Question 1

Herman Company,which applies overhead to production on the basis of machine hours,reported the following data for the period just ended:
Actual units produced: 13,000
Actual fixed overhead incurred: $742,000
Standard fixed overhead rate: $15 per hour
Budgeted fixed overhead: $720,000
Planned level of machine-hour activity: 48,000
If Herman estimates four hours to manufacture a completed unit,the company's fixed-overhead budget variance would be:

Accepted Answer

The fixed-overhead budget variance is calculated as the difference between the actual fixed overhead incurred and the budgeted fixed overhead, using the actual level of machine-hour activity:

Actual machine hours = Actual units produced × Standard hours per unit
Actual machine hours = 13,000 units × 4 hours per unit
Actual machine hours = 52,000 hours

Fixed-overhead budget variance = Actual fixed overhead - Budgeted fixed overhead
Fixed-overhead budget variance = $742,000 - $720,000
Fixed-overhead budget variance = $22,000 unfavorable

Question 2

If Rowe prepared an overhead cost performance report,which of these overhead variances is likely to be excluded from the report?

Accepted Answer

The fixed-overhead volume variance is excluded from the overhead cost performance report because it is not controllable by the management. The variable-overhead spending variance and efficiency variance and the fixed-overhead budget variance are included in the report as they are controllable by management. Therefore, choice D is the best option.

Question 3

Luke,Inc.has a standard variable overhead rate of $5 per machine hour,with each completed unit expected to take three machine hours to produce.A review of the company's accounting records found the following:
Actual production: 19,500 units
Variable-overhead efficiency variance: $9,000U
Variable-overhead spending variance: $21,000F
What was Luke's actual variable overhead during the period?

Accepted Answer

Variable-overhead efficiency variance = Actual hours used - Standard hours allowed
$9,000U = Actual hours used - (19,500 x 3)
Actual hours used = 58,500 + 9,000 = 67,500

Variable-overhead spending variance = Actual overhead - (Standard overhead rate x Actual hours used)
$21,000F = Actual overhead - ($5 x 67,500)
Actual overhead = $280,500

Question 4

Abbott's variable-overhead spending variance is:

Accepted Answer

Variable-overhead spending variance = Actual variable overhead - Budgeted variable overhead= $127,000 - $100,000= $27,000 favorable

Question 5

Benson's fixed-overhead volume variance is:

Accepted Answer

The fixed-overhead volume variance is calculated by multiplying the budgeted fixed overhead rate per unit by the difference between the budgeted production volume and the actual production volume.

Fixed overhead volume variance = (Budgeted fixed overhead rate per unit x (Budgeted production volume - Actual production volume))

In this case, the budgeted fixed overhead rate per unit is $5 ($50,000/10,000 units). The budgeted production volume is 10,000 units and the actual production volume is 8,000 units.

Fixed overhead volume variance = ($5 x (10,000 - 8,000)) = $10,000 unfavorable.

Therefore, the correct answer is C.

Question 6

Robert Company,which applies overhead to production on the basis of machine hours,reported the following data for the period just ended:
Actual units produced: 12,000
Actual variable overhead incurred: $77,700
Actual machine hours worked: 18,800
Standard variable overhead cost per machine hour: $4.50
If Robert estimates 1.5 hours to manufacture a completed unit,the company's variable-overhead spending variance is:

Accepted Answer

The answer of Robert Company,which applies overhead to production on...

Question 7

Benson's fixed-overhead budget variance is:

Accepted Answer

The answer of Benson's fixed-overhead budget variance is:
...

Question 8

Abbott's variable-overhead efficiency variance is:

Accepted Answer

The answer of Abbott's variable-overhead efficiency variance is:
...

Question 9

Darling Company,which applies overhead to production on the basis of machine hours,reported the following data for the period just ended:
Actual units produced: 12,000
Actual fixed overhead incurred: $730,000
Actual machine hours worked: 60,000
Budgeted fixed overhead: $720,000
Planned level of machine-hour activity: 50,000
If Darling estimates four hours to manufacture a completed unit,the company's standard fixed overhead rate per machine hour would be:

Accepted Answer

To calculate the standard fixed overhead rate per machine hour, we need to divide the budgeted fixed overhead by the planned level of machine-hour activity.

Standard fixed overhead rate per machine hour = Budgeted fixed overhead / Planned level of machine-hour activity
= $720,000 / 50,000 machine hours
= $14.40 per machine hour.

Therefore, the answer is choice B.

Question 10

Atlanta 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 Atlanta's budgeted fixed overhead?

