Question 1

Use the following information to answer the following Questions
Seven Falls Cuisines has the following flexible-budget formula: 
Y = $13PH + $450,000 where PH is defined as process hours.

-Dealer Enterprises (DE) anticipated that 84,000 process hours would be worked during an upcoming accounting period when, in fact, 92,000 hours were actually worked. One of the company's cost functions is expressed as follows:
Y = $16PH + $640,000 where PH is defined as process hours
What budgeted dollar amount would appear in DE's static budget and flexible budget for the preceding cost function?

Accepted Answer

The answer of Use the following information to answer the...

Question 2

The manufacturing overhead applied to Work-in-Process Inventory by a company that uses standard costing would be computed as:

Accepted Answer

Standard costing systems apply manufacturing overhead to Work-in-Process Inventory based on the standard hours allowed for the actual output produced multiplied by the predetermined (standard) overhead rate. This method facilitates variance analysis by comparing the standard costs to actual costs.

Question 3

Nerve Pain Innovations anticipated that 84,000 process hours would be worked during an upcoming accounting period when, in fact, 90,000 hours were actually worked. One of the company's cost functions is expressed as follows:
Y = $16PH + $640,000 where PH is defined as process hours
What is Nerve Pain's flexible budget (Y) for the preceding cost function?

Accepted Answer

The answer of Nerve Pain Innovations anticipated that 84,000 process...

Question 4

Use the following information to answer the following Questions
Seven Falls Cuisines has the following flexible-budget formula: 
Y = $13PH + $450,000 where PH is defined as process hours.

-Which of the following statements is (are) true?

Accepted Answer

The formula Y = $13PH + $450,000 indicates that $450,000 is the fixed cost component (A is true), each additional process hour costs $13 (B is true), and Y represents the total cost in the flexible budget (C is true), making all statements correct.

Question 5

A flexible budget:

Accepted Answer

A flexible budget adjusts for different levels of activity, making it more useful than a static budget for performance evaluation and for comparing actual to budgeted costs across different activity levels.

Question 6

Which of the following should have the strongest cause and effect relationship with overhead costs?

Accepted Answer

Cost drivers have the strongest cause and effect relationship with overhead costs because they are the activities or factors that directly cause a cost to occur. Identifying and managing cost drivers can significantly impact the control and reduction of overhead costs.

Question 7

Use the following information to answer the following Questions
Commerce Corporation has a high probability of operating at 40,000 activity hours during the upcoming period, and lower probabilities of operating at 30,000 hours and 50,000 hours. The company's flexible budget revealed the following:

-If Commerce operated at 35,000 hours, its total budgeted cost would be:

Accepted Answer

The total budgeted cost is calculated by multiplying the number of hours (35,000) by the cost per hour ($25), resulting in $877,500.

Question 8

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:

Accepted Answer

The answer of A flexible budget for 15,000 hours revealed...

Question 9

Barrington Industries anticipated selling 29,000 units of a major product and paying sales commissions of $6 per unit. Actual sales and sales commissions totaled 31,500 units and $182,700, respectively. If the company used a static budget for performance evaluations, Barrington would report a cost variance of:

Accepted Answer

The static budget for sales commissions would be 29,000 units * $6 = $174,000. The actual cost was $182,700, leading to a variance of $182,700 - $174,000 = $8,700 unfavorable (U), because the actual cost was higher than the budgeted cost.

Question 10

A flexible budget for 15,000 hours revealed variable manufacturing overhead of $90,000 and fixed manufacturing overhead of $120,000. The budget for 20,000 hours would reveal total overhead costs of:

Accepted Answer

Variable manufacturing overhead is $6 per hour and fixed manufacturing overhead is $120,000. Total overhead costs for 20,000 hours would be $240,000 ($6 x 20,000 + $120,000).

Question 11

Chong Corporation recently prepared a manufacturing cost budget for an output of 50,000 units, as follows:

Actual units produced amounted to 60,000. Actual costs incurred were: direct materials, $110,000; direct labor, $60,000; variable overhead, $100,000; and fixed overhead, $97,000. If Chong evaluated performance by the use of a flexible budget, a performance report would reveal a total variance of:

Accepted Answer

The answer of Chong Corporation recently prepared a manufacturing cost...

Question 12

Which of the following mathematical expressions is found in a typical flexible-budget formula for overhead?

