Question 1

When distribution costs are high, managers can use standard costing to analyze variances for spending and efficiency variances.

Accepted Answer

Standard costing is a valuable tool for analyzing variances related to spending and efficiency in order to control costs. This can be particularly useful when distribution costs are high, as it allows managers to identify the reasons behind the increased costs and take corrective action to improve efficiency and reduce expenses.

Question 2

One possible reason for unfavorable variable overhead efficiency variance for materials handling is ________.

Accepted Answer

The answer of One possible reason for unfavorable variable overhead...

Question 3

Bristol Fabricators, Inc., produces air purifiers in batches. To manufacture a batch of the purifiers, Bristol Fabricator, Inc., must set up the machines and assembly line tooling. Setup costs are batch-level costs because they are associated with batches rather than individual units of products. A separate Setup Department is responsible for setting up machines and tooling for different models of the air purifiers.
Setup overhead costs consist of some costs that are variable and some costs that are fixed with respect to the number of setup-hours. The following information pertains to June 2015:

Calculate the spending variance for variable overhead setup costs. (Round all intermediary calculations two decimal places and your final answer to the nearest whole number.)

Accepted Answer

(13,000 / 410) × 5 × ($44 - $50) = $951 (U)

Question 4

Bristol Fabricators, Inc., produces air purifiers in batches. To manufacture a batch of the purifiers, Bristol Fabricators, Inc, Inc., must set up the machines and assembly line tooling. Setup costs are batch-level costs because they are associated with batches rather than individual units of products. A separate Setup Department is responsible for setting up machines and tooling for different models of the air purifiers.
Setup overhead costs consist of some costs that are variable and some costs that are fixed with respect to the number of setup-hours. The following information pertains to June 2015:

Calculate the efficiency variance for variable overhead setup costs. (Round all intermediary calculations two decimal places and your final answer to the nearest whole number.)

Accepted Answer

{[(12,000 / 390) × 5] - [(12,000 / 450) × 6] } × $51 = $315 (F)

Question 5

Managers can use variance analysis to make decisions about the mix of products to make.

Accepted Answer

Variance analysis helps managers understand the differences between actual and expected results, and can be useful in identifying which products or product lines are most profitable or which ones are in need of improvement. This information can help inform decisions about which products to prioritize or discontinue.

Question 6

Possible reasons for the larger actual materials-handling labor-hours per batch include the possibility of inefficient layout of production facilities.

Accepted Answer

Inefficient layout of production facilities can lead to longer materials-handling labor-hours per batch, which explains the larger actual labor-hours observed.

Question 7

Bristol Fabricators, Inc., produces air purifiers in batches. To manufacture a batch of the purifiers, Bristol Fabricators, Inc., must set up the machines and assembly line tooling. Setup costs are batch-level costs because they are associated with batches rather than individual units of products. A separate Setup Department is responsible for setting up machines and tooling for different models of the air purifiers.
Setup overhead costs consist of some costs that are variable and some costs that are fixed with respect to the number of setup-hours. The following information pertains to June 2015:

Calculate the production-volume variance for fixed overhead setup costs. (Round all intermediary calculations to two decimal places and your final answer to the nearest whole number.)

Accepted Answer

Normal setup hours = (14,100 / 420) × 8 = 268.56 hours
OH rate = $36,300 / 268.56 = $135.17 per setup hour
[(13,000 / 420) × 8 × $135.17] - $36,300 = $2,832 unfavorable

Question 8

River Falls Company uses a flexible budget for its indirect manufacturing costs. For 2017, the company anticipated that it would produce 27,000 units with 4,800 machine-hours and 8,000 employee days. The costs and cost drivers were to be as follows:
  
During the year, the company processed 26,500 units, worked 8,200 employee days, and had 4,850 machine-hours. The actual costs for 2017 were:
  
Required:
a.Prepare the static budget using the overhead items above and then compute the static-budget variances.
b.Prepare the flexible budget using the overhead items above and then compute the flexible-budget variances.

Accepted Answer

The answer of River Falls Company uses a flexible budget...