Accepted Answer

The budgeted fixed overhead is calculated as follows:Budgeted fixed overhead = Applied fixed overhead + Unfavorable budget varianceBudgeted fixed overhead = $845,000 + $41,000Budgeted fixed overhead = $886,000

Question 11

A fixed-overhead volume variance would normally arise when:

Accepted Answer

A fixed-overhead volume variance occurs when the actual units of production differ from the budgeted units of production, resulting in a difference between the applied fixed overhead and the actual fixed overhead. Therefore, if the budgeted fixed overhead is less than or greater than the applied fixed overhead, it would result in a fixed-overhead volume variance.

Option A is incorrect because actual hours of activity coinciding with actual units of production would result in no variance.

Option C is incorrect because a fixed-overhead budget variance occurs when the actual fixed overhead differs from the budgeted fixed overhead.

Option D is incorrect because it refers to an overapplied fixed overhead variance, which is not necessarily related to the fixed-overhead volume variance.

Option E is incorrect because it refers to a variable-overhead efficiency variance, which is a separate variance from the fixed-overhead volume variance.

Question 12

Rich's fixed-overhead budget variance is:

Accepted Answer

The answer of Rich's fixed-overhead budget variance is:
...

Question 13

Rich's variable-overhead efficiency variance is:

Accepted Answer

Variable-overhead efficiency variance = Standard variable-overhead rate * (Actual hours - Standard hours)= $1.50 * (10,000 - 6,800)= $1.50 * 3,200= $10,200F

Question 14

Which variance is commonly associated with measuring the cost of under- or over-utilization of plant capacity?

Accepted Answer

The fixed-overhead volume variance is commonly associated with measuring the cost of under- or over-utilization of plant capacity. This variance is calculated by multiplying the standard fixed overhead rate per unit by the difference between the budgeted level of production and the actual level of production.

Question 15

The difference between budgeted fixed manufacturing overhead and the fixed overhead applied to production is the:

Accepted Answer

The difference between budgeted fixed manufacturing overhead and the fixed overhead applied to production is known as the volume variance. This variance arises because the actual production volume differs from the expected production volume used to allocate fixed overhead costs.

Question 16

Martin Company,which applies overhead to production on the basis of machine hours,reported the following data for the period just ended:
Actual units produced: 9,000
Actual variable overhead incurred: $54,400
Actual machine hours worked: 16,000
Standard variable overhead cost per machine hour: $3.50
If Martin estimates two hours to manufacture a completed unit,the company's variable-overhead efficiency variance is:

Accepted Answer

The answer of Martin Company,which applies overhead to production on...

Question 17

If Rowe desires to analyze variances that arose primarily from managers' expenditures in excess of anticipated amounts,the company should focus on variances that total:

Accepted Answer

The highest possible variance total listed is $120,000U, which is more than the other options listed. This indicates that there were significant deviations from anticipated expenditures by managers, making it the best option for analysis.

Question 18

Enberg Company,which applies overhead to production on the basis of machine hours,reported the following data for the period just ended:
Actual units produced: 14,800
Actual fixed overhead incurred: $791,000
Standard fixed overhead rate: $13 per hour
Budgeted fixed overhead: $780,000
Planned level of machine-hour activity: 60,000
If Enberg estimates four hours to manufacture a completed unit,the company's fixed-overhead volume variance would be:

Accepted Answer

To calculate Fixed Overhead Volume Variance, we use the following formula:

Fixed Overhead Volume Variance = (Budgeted Fixed Overhead - Applied Fixed Overhead)

Applied Fixed Overhead = Actual Machine Hours * Standard Fixed Overhead Rate

Let's calculate the Applied Fixed Overhead first:

Actual machine hours = Actual units produced * Standard hours per unit
Actual machine hours = 14,800 units * 4 hours
Actual machine hours = 59,200 hours

Applied Fixed Overhead = Actual Machine Hours * Standard Fixed Overhead Rate
Applied Fixed Overhead = 59,200 hours * $13 per hour
Applied Fixed Overhead = $767,600

Now, let's calculate Fixed Overhead Volume Variance:

Fixed Overhead Volume Variance = (Budgeted Fixed Overhead - Applied Fixed Overhead) 
Fixed Overhead Volume Variance = ($780,000 - $767,600) 
Fixed Overhead Volume Variance = $12,400 unfavorable

Therefore, the correct answer is B) $10,400 unfavorable.

Question 19

Bushnell,Inc.has a standard variable overhead rate of $4 per machine hour,with each completed unit expected to take three machine hours to produce.A review of the company's accounting records found the following:
Actual variable overhead: $210,000
Variable-overhead efficiency variance: $18,000U
Variable-overhead spending variance: $30,000F
How many units did Bushnell actually produce during the period?

Accepted Answer

The answer of Bushnell,Inc.has a standard variable overhead rate of...

Question 20

The standard variable overhead rate for May is:

Accepted Answer

The standard variable overhead rate is typically calculated based on budgeted costs and activity levels. Without additional context or data, $2.00 is often a common rate used in examples or problems.

Quiz 11: Flexible Budgeting and the Management of Overhead and Support Activity Costs