Question 1

Somalian Corporation uses a standard costing system. Information for the month of May is as follows: $\begin{array}{ll}
\text { Actual manufacturing overhead costs }(\$ 26,000 \text { is fixed) } & \$ 80,000 \
\text { Direct labor: } & \
\text { Actual hours worked } & 12,000 \text { hrs. } \
\text { Standard hours allowed for actual production } & 10,000 \text { hrs. } \
\text { Average actual labor cost per hour } & \$ 18
\end{array}$
The factory overhead rate is based on a normal volume of 12,000 direct labor hours. Standard cost data at 12,000 direct labor hours were as follows:

$\begin{array}{lr}
\text { Variable factory overhead } & \$ 48,000 \
\text { Fixed factory overhead } & 24,000 \
\text { Total factory overhead } & \underline{\mathbf{\$ 72}, 000}
\end{array}$
What is the fixed overhead spending variance for Somalian?

Accepted Answer

The answer of Somalian Corporation uses a standard costing system....

Question 2

Synergy Manufacturing Company has a normal monthly activity of 7,500 units.
Standard factory overhead rates are based on a normal monthly volume of one standard direct hour per unit.
Standard factory overhead rates per direct labor hour are:
$\begin{array}{ll}
\text { Fixed } & \$ 5.00 \
\text { Variable } & 12.00 &\$17.00\
\text { Units actually produced in } && 7,000 \text { units } \
\text { current month }  \
\text { Actual factory overhead costs } && \$ 140,000\
\text { incurred (includes } \$ 50,000 & \
\text { fixed) } &
\end{array}$
What is the variable overhead spending variance for Synergy?

Accepted Answer

The variable overhead spending variance is calculated as the difference between the actual variable overhead costs incurred and the expected (or budgeted) variable overhead costs based on the actual production volume. The expected variable overhead costs are calculated by multiplying the standard variable overhead rate per unit by the actual production volume. In this case, the standard variable overhead rate is $12 per direct labor hour, and the actual production volume is 7,000 units. Therefore, the expected variable overhead costs are 7,000 units * $12/unit = $84,000. The actual variable overhead costs can be found by subtracting the fixed overhead costs from the total actual overhead costs, which is $140,000 - $50,000 = $90,000. The variable overhead spending variance is $90,000 (actual) - $84,000 (expected) = $6,000 unfavorable.

Question 3

Formidable Company collected the following information: $\begin{array}{ll}\text { Standard costs per unit: }\
\text { Variable overhead } & 4 \text { machine hours } @ \$ 6 \text { per machine hour } \
\text { Fixed overhead } & 4 \text { machine hours } @ \$ 10 \text { per machine hour }\\
\text { Actual output } & 20,000 \text { units } \
\text { Denominator (normal capacity) output } & 21,000 \text { units } \
\text { Actual machine hours } & 79,000 \text { machine hours } \
\text { Actual variable overhead cost } & \$ 540,000 \
\text { Actual fixed overhead cost } & \$ 810,000\
\end{array}$ Using the two variance method, what is the total variance?

Accepted Answer

The total variance is calculated by adding the variable overhead variance and the fixed overhead variance. Variable overhead variance:Standard cost = 4 machine hours/unit * $6/machine hour = $24/unitActual cost = $540,000 / 20,000 units = $27/unitVariance = ($27 - $24) * 20,000 units = $60,000 UnfavorableFixed overhead variance:Standard cost = 4 machine hours/unit * $10/machine hour = $40/unitApplied fixed overhead = 21,000 units (denominator output) * $40 = $840,000Variance = $810,000 (actual) - $840,000 (applied) = $30,000 FavorableTotal variance = $60,000 (U) + $30,000 (F) = $30,000 Unfavorable.

