Question 1

Fixed overhead costs for March for a factory were Salaries of $44,000, depreciation of $10,000, and property taxes of $4,000. Which of the following journal entries would be correct?
A) 
B) 
C) 
D)

Accepted Answer

The answer of Fixed overhead costs for March for a...

Question 2

Define variable overhead spending variance. Briefly explain why a favorable variable overhead spending variance may not always be desirable.

Accepted Answer

The answer of Define variable overhead spending variance. Briefly explain...

Question 3

An unfavorable fixed overhead spending variance indicates that ________.
A) there was more excess capacity than planned
B) the price of fixed overhead items cost more than budgeted
C) the fixed overhead cost-allocation base was not used efficiently
D) the denominator level was more than planned

Accepted Answer

An unfavorable fixed overhead spending variance occurs when the actual fixed overhead costs are higher than the budgeted or standard fixed overhead costs. This can happen if the price of items that contribute to fixed overhead costs more than was budgeted for.

Question 4

Which of the following journal entries is used to record fixed overhead costs allocated?
A) Fixed Overhead Allocated Work-in-Process Control
B) Work-in-Process Control Fixed Overhead Allocated
C) Fixed Overhead Control Work-in-Process Control
D) Fixed Overhead Allocated Fixed Overhead Control

Accepted Answer

The journal entry to record fixed overhead costs allocated is to debit the Work-in-Process Control account and credit the Fixed Overhead Allocated account. Among the given choices, only option B has the correct account titles and the correct order of debit and credit.

Question 5

When machine-hours are used as an overhead cost-allocation base and annual leasing costs for equipment unexpectedly increase, the most likely result would be to report a(n) ________.
A) unfavorable variable overhead spending variance
B) favorable variable overhead efficiency variance
C) unfavorable fixed overhead flexible-budget variance
D) favorable production-volume variance

Accepted Answer

When leasing costs for equipment unexpectedly increase, it is an increase in fixed overhead costs. Since machine-hours are used as the overhead cost-allocation base, this would lead to an unfavorable fixed overhead flexible-budget variance.

Question 6

Davidson Corporation manufactured 58,500 units during September. The following fixed overhead data relates to September:

What is the amount of fixed overhead allocated to production?
A) $171,990
B) $170,220
C) $170,520
D) $58,500

Accepted Answer

Fixed overhead cost per machine hour = $170,520 ÷ 3,480 = $49
Machine hours per unit = 3,480 ÷ 58,000 = 0.06
Fixed overhead cost per unit = $49 × 0.06 = $2.94
Fixed overhead allocated = 58,500 × $2.94 = $171,990

Question 7

Hockey Accessories Corporation manufactured 22,400 duffle bags during March. The following fixed overhead data pertain to March:

What is the flexible-budget amount?
A) $451,700
B) $472,321
C) $460,000
D) $448,000

Accepted Answer

$460,000, the same lump sum as the static budget

Question 8

Hockey Accessories Corporation manufactured 23,000 duffle bags during March. The following fixed overhead data pertain to March:

What is the amount of fixed overhead allocated to production?
A) $621,000
B) $634,500
C) $639,711
D) $612,779

Accepted Answer

Fixed overhead cost per machine hour = $634,500 ÷ 14,100 = $45
Machine hours per unit = 14,100 ÷ 23,500 = 0.6
Fixed overhead cost per unit = $45 × 0.6 = $27.00
Fixed overhead allocated = 23,000 × $27.00 = $621,000

Question 9

Which of the following is the correct mathematical expression to calculate the fixed overhead spending variance?
A) Static-budget amount - Flexible-budget amount
B) Actual costs incurred - Flexible-budget amount
C) Static-budget amount - Fixed overhead allocated for actual output
D) Flexible-budget amount - Fixed overhead allocated for actual output

Accepted Answer

The fixed overhead spending variance is calculated by subtracting the flexible-budget amount from the actual costs incurred. This variance shows whether the actual fixed overhead costs were higher or lower than what was expected (flexible budget) for the actual level of production.

Question 10

Castleton Corporation manufactured 36,500 units during March. The following fixed overhead data relates to March:

What is the fixed overhead spending variance?
A) $2,635.00 unfavorable
B) $8,260.00 favorable
C) $8,260.00 unfavorable
D) $2,635.00 favorable

Accepted Answer

Fixed overhead spending variance = $139,510 actual costs - $131,250 budgeted cost = $8,260.00 unfavorable

Question 11

Castleton Corporation manufactured 41,000 units during March. The following fixed overhead data relates to March:

What is the amount of fixed overhead allocated to production?
A) $128,210.13
B) $117,000.00
C) $125,500.00
D) $123,000.00

Accepted Answer

Fixed overhead cost per machine hour = $117,000 ÷ 5,850 = $20
Machine hours per unit = 5,850 ÷ 39,000 = 0.15
Fixed overhead cost per unit = $20 × 0.15 = $3.00
Fixed overhead allocated = 41,000 × $3.00 = $123,000.00

Question 12

The amount reported for fixed overhead on the static budget is also reported ________.
A) as actual fixed costs
B) as allocated fixed overhead costs
C) as flexible budget costs
D) as committed variable costs

Accepted Answer

The answer of The amount reported for fixed overhead on...

