Total actual manufacturing ov erhead cost incurred } & £ 217,750 \\\text { Units of product completed } & 8,000 \\\text { Actual machine-hours worked } & 23,000\end{array}$ The amount of overhead cost that the company applied to Work in Process for January was

A)£217,750.
B)£225,000.
C)£221,600.
D)£216,000.

Question 52

Fixed costs should never be considered when evaluating how well a manager has controlled costs

Question 53

A static budget

A)should be compared to actual costs to assess how well costs were controlled.
B)should be compared to a flexible budget to assess how well costs were controlled.
C)is valid for only one level of activity.
D)represents the best way to set spending targets for managers.

Question 54

Wicks Company has established a flexible budget for manufacturing overhead based on direct labour-hours. Budgeted costs at 100,000 direct labour-hours are as follows: $\begin{array} { l l } \text { Variable costs (total):}\\\text { Packing supplies } & £ 70,000 \\ \text { Indirect labour } & £ 90,000\\ \text { Fixed costs (total):}\\ \text { Utilities}& £50,000\\ \text { Rent}& £20,000\\ \text { Insurance}& £10,000 \end{array}$


-
If Wicks Company plans to operate at 90,000 direct labour-hours during the next period, the flexible budget would show indirect labour costs of

A)£144,000.
B)£63,000.
C)£90,000.
D)£81,000.

Question 55

Wicks Company has established a flexible budget for manufacturing overhead based on direct labour-hours. Budgeted costs at 100,000 direct labour-hours are as follows: $\begin{array} { l l } \text { Variable costs (total):}\\\text { Packing supplies } & £ 70,000 \\ \text { Indirect labour } & £ 90,000\\ \text { Fixed costs (total):}\\ \text { Utilities}& £50,000\\ \text { Rent}& £20,000\\ \text { Insurance}& £10,000 \end{array}$


-
The flexible budget for factory overhead would show that the variable overhead per direct labour-hour is

A)£1.90.
B)£1.60.
C)£0.90.
D)£0.70.

Question 56

Wicks Company has established a flexible budget for manufacturing overhead based on direct labour-hours. Budgeted costs at 100,000 direct labour-hours are as follows: $\begin{array} { l l } \text { Variable costs (total):}\\\text { Packing supplies } & £ 70,000 \\ \text { Indirect labour } & £ 90,000\\ \text { Fixed costs (total):}\\ \text { Utilities}& £50,000\\ \text { Rent}& £20,000\\ \text { Insurance}& £10,000 \end{array}$


-
At an activity level of 70,000 direct labour-hours, the flexible budget would show the budgeted amount for utilities as

A)£35,000.
B)£70,000.
C)£80,000.
D)£50,000.

Question 57

A company has a standard cost system in which fixed and variable manufacturing overhead costs are applied to products on the basis of direct labour-hours. The company's choice of the denominator level of activity affects the fixed overhead budget variance

Question 58

The economic impact of the inability to reach a target denominator level of activity would best be measured by

A)the amount of the volume variance.
B)the contribution margin lost by failing to meet the target denominator level of activity.
C)the amount of the fixed overhead budget variance.
D)the amount of the variable overhead efficiency variance.

Question 59

Rameriz Company erred in selecting a denominator activity and chose a much higher level than was realistic. This error would most likely result in a large

A)favourable variable overhead efficiency variance.
B)favourable fixed overhead budget variance.
C)unfavourable overhead volume variance.
D)unfavourable fixed overhead budget variance.

Question 60

When a flexible budget is used, a decrease in the activity level would

A)increase total fixed costs.
B)increase variable cost per unit.
C)decrease variable cost per unit.
D)decrease total costs.

Question 61

"A budget should be fixed and not flexible. How can you change the figures once you've budgeted?" Discuss.

Question 62

Critically analyse how variance analysis may be applied to a service organisation

Question 63

The variable overhead spending variance is most effective in measuring

A)how well overhead spending matches the targets set in the original budget at the beginning of the year.
B)the efficiency with which the activity base was utilised in production.
C)excessive use of overhead resources.
D)the utilisation of plant facilities.

Question 64

Compare and contrast the standard variance analysis approach with that need for ABC.

Question 65

Outline the advantages of ABC variance analysis

Question 66

A volume variance and an efficiency variance are computed for fixed overhead costs

Question 67

A company has a standard cost system in which fixed and variable manufacturing overhead costs are applied to products on the basis of direct labour-hours. The company's choice of the denominator level of activity affects the variable portion of the predetermined overhead rate

Question 68

Discuss the relevance of Sales mix and yield variances. What useful information could they give you?

Question 69

If the fixed overhead volume variance is unfavourable, too much has been spent on fixed overhead items

Question 70

Discuss the relevance of Production mix and yield variances. What useful information could they give you?

Question 71

The budget variance represents the difference between the actual fixed overhead cost incurred during a period and the budgeted fixed overhead cost