Question 4

Alumni Manufacturing Company has the following information pertaining to a normal monthly activity of 10,000 units: Standard factory overhead rates are based on a normal monthly volume of one standard direct hour per unit. Standard factory overhead rates per direct labor hour are:
$\begin{array} { l l l } \text { Fixed } & \$ 6.00 & \ \text { Variable } & 10.00 & \$ 16.00 \\
\text { Units actually produced in current month } & 9,000 \text { units } \
\text { Actual factory overhead costs incurred } & \
\text { (includes } \$ 70,000 \text { fixed) } & \$ 156,000 \
\text { Actual direct labor hours } & 9,000 \text { hours }\end{array}$

What is the fixed overhead spending variance for Alumni?

Accepted Answer

Fixed overhead spending variance = (Standard fixed overhead rate * Actual direct labor hours) - Fixed overhead incurred= ($6.00 * 9,000 hours) - $70,000= $54,000 - $70,000= $10,000 (U)

Question 5

Croissant Company's standard fixed overhead cost is $6 per direct labor hour based on budgeted fixed costs of $600,000. The standard allows 1 direct labor hour per unit. During the current year, Croissant produced 110,000 units of product, incurred $630,000 of fixed overhead costs, and recorded 212,000 actual hours of direct labor.
What is the standard activity level on which Croissant based its fixed overhead rate?

Accepted Answer

The standard activity level is based on the budgeted fixed costs divided by the standard fixed overhead cost per direct labor hour, which is $600,000 / $6 = 100,000 direct labor hours.

Question 6

Somalian Corporation uses a standard costing system. Information for the month of May is as follows: $\begin{array}{ll}
\text { Actual manufacturing overhead costs }(\$ 26,000 \text { is fixed) } & \$ 80,000 \
\text { Direct labor: } & \
\text { Actual hours worked } & 12,000 \text { hrs. } \
\text { Standard hours allowed for actual production } & 10,000 \text { hrs. } \
\text { Average actual labor cost per hour } & \$ 18
\end{array}$
The factory overhead rate is based on a normal volume of 12,000 direct labor hours. Standard cost data at 12,000 direct labor hours were as follows:

$\begin{array}{lr}
\text { Variable factory overhead } & \$ 48,000 \
\text { Fixed factory overhead } & 24,000 \
\text { Total factory overhead } & \underline{\mathbf{\$ 72}, 000}
\end{array}$ What is the variable overhead efficiency variance for Somalian?

Accepted Answer

The answer of Somalian Corporation uses a standard costing system....

Question 7

Which of the following is the result of actual production being less than expected production?

Accepted Answer

An unfavorable volume variance occurs when the actual production is less than the expected production. This is due to lower output levels causing higher fixed costs per unit, which leads to a decrease in profitability.

Question 8

Alumni Manufacturing Company has the following information pertaining to a normal monthly activity of 10,000 units: Standard factory overhead rates are based on a normal monthly volume of one standard direct hour per unit. Standard factory overhead rates per direct labor hour are:
$\begin{array} { l l l } \text { Fixed } & \$ 6.00 & \ \text { Variable } & 10.00 & \$ 16.00 \\
\text { Units actually produced in current month } & 9,000 \text { units } \
\text { Actual factory overhead costs incurred } & \
\text { (includes } \$ 70,000 \text { fixed) } & \$ 156,000 \
\text { Actual direct labor hours } & 9,000 \text { hours }\end{array}$

What is the fixed overhead volume variance for Alumni?

Accepted Answer

The fixed overhead volume variance is calculated as (Standard hours for actual production - Budgeted hours) x Standard fixed overhead rate. Here, (9,000 - 10,000) x $6 = $6,000 (U).

Question 9

Fixed manufacturing overhead was budgeted at $200,000, and 25,000 direct labor hours were budgeted. If the fixed overhead volume variance was $8,000 favorable and the fixed overhead spending variance was $6,000 unfavorable, fixed manufacturing overhead applied must be

Accepted Answer

The fixed overhead volume variance is favorable, meaning more overhead was applied than budgeted. The spending variance is unfavorable, meaning actual overhead was more than budgeted. Therefore, the applied overhead is $200,000 (budgeted) + $8,000 (favorable volume variance) = $208,000.

