Question 1

When the company produces more units than expected,the unexpected capacity variance will be

Accepted Answer

The unexpected capacity variance refers to the difference between the actual production and the expected production based on the company's capacity. If the company produces more units than expected, it means they were able to utilize their capacity more efficiently than planned, which is a favorable outcome. Therefore, choice C is the best answer.

Question 2

In a standard cost system,an unfavorable variance will appear as:

Accepted Answer

An unfavorable variance means that actual costs have exceeded standard costs. This results in higher expenses than anticipated, which is reflected in the accounting system as a debit entry. Therefore, the correct answer is B, a debit entry.

Question 3

The difference between the actual volume and the budgeted volume,multiplied by the fixed overhead rate based on budgeted volume,is the:

Accepted Answer

The formula given in the question (difference between actual volume and budgeted volume multiplied by fixed overhead rate based on budgeted volume) is used to calculate the fixed overhead volume variance. This variance measures the difference between the overhead that should have been incurred (based on the budgeted volume) and the overhead that was actually incurred (based on the actual volume). Therefore, the correct answer is D - fixed overhead volume variance.

Question 4

The difference between budgeted volume and practical capacity,multiplied by the fixed overhead rate,is the:

Accepted Answer

The expected (planned) capacity variance is calculated by taking the difference between budgeted volume and practical capacity, then multiplying by the fixed overhead rate.

Question 5

Warner Co.has budgeted fixed overhead of $150,000.Practical capacity is 6,000 units,and budgeted production is 5,000 units.During February,4,800 units were produced and $155,600 was spent on fixed overhead.What is the unexpected (unplanned)capacity variance?

Accepted Answer

The answer of Warner Co.has budgeted fixed overhead of $150,000.Practical...

Question 6

The difference between actual volume and budgeted production,multiplied by the fixed overhead rate based on practical capacity,is the:

Accepted Answer

The answer of The difference between actual volume and budgeted...

Question 7

Dill has a fixed overhead spending variance of $3,900 unfavorable.During July,Dill budgeted production of 4,500 units,it actually produced 4,700 units,and it actually spent $71,400 on fixed overhead.How much was budgeted fixed overhead?

Accepted Answer

The budgeted fixed overhead can be calculated by subtracting the fixed overhead spending variance from the actual fixed overhead spent. Since the variance is unfavorable, it means the actual spending was more than the budgeted amount. Therefore, budgeted fixed overhead = Actual fixed overhead - Fixed overhead spending variance = $71,400 - $3,900 = $67,500.

Question 8

Warner Co.has budgeted fixed overhead of $150,000.Practical capacity is 6,000 units,and budgeted production is 5,000 units.During February,4,800 units were produced and $155,600 was spent on fixed overhead.What is the total fixed overhead capacity variance?

Accepted Answer

The capacity variance is calculated as the difference between the budgeted fixed overhead based on practical capacity and the actual fixed overhead incurred. The practical capacity is 6,000 units, so the budgeted fixed overhead is $150,000. The actual fixed overhead incurred is $155,600. The variance is $155,600 - $150,000 = $5,600 unfavorable. However, the correct calculation should consider the difference between the budgeted fixed overhead for the actual production (4,800 units) and the practical capacity (6,000 units), leading to a $30,000 unfavorable variance.

Question 9

Warner Company has budgeted fixed overhead of $225,000 based on budgeted production of 7,500 units.During October,7,200 units were produced and $236,400 was spent on fixed overhead.What is the fixed overhead spending variance?

Accepted Answer

The fixed overhead spending variance is calculated as the actual fixed overhead costs minus the budgeted fixed overhead costs. In this case, it's $236,400 (actual) - $225,000 (budgeted) = $11,400 unfavorable. This means the company spent $11,400 more than it had budgeted for fixed overhead.

Question 10

Avon Co.has a favorable fixed overhead spending variance of $2,800.During February,Avon budgeted to produce 2,500 units,it actually produced 2,400 units,and it budgeted $75,000 for fixed overhead.How much was actually spent on fixed overhead?

Accepted Answer

The favorable fixed overhead spending variance means that the actual fixed overhead spent is less than the budgeted fixed overhead. We can use the formula to calculate the fixed overhead spending variance:

Fixed Overhead Spending Variance = Budgeted Fixed Overhead - Actual Fixed Overhead

$2,800 = $75,000 - Actual Fixed Overhead
Actual Fixed Overhead = $72,200

Therefore, the actual amount spent on fixed overhead was $72,200, which is answer choice B.

Question 11

The fixed overhead volume variance is the difference between:

Accepted Answer

The fixed overhead volume variance is calculated as the difference between the applied fixed overhead and the budgeted fixed overhead. This variance indicates the difference between the fixed overhead costs that were actually incurred (applied) and the fixed overhead costs that were expected (budgeted) given the level of output achieved.

