Question 1

Use the following information to answer Questions 
Match Point, Inc. has the following overhead standards:
Variable overhead: 4 hours at $8 per hour
Fixed overhead: 4 hours at $10 per hour
The standards were based on a planned activity of 20,000 machine hours when 5,000 units were scheduled for production. Actual data follow.
Variable overhead incurred: $167,750
Fixed overhead incurred: $210,000
Machine hours worked: 19,800
Actual units produced: 5,100

-Match Point's variable-overhead spending variance is:
A) $550 favorable.
B) $4,550 unfavorable.
C) $4,800 favorable.
D) $9,350 unfavorable.
E) None of the answers is correct.

Accepted Answer

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Question 2

What is the most common treatment of the fixed-overhead budget variance at the end of the accounting period?
A) Reported as a deferred charge or credit.
B) Allocated among Work-in-Process Inventory, Finished-Goods Inventory, and Cost of Goods Sold.
C) Charged or credited to Cost of Goods Sold.
D) Allocated among Cost of Goods Manufactured, Finished-Goods Inventory, and Cost of Goods Sold.
E) Charged or credited to Income Summary.

Accepted Answer

The most common treatment of the fixed-overhead budget variance is to charge or credit it to Cost of Goods Sold, as it directly affects the cost of production and ultimately the profitability of the company.

Question 3

Use the following information to answer Questions 
Match Point, Inc. has the following overhead standards:
Variable overhead: 4 hours at $8 per hour
Fixed overhead: 4 hours at $10 per hour
The standards were based on a planned activity of 20,000 machine hours when 5,000 units were scheduled for production. Actual data follow.
Variable overhead incurred: $167,750
Fixed overhead incurred: $210,000
Machine hours worked: 19,800
Actual units produced: 5,100

-Match Point's variable-overhead efficiency variance is:
A) $550 favorable.
B) $550 unfavorable.
C) $4,800 favorable.
D) $4,800 unfavorable.
E) None of the answers is correct.

Accepted Answer

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Question 4

Use the following information to answer the following Questions
Sigmo Company, which uses a standard cost system, budgeted $800,000 of fixed overhead when 50,000 machine hours were anticipated. Other data for the period were: 
	Actual units produced: 10,600
	Actual machine hours worked: 51,800
	Actual variable overhead incurred: $475,000
	Actual fixed overhead incurred: $790,100
	Standard variable overhead rate per machine hour: $8.50
	Standard production time per unit: 5 hours

-Sigmo's variable-overhead efficiency variance is:
A) $10,200U.
B) $10,200F.
C) $15,300U.
D) $15,300F.
E) None of the answers is correct.

Accepted Answer

The variable-overhead efficiency variance is calculated as the difference between the actual hours worked and the standard hours allowed for the actual output, multiplied by the standard variable overhead rate per machine hour. The standard hours allowed for the actual output (10,600 units * 5 hours per unit) = 53,000 hours. The actual hours worked were 51,800 hours. Therefore, the company worked 1,200 hours less than the standard (53,000 - 51,800 = 1,200 hours). Multiplying this difference by the standard variable overhead rate per machine hour ($8.50) gives a variance of $10,200 ($8.50 * 1,200 hours) in favor of the company, hence a favorable variance.

Question 5

The City Symphony Orchestra presents a series of concerts throughout the year. Budgeted fixed costs total $300,000 for the concert season; variable costs are expected to average $5 per patron. The orchestra uses flexible budgeting.
Required: 
A. Prepare a flexible budget that shows the expected costs of 8,000, 8,500, and 9,000 patrons.
B. Construct the orchestra's flexible budget formula.
C. Assume that 8,700 patrons attended concerts during the year just ended, and actual costs were: variable, $42,000; fixed, $307,500. Evaluate the orchestra's financial performance by computing variances for variable costs and fixed costs.