Question 10

The formula for the fixed overhead spending variance is:

Accepted Answer

The answer of The formula for the fixed overhead spending...

Question 11

Fixed overhead volume variance is:

Accepted Answer

The answer of Fixed overhead volume variance is:
...

Question 12

If actual fixed manufacturing overhead was $55,000 and there was a $1,400 unfavorable spending variance and a $1,000 unfavorable volume variance, budgeted fixed manufacturing overhead must have been

Accepted Answer

The budgeted fixed manufacturing overhead is found by adjusting the actual fixed manufacturing overhead for the variances. Since there was a $1,400 unfavorable spending variance, it means the actual spending was $1,400 more than budgeted. Therefore, subtracting this variance from the actual fixed manufacturing overhead ($55,000 - $1,400) gives the budgeted amount before considering the volume variance, which does not affect the calculation of the budgeted fixed manufacturing overhead. Thus, the budgeted fixed manufacturing overhead was $53,600.

Question 13

Croissant Company's standard fixed overhead cost is $6 per direct labor hour based on budgeted fixed costs of $600,000. The standard allows one direct labor hour per unit. During the current year, Crawford produced 110,000 units of product, (within the relevant range of activity) incurred $630,000 of fixed overhead costs, and recorded 212,000 actual hours of direct labor.
What is Croissant's fixed overhead spending variance for the current year?

Accepted Answer

Fixed overhead spending variance = Actual fixed overhead costs - Budgeted fixed overhead costs

Actual fixed overhead costs = $630,000
Budgeted fixed overhead costs = (Budgeted fixed overhead cost per hour) x (Actual hours of direct labor)
Budgeted fixed overhead cost per hour = $6
Actual hours of direct labor = 212,000

Budgeted fixed overhead costs = $6 x 212,000 = $1,272,000

Fixed overhead spending variance = $630,000 - $1,272,000 = $642,000 (U)
This means that the actual fixed overhead costs were $642,000 more than the budgeted fixed overhead costs.

However, we only want to know the fixed overhead spending variance per unit of product, so we need to divide the total variance by the number of units produced:

Fixed overhead spending variance per unit = Total fixed overhead spending variance / Number of units produced
Fixed overhead spending variance per unit = $642,000 / 110,000 units
Fixed overhead spending variance per unit = $5.84 (U)

Therefore, the fixed overhead spending variance per unit is $5.84 (U), which means that the actual fixed overhead costs per unit were $5.84 more than the budgeted fixed overhead costs per unit. Option C, $30,000 (U), is the closest to this result, so it is the best choice.

Question 14

Croissant Company's standard fixed overhead cost is $6 per direct labor hour based on budgeted fixed costs of $600,000. The standard allows 1 direct labor hour per unit. During the current year, Croissant produced 110,000 units of product, incurred $630,000 of fixed overhead costs, and recorded 212,000 actual hours of direct labor.
What is Croissant's fixed overhead volume variance for the current year?

Accepted Answer

The answer of Croissant Company's standard fixed overhead cost is...

Question 15

Formidable Company collected the following information: $\begin{array}{ll}\text { Standard costs per unit: }\
\text { Variable overhead } & 4 \text { machine hours } @ \$ 6 \text { per machine hour } \
\text { Fixed overhead } & 4 \text { machine hours } @ \$ 10 \text { per machine hour }\\
\text { Actual output } & 20,000 \text { units } \
\text { Denominator (normal capacity) output } & 21,000 \text { units } \
\text { Actual machine hours } & 79,000 \text { machine hours } \
\text { Actual variable overhead cost } & \$ 540,000 \
\text { Actual fixed overhead cost } & \$ 810,000\
\end{array}$ Using the three variance method, what is the spending variance?

Accepted Answer

The answer of Formidable Company collected the following information: \(\begin{array}{ll}\text...