Question 9

Bristol Fabricators, Inc., produces air purifiers in batches. To manufacture a batch of the purifiers, Bristol Fabricators, Inc., must set up the machines and assembly line tooling. Setup costs are batch-level costs because they are associated with batches rather than individual units of products. A separate Setup Department is responsible for setting up machines and tooling for different models of the air purifiers.
Setup overhead costs consist of some costs that are variable and some costs that are fixed with respect to the number of setup-hours. The following information pertains to June 2015:

Calculate the spending variance for fixed overhead setup costs.

Accepted Answer

The answer of Bristol Fabricators, Inc., produces air purifiers in...

Question 10

Explain how service-sector companies can benefit from variance analysis.

Accepted Answer

The answer of Explain how service-sector companies can benefit from...

Question 11

The fixed setup overhead flexible-budget variance is calculated as actual costs - flexible-budget variance.

Accepted Answer

The answer of The fixed setup overhead flexible-budget variance is...

Question 12

Casey Corporation produces a special line of basketball hoops. Casey Corporation produces the hoops in batches. To manufacture a batch of the basketball hoops, Casey Corporation must set up the machines and molds. Setup costs are batch-level costs because they are associated with batches rather than individual units of products. A separate Setup Department is responsible for setting up machines and molds for different styles of basketball hoops.
Setup overhead costs consist of some costs that are variable and some costs that are fixed with respect to the number of setup-hours. The following information pertains to January 2005.
  
Required:
a.Calculate the efficiency variance for variable overhead setup costs.
b.Calculate the spending variance for variable overhead setup costs.
c.Calculate the flexible-budget variance for variable overhead setup costs.
d.Calculate the spending variance for fixed overhead setup costs.
e.Calculate the production-volume variance for fixed overhead setup costs.

Accepted Answer

The answer of Casey Corporation produces a special line of...

Question 13

An unfavorable price variance for materials-handling labor indicates that the actual cost per materials-handling labor-hour is less than the budgeted cost per materials-handling labor-hour.

Accepted Answer

An unfavorable price variance for materials-handling labor indicates that the actual cost per materials-handling labor-hour exceeds the budgeted cost per materials-handling labor-hour.

Question 14

Raposa, Inc., produces a special line of plastic toy racing cars. Raposa, Inc., produces the cars in batches. To manufacture a batch of the cars, Raposa, Inc., must set up the machines and molds. Setup costs are batch-level costs because they are associated with batches rather than individual units of products. A separate Setup Department is responsible for setting up machines and molds for different styles of car.
Setup overhead costs consist of some costs that are variable and some costs that are fixed with respect to the number of setup-hours. The following information pertains to June 2015:

Calculate the production-volume variance for fixed overhead setup costs. (Round all intermediary calculations to two decimal places and your final answer to the nearest whole number.)

Accepted Answer

Normal setup hours = (11,850 / 230) × 7 = 360.64 hours
OH rate = $16,286 / 360.64 = $45.16 per setup hour
[(15,150 / 230) × 7 × $45.16] - $16,286 = $4,537 favorable

Question 15

Service-sector companies have no use of variance analysis as only few costs can be traced to their outputs in a cost effective way.

Accepted Answer

Even though service-sector companies have only few costs can be traced to their outputs in a cost effective way, service-sector companies can use variance analysis to good effect as most of their costs are fixed overhead costs.

Question 16

Bristol Fabricators, Inc., produces air purifiers in batches. To manufacture a batch of the purifiers, Bristol Fabricators, Inc., must set up the machines and assembly line tooling. Setup costs are batch-level costs because they are associated with batches rather than individual units of products. A separate Setup Department is responsible for setting up machines and tooling for different models of the air purifiers.
Setup overhead costs consist of some costs that are variable and some costs that are fixed with respect to the number of setup-hours. The following information pertains to June 2015:

Calculate the flexible-budget variance for variable overhead setup costs. (Round all intermediary calculations two decimal places and your final answer to the nearest whole number.)

Accepted Answer

Price variance: ((11,000 / 405) x 7.5) x (53 - 47) = 1,222 (U)
Efficiency variance: (((11,000 / 430) x 8) - ((11,000 / 405) x 7.5)) x 47 = 44 (F)
Flexible-budget variance: 44 (F) - 1,222 (U) = 1,178 (U)

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