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Question 6

When actual variable cost per unit equals standard variable cost per unit, the difference between actual and budgeted contribution margin is explained by a combination of which two variances?
A) The sales-volume variance and the fixed-overhead volume variance.
B) The sales-volume variance and the fixed-overhead budget variance.
C) The sales-price variance and the fixed-overhead volume variance.
D) The sales-price variance and sales-volume variance.
E) The sales-price variance and fixed-overhead budget variance.

Accepted Answer

When actual variable cost per unit equals standard variable cost per unit, it means there are no variances due to variable costs. Therefore, differences in contribution margin would be due to differences in sales revenue, which can be explained by the sales-price variance (difference in actual vs. expected selling price) and the sales-volume variance (difference in actual vs. expected quantity sold).

Question 7

In an effort to reduce record-keeping, companies that sell perishable goods will often enter the standard cost of direct material, direct labor, and manufacturing overhead directly into what account?
A) Work-in-Process Inventory.
B) Finished-Goods Inventory.
C) Cost of Goods Sold.
D) Cost of Goods Manufactured.
E) Sales Revenue.

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Question 8

Use the following information to answer the following Questions
Forward Venture Company, which uses a standard cost system, budgeted $600,000 of fixed overhead when 40,000 machine hours were anticipated. Other data for the period were: 
	Actual units produced: 10,000
	Standard production time per unit: 3.9 machine hours
	Fixed overhead incurred: $620,000
	Actual machine hours worked: 42,000

-Forward Venture Company's fixed-overhead budget variance is:
A) $10,000 favorable.
B) $15,000 favorable.
C) $15,000 unfavorable.
D) $20,000 favorable.
E) $20,000 unfavorable.

Accepted Answer

The fixed overhead budget variance is calculated as the difference between the actual fixed overhead incurred and the budgeted fixed overhead. The budgeted fixed overhead was $600,000, and the actual fixed overhead incurred was $620,000. Therefore, the variance is $620,000 - $600,000 = $20,000 unfavorable.

Question 9

The sales-volume variance equals:
A) (actual sales volume - budgeted sales volume) * actual sales price.
B) (actual sales volume - budgeted sales volume) * actual contribution margin.
C) (actual sales volume - budgeted sales volume) *budgeted sales price.
D) (actual sales price - budgeted sales price) *budgeted sales volume.
E) (actual sales price - budgeted sales price)*fixed-overhead volume variance.

Accepted Answer

The sales-volume variance is calculated by taking the difference between the actual sales volume and the budgeted sales volume, and then multiplying that difference by the budgeted sales price. This measures the impact of the difference in the quantity sold from the budgeted quantity, valued at the budgeted price per unit.

Question 10

Super Fast Insurance uses budgets to forecast and monitor overhead throughout the organization. The following budget formula relates to the processing of applications for automobile policies in any given month:
Total overhead = $6.80APH + $13,500
where APH = application processing hours
The typical automobile insurance policy has an estimated processing time of 1.5 hours.
During June, management originally anticipated that 320 applications would be processed. Activity was lower than expected, with only 280 applications completed by month-end, and the following costs were incurred: variable overhead, $2,950; fixed overhead, $13,700.
Required: 
A. What volume level of applications and processing hours would have been used if Super Fast had constructed a static budget?
B. Construct a flexible budget that shows the expected monthly variable and fixed overhead costs of processing 270, 300, and 330 applications.
C. From a cost perspective, did the company perform better or worse than anticipated in June? Show calculations to support your answer.

Accepted Answer

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Question 11

Use the following information to answer the following Questions
Sigmo Company, which uses a standard cost system, budgeted $800,000 of fixed overhead when 50,000 machine hours were anticipated. Other data for the period were: 
	Actual units produced: 10,600
	Actual machine hours worked: 51,800
	Actual variable overhead incurred: $475,000
	Actual fixed overhead incurred: $790,100
	Standard variable overhead rate per machine hour: $8.50
	Standard production time per unit: 5 hours

-Sigmo's fixed-overhead budget variance is:
A) $9,900U.
B) $9,900F.
C) $28,800U.
D) $28,800F.
E) None of the answers is correct.