Question 16

Formidable Company collected the following information: $\begin{array}{ll}\text { Standard costs per unit: }\
\text { Variable overhead } & 4 \text { machine hours } @ \$ 6 \text { per machine hour } \
\text { Fixed overhead } & 4 \text { machine hours } @ \$ 10 \text { per machine hour }\\
\text { Actual output } & 20,000 \text { units } \
\text { Denominator (normal capacity) output } & 21,000 \text { units } \
\text { Actual machine hours } & 79,000 \text { machine hours } \
\text { Actual variable overhead cost } & \$ 540,000 \
\text { Actual fixed overhead cost } & \$ 800,000\
\end{array}$ Using the three variance method, what is the budget variance?

Accepted Answer

The answer of Formidable Company collected the following information: \(\begin{array}{ll}\text...

Question 17

Which of the following is true of mix variance?

Accepted Answer

Mix variance is the difference between the actual mix and the standard mix of inputs used. Therefore, option A is correct. Option B is incorrect because mix variance is not related to output but to input mix. Option C is incorrect because it only refers to the cost aspect of mix variance and not the mix aspect. Option D is incorrect because it only refers to the amount of input and not the mix aspect.

Question 18

Fixed manufacturing overhead was budgeted at $105,000, and 25,000 direct labor hours were budgeted. If the fixed overhead volume variance was $4,000 unfavorable and the fixed overhead spending variance was $1,500 favorable, fixed manufacturing overhead applied must be

Accepted Answer

The answer of Fixed manufacturing overhead was budgeted at $105,000,...

Question 19

Formidable Company collected the following information: $\begin{array}{ll}\text { Standard costs per unit: }\
\text { Variable overhead } & 4 \text { machine hours } @ \$ 6 \text { per machine hour } \
\text { Fixed overhead } & 4 \text { machine hours } @ \$ 10 \text { per machine hour }\\
\text { Actual output } & 20,000 \text { units } \
\text { Denominator (normal capacity) output } & 21,000 \text { units } \
\text { Actual machine hours } & 79,000 \text { machine hours } \
\text { Actual variable overhead cost } & \$ 540,000 \
\text { Actual fixed overhead cost } & \$ 810,000\
\end{array}$ Using the two variance method, what is the volume variance?

Accepted Answer

The volume variance is calculated as (Denominator output - Actual output) x Fixed overhead rate per unit. Here, (21,000 - 20,000) x $10 = $10,000 (U).

Question 20

Formidable Company collected the following information: $\begin{array}{ll}\text { Standard costs per unit: }\
\text { Variable overhead } & 4 \text { machine hours } @ \$ 6 \text { per machine hour } \
\text { Fixed overhead } & 4 \text { machine hours } @ \$ 10 \text { per machine hour }\\
\text { Actual output } & 20,000 \text { units } \
\text { Denominator (normal capacity) output } & 21,000 \text { units } \
\text { Actual machine hours } & 79,000 \text { machine hours } \
\text { Actual variable overhead cost } & \$ 540,000 \
\text { Actual fixed overhead cost } & \$ 810,000\
\end{array}$ Using the two variance method, what is the budget variance?

Accepted Answer

The answer of Formidable Company collected the following information: \(\begin{array}{ll}\text...

Quiz 9: Standard Costing: a Functional-Based Control Approach

Which of the following is the result of actual production being less than expected production?

Fixed manufacturing overhead was budgeted at $200,000, and 25,000 direct labor hours were budgeted. If the fixed overhead volume variance was $8,000 favorable and the fixed overhead spending variance was $6,000 unfavorable, fixed manufacturing overhead applied must be

The formula for the fixed overhead spending variance is:

Fixed overhead volume variance is:

If actual fixed manufacturing overhead was $55,000 and there was a $1,400 unfavorable spending variance and a $1,000 unfavorable volume variance, budgeted fixed manufacturing overhead must have been

Which of the following is true of mix variance?

Fixed manufacturing overhead was budgeted at $105,000, and 25,000 direct labor hours were budgeted. If the fixed overhead volume variance was $4,000 unfavorable and the fixed overhead spending variance was $1,500 favorable, fixed manufacturing overhead applied must be