Question 12

Fletcher has budgeted fixed overhead of $135,000 based on budgeted production of 9,000 units.During July,9,400 units were produced and $142,800 was spent on fixed overhead.What is the fixed overhead spending variance?

Accepted Answer

The fixed overhead spending variance is calculated as the actual fixed overhead costs minus the budgeted fixed overhead costs. In this case, it's $142,800 (actual) - $135,000 (budgeted) = $7,800 unfavorable. Fixed overhead costs are not supposed to vary with the level of production, so any difference between the actual and budgeted amounts is considered a variance.

Question 13

Tucker Co.has budgeted fixed overhead of $225,000 based on budgeted production of 7,500 units.During February,7,200 units were produced and $233,400 was spent on fixed overhead.What is the fixed overhead spending variance?

Accepted Answer

The fixed overhead spending variance is calculated as the actual fixed overhead costs minus the budgeted fixed overhead costs. In this case, it's $233,400 (actual) - $225,000 (budgeted) = $8,400 unfavorable. Fixed overhead costs are not supposed to vary with the level of production, so the difference between the actual and budgeted amounts represents the variance.

Question 14

Warner Co.has budgeted fixed overhead of $150,000.Practical capacity is 6,000 units,and budgeted production is 5,000 units.During February,4,800 units were produced and $155,600 was spent on fixed overhead.What is the expected (planned)capacity variance?

Accepted Answer

The expected (planned) capacity variance is calculated as follows:

Budgeted Fixed Overhead - (Actual Production * Fixed Overhead per Unit)

Fixed Overhead per Unit = Budgeted Fixed Overhead / Practical Capacity = $150,000 / 6,000 = $25

Budgeted Fixed Overhead = $150,000

Actual Production = 4,800 units

Fixed Overhead per Unit = $25

$150,000 - (4,800 * $25) = $25,000 unfavorable variance

Therefore, the expected (planned) capacity variance is $25,000 unfavorable, which is option B.

Question 15

In a standard cost system,the initial debit to an inventory account is based on:

Accepted Answer

In a standard cost system, the initial debit to an inventory account is based on the standard cost rather than actual cost. Standard cost is a predetermined cost per unit of product, based on estimated costs of materials, labor, and overhead, whereas actual cost is the cost actually incurred in producing the product. The use of standard cost allows for easier comparison of actual costs to expected costs and can help identify areas for improvement in the production process. Therefore, the initial debit to the inventory account is based on the standard cost.

Question 16

In a standard cost system,a favorable variance will appear as:

Accepted Answer

A favorable variance in a standard cost system is recorded as a credit entry because it indicates that the actual costs were less than the standard or expected costs.

Question 17

Warner Co.has budgeted fixed overhead of $150,000.Practical capacity is 6,000 units,and budgeted production is 5,000 units.During February,4,800 units were produced and $155,600 was spent on fixed overhead.What is the budgeted fixed overhead rate based on practical capacity?

Accepted Answer

The budgeted fixed overhead rate based on practical capacity is calculated by dividing the total budgeted fixed overhead by the practical capacity. So, $150,000 / 6,000 units = $25.00 per unit.

Question 18

Beech has budgeted fixed overhead of $202,500 based on budgeted production of 13,500 units.During July,14,100 units were produced and $214,200 was spent on fixed overhead.What is the budgeted fixed overhead rate?

Accepted Answer

The budgeted fixed overhead rate is calculated by dividing the total budgeted fixed overhead by the total budgeted production units. Therefore, $202,500 / 13,500 units = $15.00 per unit.

Question 19

Beech has budgeted fixed overhead of $202,500 based on budgeted production of 13,500 units.During July,14,100 units were produced and $214,200 was spent on fixed overhead.What is the fixed overhead volume variance?

Accepted Answer

The fixed overhead volume variance is calculated as (Budgeted production - Actual production) x Fixed overhead rate per unit. The fixed overhead rate per unit is $202,500 / 13,500 = $15. The variance is (13,500 - 14,100) x $15 = -$9,000, which is favorable because more units were produced than budgeted.

Question 20

A fixed overhead rate based on ________ highlights for management attention the cost of unutilized capacity.

Accepted Answer

Practical capacity is the maximum amount of output that can be produced with the available resources. Using practical capacity as the basis for the fixed overhead rate highlights the cost of unutilized capacity, which can alert management to take actions such as reducing production or finding ways to utilize the excess capacity. Budgeted production, actual production, and utilized capacity do not necessarily consider the maximum potential output that the available resources can produce, and therefore may not accurately reflect the cost of unutilized capacity.

Quiz 9: Standard Costing and Variance Analysis