Accepted Answer

The fixed-overhead budget variance is calculated as the difference between the budgeted fixed overhead and the actual fixed overhead incurred. In this case, it is $800,000 (budgeted) - $790,100 (actual) = $9,900 favorable (F), because the actual fixed overhead was less than what was budgeted.

Question 12

The International Students Club at Eastern University recently held an end-of-year dinner and swim party, which the treasurer declared to be a financial success. "Attendance was an all-time high, 60 members, and the results were much better than expected." The treasurer presented the following performance report at the executive board's June meeting:
  
The budget was based on the assumptions that follow.
· Forty-five members would attend at a fixed ticket price of $35.
· Food and beverage costs were anticipated to be $15 and $7 per attendee, respectively.
· A disc jockey was hired via a written contract at $50 per hour. 
Required: 
A. Briefly evaluate the meaningfulness of the treasurer's performance report.
B. Prepare a performance report by using flexible budgeting and determine whether the end-of-year party was as successful as originally reported.
C. Based on your answer in requirement "B," present a possible explanation for the variances in revenue, food costs, beverage costs, and the disc jockey.

Accepted Answer

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Question 13

Use the following information to answer the following Questions
The Step Company has the following information for the year just ended:

-The Step Company's sales-price variance is:
A) $3,000 unfavorable.
B) $7,000 unfavorable.
C) $7,000 favorable.
D) $7,500 unfavorable.
E) $7,500 favorable.

Accepted Answer

The sales-price variance is calculated as the difference between the actual selling price and the budgeted selling price, multiplied by the actual quantity sold. The $7,000 favorable variance indicates that the actual selling price was higher than the budgeted price, resulting in increased revenue.

Question 14

Pizzazz Pizza Inc.’s activity based flexible budget is as follows:

Pizzazz’s activity for September is as follows:
Required:
1. Determine the flexible budgeted cost for each of the following: 
 
a. Indirect material 
b. Utilities 
c. Inspection 
d. Test kitchen 
e. Material handling 
f. Total overhead cost

2.Compute the variance for setup cost during the month, assuming that the actual setup cost was $3,000: Using the activity-based flexible budget.

Accepted Answer

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Question 15

Prevlar's budget for variable overhead and fixed overhead revealed the following information for an anticipated 40,000 hours of activity: variable overhead, $348,000; fixed overhead, $600,000.
The company actually worked 43,000 hours and actual overhead incurred was: variable, $365,500; fixed, $608,000.
Required: 
A. Compute the company's total cost variance for variable overhead and fixed overhead if the firm uses a static budget to help assess performance.
B. Repeat part "A" assuming the use of a flexible budget.
C. Which of the two budgets (static or flexible) is preferred for performance evaluations? Why?

Accepted Answer

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Question 16

Use the following information to answer the following Questions
Forward Venture Company, which uses a standard cost system, budgeted $600,000 of fixed overhead when 40,000 machine hours were anticipated. Other data for the period were: 
	Actual units produced: 10,000
	Standard production time per unit: 3.9 machine hours
	Fixed overhead incurred: $620,000
	Actual machine hours worked: 42,000

-Forward Venture Company's fixed-overhead volume variance is:
A) $10,000 favorable.
B) $15,000 favorable.
C) $15,000 unfavorable.
D) $20,000 favorable.
E) $20,000 unfavorable.

Accepted Answer

Fixed-overhead volume variance = (Budgeted fixed overhead - Actual fixed overhead)= ($600,000 - $620,000)= $15,000 unfavorable

Question 17

Use the following information to answer Questions 
Match Point, Inc. has the following overhead standards:
Variable overhead: 4 hours at $8 per hour
Fixed overhead: 4 hours at $10 per hour
The standards were based on a planned activity of 20,000 machine hours when 5,000 units were scheduled for production. Actual data follow.
Variable overhead incurred: $167,750
Fixed overhead incurred: $210,000
Machine hours worked: 19,800
Actual units produced: 5,100

-The amount of variable overhead that Match Point applied to production is:
A) $158,400.
B) $160,000.
C) $163,200.
D) $167,750.
E) None of the answers is correct.