Accepted Answer

A typical flexible-budget formula for overhead includes both variable and fixed components. The variable component is calculated as the budgeted variable overhead cost per unit times the total activity units, and then the budgeted fixed overhead costs are added to this amount.

Question 13

The activity measure selected for use in a variable- and fixed-overhead flexible budget:

Accepted Answer

The activity measure for a variable- and fixed-overhead flexible budget should vary in a similar behavior pattern to the way that variable overhead varies. This ensures that the budget accurately reflects changes in costs as activity levels change.

Question 14

Use the following information to answer the following Questions
Seven Falls Cuisines has the following flexible-budget formula: 
Y = $13PH + $450,000 where PH is defined as process hours.

-What is Seven Falls' budgeted total cost if its process hours equal 25,000?

Accepted Answer

To calculate the budgeted total cost, substitute 25,000 for PH in the formula: Y = $13(25,000) + $450,000 = $325,000 + $450,000 = $775,000.

Question 15

Zhou, Inc. is planning its cash needs for an upcoming period when 85,000 machine hours are expected to be worked. Activity may drop as low as 78,000 hours if some overdue equipment maintenance procedures are performed; on the other hand, activity could jump to 94,000 hours if one of Zhou's major competitors likely goes bankrupt. A flexible cash budget to determine cash needs would best be based on:

Accepted Answer

A flexible cash budget is designed to change in response to the level of activity. Therefore, it should include all potential levels of activity (78,000 hours, 85,000 hours, and 94,000 hours) to accurately reflect the range of possible cash needs.

Question 16

Use the following information to answer the following Questions
Commerce Corporation has a high probability of operating at 40,000 activity hours during the upcoming period, and lower probabilities of operating at 30,000 hours and 50,000 hours. The company's flexible budget revealed the following:

-Commerce's flexible-budget formula, where Y is defined as total cost and AH represents activity hours, is:

Accepted Answer

A flexible budget formula typically includes both variable and fixed costs. In this case, $4.50AH represents the variable cost per activity hour, and $720,000 is the fixed cost, making option B the correct formula for a flexible budget.

Question 17

Which of the following is not an overhead variance?

Accepted Answer

The variable-overhead volume variance is not a recognized overhead variance. The recognized variances are spending, efficiency, and budget variances for both variable and fixed overheads.

Question 18

With respect to overhead, what is the difference between normal costing and standard costing?

Accepted Answer

Normal costing uses actual hours worked, while standard costing uses standard hours allowed for the actual production.

Question 19

Which of the following statements is/are correct concerning the application of overhead in a standard costing system driven by process hours?

Accepted Answer

Overhead application in a standard costing system is based on the standard process hours allowed for the actual output produced. This method helps in planning, controlling, and analyzing overhead costs by comparing them with the standard or expected costs.

Question 20

Strongheart Enterprises anticipated selling 27,000 units of a major product and paying sales commissions of $6 per unit. Actual sales and sales commissions totaled 27,500 units and $171,400, respectively. If the company used a flexible budget for performance evaluations, Strongheart would report a cost variance of:

Accepted Answer

The flexible budget for sales commissions would be 27,500 units x $6 = $165,000. The actual sales commissions were $171,400, resulting in a cost variance of $171,400 - $165,000 = $6,400 unfavorable (U).

Quiz 11: Flexible Budgeting and Analysis of Overhead Costs

The manufacturing overhead applied to Work-in-Process Inventory by a company that uses standard costing would be computed as:

Use the following information to answer the following Questions Seven Falls Cuisines has the following flexible-budget formula: Y = $13PH + $450,000 where PH is defined as process hours. -Which of the following statements is (are) true?

A flexible budget:

Which of the following should have the strongest cause and effect relationship with overhead costs?

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:

A flexible budget for 15,000 hours revealed variable manufacturing overhead of $90,000 and fixed manufacturing overhead of $120,000. The budget for 20,000 hours would reveal total overhead costs of:

Which of the following mathematical expressions is found in a typical flexible-budget formula for overhead?

The activity measure selected for use in a variable- and fixed-overhead flexible budget:

Use the following information to answer the following Questions Seven Falls Cuisines has the following flexible-budget formula: Y = $13PH + $450,000 where PH is defined as process hours. -What is Seven Falls' budgeted total cost if its process hours equal 25,000?

Which of the following is not an overhead variance?

With respect to overhead, what is the difference between normal costing and standard costing?

Which of the following statements is/are correct concerning the application of overhead in a standard costing system driven by process hours?