Question 13

Advanced Manufacturing Company reported:

To isolate these variances at the end of the accounting period, John would debit Fixed Manufacturing Overhead Allocated for ________.
A) $411,000
B) $425,000
C) $430,000
D) $435,000

Accepted Answer

$430,000 + $19,000 - $24,000 = $425,000

Question 14

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

Accepted Answer

The answer of Can the variable overhead efficiency variance
a.be computed...

Question 15

Hockey Accessories Corporation manufactured 21,400 duffle bags during March. The following fixed overhead data pertain to March:

What is the amount of fixed overhead spending variance?
A) $8,500 unfavorable
B) $3,460 favorable
C) $3,460 unfavorable
D) $8,500 favorable

Accepted Answer

Fixed overhead spending variance = $176,300 actual costs - $184,800 budgeted cost = $8,500 favorable

Question 16

For fixed manufacturing overhead, there is no ________.
A) spending variance
B) efficiency variance
C) flexible-budget variance
D) production-volume variance

Accepted Answer

For fixed manufacturing overhead, there is no efficiency variance because efficiency variances are related to how efficiently a company uses its variable inputs. Fixed manufacturing overhead costs do not vary with the level of production or efficiency in the use of inputs.

Question 17

Davidson Corporation manufactured 53,400 units during September. The following fixed overhead data relates to September:

What is the fixed overhead spending variance?
A) $1,056 unfavorable
B) $400 favorable
C) $400 unfavorable
D) $1,056 favorable

Accepted Answer

The answer of Davidson Corporation manufactured 53,400 units during September....

Question 18

Which of the following is the correct mathematical expression to calculate the fixed overhead production-volume variance?
A) static-budget amount - flexible-budget amount
B) flexible-budget amount - actual costs incurred
C) actual costs incurred - fixed overhead allocated for actual output
D) budgeted fixed overhead - fixed overhead allocated for actual output

Accepted Answer

The fixed overhead production-volume variance is the difference between the budgeted fixed overhead and the fixed overhead allocated for actual output, which is D. Option A is the formula for the static-budget variance, Option B is the formula for the flexible-budget variance, and Option C is the formula for the fixed overhead spending variance.

Question 19

Castleton Corporation manufactured 36,000 units during March. The following fixed overhead data relates to March:

What is the flexible-budget amount?
A) $170,379.31
B) $156,400.00
C) $165,600.00
D) $164,700.00

Accepted Answer

$156,400, the same lump sum as the static budget

Question 20

Davidson Corporation manufactured 52,400 units during September. The following fixed overhead data relates to September:

What is the flexible-budget amount?
A) $108,900
B) $110,040
C) $109,200
D) $52,400

Accepted Answer

$160,080, the same lump sum as the static budget

Quiz 8: Flexible Budgets, Overhead Cost Variances, and Management Control

Fixed overhead costs for March for a factory were Salaries of $44,000, depreciation of $10,000, and property taxes of $4,000. Which of the following journal entries would be correct?

Define variable overhead spending variance. Briefly explain why a favorable variable overhead spending variance may not always be desirable.

An unfavorable fixed overhead spending variance indicates that ________.

Which of the following journal entries is used to record fixed overhead costs allocated?

When machine-hours are used as an overhead cost-allocation base and annual leasing costs for equipment unexpectedly increase, the most likely result would be to report a(n) ________.

Davidson Corporation manufactured 58,500 units during September. The following fixed overhead data relates to September: What is the amount of fixed overhead allocated to production?

Hockey Accessories Corporation manufactured 22,400 duffle bags during March. The following fixed overhead data pertain to March: What is the flexible-budget amount?

Hockey Accessories Corporation manufactured 23,000 duffle bags during March. The following fixed overhead data pertain to March: What is the amount of fixed overhead allocated to production?

Which of the following is the correct mathematical expression to calculate the fixed overhead spending variance?

Castleton Corporation manufactured 36,500 units during March. The following fixed overhead data relates to March: What is the fixed overhead spending variance?

Castleton Corporation manufactured 41,000 units during March. The following fixed overhead data relates to March: What is the amount of fixed overhead allocated to production?

The amount reported for fixed overhead on the static budget is also reported ________.

Advanced Manufacturing Company reported: To isolate these variances at the end of the accounting period, John would debit Fixed Manufacturing Overhead Allocated for ________.

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

Hockey Accessories Corporation manufactured 21,400 duffle bags during March. The following fixed overhead data pertain to March: What is the amount of fixed overhead spending variance?

For fixed manufacturing overhead, there is no ________.

Davidson Corporation manufactured 53,400 units during September. The following fixed overhead data relates to September: What is the fixed overhead spending variance?

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

Castleton Corporation manufactured 36,000 units during March. The following fixed overhead data relates to March: What is the flexible-budget amount?

Davidson Corporation manufactured 52,400 units during September. The following fixed overhead data relates to September: What is the flexible-budget amount?