Question 1

A static budget:

Accepted Answer

A static budget is designed around a specific, predetermined level of activity and does not change with actual activity levels.

Question 2

The advantage of dollar measures as a basis for flexible overhead budgeting is that they are relatively stable over time.

Accepted Answer

Dollar measures can fluctuate significantly over time due to inflation, changes in costs, and other economic factors, making them less stable for flexible overhead budgeting.

Question 3

The activity-based flexible budget provides a more accurate benchmark against which to compare actual costs than does a conventional flexible budget.

Accepted Answer

An activity-based flexible budget considers the costs associated with specific activities, allowing for a more precise comparison of actual costs by adjusting for the volume and complexity of activities, unlike a conventional flexible budget that might only adjust for overall output levels.

Question 4

Flexible budgets reflect a company's anticipated costs based on variations in:

Accepted Answer

Flexible budgets are designed to change and adapt based on different levels of activity within a company, allowing for more accurate budgeting and financial planning.

Question 5

The budget variance arises from a comparison of actual variable overhead expenditures with budgeted variable overhead costs.

Accepted Answer

The answer of The budget variance arises from a comparison...

Question 6

The sales-volume variance measures the effect on sales revenue of sales price deviations.

Accepted Answer

The sales-volume variance measures the effect on sales revenue of selling a different number of units than expected, not the effect of sales price deviations.

Question 7

Both normal- and standard-costing systems use a predetermined overhead rate.

Accepted Answer

Both normal- and standard-costing systems calculate overhead costs based on a predetermined overhead rate, which is used to allocate overhead costs to products or services.

Question 8

The manufacturing overhead applied to Work-in-Process Inventory by a company that uses standard costing would be computed as actual hours times a predetermined (standard) overhead rate.

Accepted Answer

The answer of The manufacturing overhead applied to Work-in-Process Inventory...

Question 9

From a traditional perspective, dollars of raw material have been a popular activity measure in manufacturing firms.

Accepted Answer

The answer of From a traditional perspective, dollars of raw...

Question 10

The overhead cost performance report presents itemized variances along with actual and budgeted costs for each overhead item.

Accepted Answer

The overhead cost performance report indeed presents itemized variances along with actual and budgeted costs for each overhead item, allowing for detailed tracking and analysis of overhead spending.

Question 11

The right (credit) side of the production-overhead account accumulates actual overhead costs incurred.

Accepted Answer

The debit side of the production-overhead account accumulates actual overhead costs incurred, while the credit side typically records the applied overhead based on a predetermined rate.

Question 12

The formula flexible budget is more general than the columnar flexible budget, because the formula allows managers to compute budgeted overhead costs at any activity level.

Accepted Answer

The formula flexible budget is more general because it enables the calculation of budgeted costs for various activity levels using a formula, offering more flexibility than the fixed columns of a columnar flexible budget.

Question 13

The units of output are meaningful measures in multiproduct firms.

Accepted Answer

The answer of The units of output are meaningful measures...

Question 14

In an activity-based flexible budget, each overhead item has the same cost driver, identified by flexible overhead budget for that cost item.

Accepted Answer

In an activity-based flexible budget, different overhead items can have different cost drivers, as the cost driver is chosen based on the activity that most directly influences the cost of each specific overhead item.

Question 15

The overhead cost performance report includes spending and efficiency variances for both variable and fixed items.

Accepted Answer

The answer of The overhead cost performance report includes spending...

Question 16

In a standard-costing system, the standard costs are used for product costing as well as for cost control.

Accepted Answer

In a standard-costing system, standard costs serve both purposes: they are used in setting prices and costing products, and they also provide a benchmark for evaluating actual costs for cost control purposes.

Question 17

Efficient or inefficient use of a specific component of variable overhead (e.g., electricity) will cause the firm to have a variable-overhead efficiency variance.

Accepted Answer

The variable-overhead efficiency variance measures how efficiently a company uses the variable components (like electricity) of its overhead. If a company uses these components more or less efficiently than expected, it will result in a variance.

Question 18

A flexible budget for 15,000 hours revealed variable manufacturing overhead of $90,000 and fixed manufacturing overhead of $120,000. The budget for 25,000 hours would reveal total overhead costs of $210,000.

Accepted Answer

The variable manufacturing overhead would increase with the hours, so for 25,000 hours, assuming the same rate, the variable overhead would be $150,000 (since $90,000 / 15,000 hours = $6 per hour, then $6 * 25,000 hours = $150,000). The fixed manufacturing overhead would remain the same at $120,000. Therefore, the total overhead costs would be $270,000 ($150,000 variable + $120,000 fixed).

Question 19

The sales-price variance is the difference between the actual and budgeted sales prices multiplied by the actual sales volume.

Accepted Answer

The sales-price variance measures the effect of the difference between the actual selling price and the budgeted selling price on the actual quantity sold.

Question 20

Flexible budgets reflect a company's anticipated costs based on variations in activity levels.

Accepted Answer

Flexible budgets are designed to change and adapt based on actual levels of activity, allowing for a more accurate reflection of anticipated costs as activity levels vary.

Quiz 11: Flexible Budgeting and Analysis of Overhead Costs