Accepted Answer

The amount of variable overhead applied to production is calculated based on the standard cost times the actual activity. The standard variable overhead rate is $8 per hour, and the actual machine hours worked were 19,800. Therefore, the applied variable overhead is 19,800 hours * $8/hour = $158,400. However, since none of the provided choices matches this calculation and the question specifically asks for the amount applied (not incurred), it seems there might be a misunderstanding in the calculation or the interpretation of the question. Given the provided choices and the standard calculation method, none of the answers match the correct calculation based on the given data. However, if we consider the standard hours for the actual production (5,100 units * 4 hours/unit = 20,400 standard hours) and apply the variable overhead rate ($8 per hour), we get 20,400 * $8 = $163,200, which matches choice C, assuming the calculation is based on standard hours for actual production rather than actual hours worked.

Question 18

Solution Enterprises incurred $828,000 of fixed overhead during the period. During that same period, the company applied $845,000 of fixed overhead to production and reported an unfavorable budget variance of $41,000. How much was Solution's budgeted fixed overhead?
A) $787,000.
B) $804,000.
C) $869,000.
D) $886,000.
E) Not enough information to judge.

Accepted Answer

Budgeted fixed overhead = Applied fixed overhead + Unfavorable budget variance= $845,000 + $41,000= $886,000

Question 19

Use the following information to answer the following Questions
The Step Company has the following information for the year just ended:

-The Step Company's sales-volume variance is:
A) $3,000 unfavorable.
B) $4,000 unfavorable.
C) $4,400 favorable.
D) $10,000 unfavorable.
E) $10,000 favorable.

Accepted Answer

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Question 20

Practical Products plans to manufacture 8,000 units over the next month at the following costs: direct materials, $480,000; direct labor, $60,000; variable manufacturing overhead, $150,000; straight-line depreciation, $24,000, and other fixed manufacturing overhead, $272,000. The result is total budgeted cost of $990,000.
Shortly after the conclusion of the month, Practical Products reported the following costs:
  
Supervisor, Calvin Moore and his crews turned out 7,200 units-a remarkable feat given that the company's manufacturing plant was closed for several days because of blizzards and impassable roads. Moore was especially pleased with the fact that total actual costs were less than budget. He was thus very surprised when Practical's general manager expressed unhappiness about the plant's financial performance. 
Required: 
A. Prepare a performance report that fairly compares budgeted and actual costs for the period just ended-namely, the report that the general manager likely used when assessing performance.
B. Should Moore be praised for "having met the budget" or is the general manager's unhappiness justified? Explain, citing any apparent problems for the firm.

Accepted Answer

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Quiz 11: Flexible Budgeting and Analysis of Overhead Costs

What is the most common treatment of the fixed-overhead budget variance at the end of the accounting period?

When actual variable cost per unit equals standard variable cost per unit, the difference between actual and budgeted contribution margin is explained by a combination of which two variances?

In an effort to reduce record-keeping, companies that sell perishable goods will often enter the standard cost of direct material, direct labor, and manufacturing overhead directly into what account?

The sales-volume variance equals:

Use the following information to answer the following Questions The Step Company has the following information for the year just ended: -The Step Company's sales-price variance is:

Solution Enterprises incurred $828,000 of fixed overhead during the period. During that same period, the company applied $845,000 of fixed overhead to production and reported an unfavorable budget variance of $41,000. How much was Solution's budgeted fixed overhead?

Use the following information to answer the following Questions The Step Company has the following information for the year just ended: -The Step Company's sales-volume variance is: