Question 1

Panama Co.prepared the following ﬂexible overhead budget where PH is process hour.Which of the answers provided correctly completes the table?

Accepted Answer

The actual overhead cost for the period was $75,000 and the actual process hours were 8,000. Thus, the actual overhead rate per process hour is $9.375 ($75,000 ÷ 8,000 PH). Using this rate, we can calculate the expected overhead cost for each level of activity. For example, at 10,000 PH, the expected overhead cost would be $93,750 ($9.375 × 10,000 PH), which is option A in the table.

Question 2

Chong Corporation recently prepared a ﬂexible budget for water usage at its manufacturing plant.Budgeted water cost at various projected production levels is as follows:  Actual units produced amounted to 60,000.Actual cost incurred for water usage was $4,500.What was Chong's cost variance for water?

Accepted Answer

The answer of Chong Corporation recently prepared a ﬂexible budget...

Question 3

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 fixed manufacturing overhead remains the same whether the company produces 15,000 or 25,000 hours. Therefore, the variable manufacturing overhead rate is $6 per hour ($90,000 divided by 15,000 hours). To find the total overhead cost for 25,000 hours, we need to multiply the total number of hours (25,000) by the variable overhead rate ($6 per hour) and then add the fixed overhead costs ($120,000).

Total overhead costs = (Variable overhead rate x Total hours) + Fixed overhead costs
Total overhead costs = ($6 x 25,000) + $120,000
Total overhead costs = $150,000 + $120,000
Total overhead costs = $270,000

Therefore, the answer is B, $270,000.

Question 4

A ﬂexible budget:

Accepted Answer

A flexible budget is preferred over a static budget in the evaluation of performance as it adjusts to changes in activity levels, making it easier to compare actual and budgeted costs. It also gives management flexibility in terms of meeting budget goals. Therefore, option E is the best choice.

Question 5

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

Accepted Answer

The activity measure selected for use in a flexible budget should vary in a similar behavior pattern to the way that variable overhead varies, as this will enable accurate and relevant budgeting for both variable and fixed overhead costs. It is not necessary for the activity measure to be stated in sales dollars, approved by the president, or produce attractive results for the individual using the budget. The activity measure should not remain fixed, as this would not enable accurate budgeting for variable overhead costs.

Question 6

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 Dealer Enterprises (DE) anticipated that 84,000 process...

Question 7

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 8

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

Accepted Answer

The answer of With respect to overhead, what is the...

Question 9

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

Using the formula Y = $13PH + $450,000 and plugging in PH = 25,000:
Y = $13(25,000) + $450,000
Y = $325,000 + $450,000
Y = $775,000
Therefore, Seven Falls' budgeted total cost if its process hours equal 25,000 is $775,000, which is answer choice C.

Question 10

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

Accepted Answer

In standard costing, manufacturing overhead is applied to products based on a predetermined (standard) overhead rate multiplied by the standard hours worked. This helps to provide a more accurate estimate of product costs and facilitates cost control efforts.

Question 11

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

Accepted Answer

In a standard costing system driven by process hours, overhead application is based on standard process hours allowed. This means that a predetermined overhead rate is used for both fixed and variable overhead, and this rate is multiplied by the standard number of process hours allowed for each unit of production. This allows for a more accurate allocation of overhead costs to products based on the activities required to produce them. Option A is incorrect because a predetermined overhead rate is used for both fixed and variable overhead. Option C is incorrect because actual process hours incurred may vary from the standard and could lead to over- or under-application of overhead costs. Option D is incorrect because both direct materials and direct labor are considered to be product costs in a standard costing system. Option E is incorrect because both fixed and variable overhead costs are usually applied to production in a standard costing system.

Question 12

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 13

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

The answer of Commerce Corporation has a high probability of...

Question 14

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 represents fixed costs, and $13 is the variable cost per process hour. Therefore, all the statements A, B, C, and D are correct.

Question 15

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 fixed and variable costs. Choice C represents the formula for calculating total overhead cost in a flexible budget, which includes the budgeted variable overhead cost per unit multiplied by the total activity units and the budgeted fixed overhead costs. This formula allows for variations in activity levels and calculates the appropriate overhead costs based on those variations.

Question 16

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 based on actual sales of 27,500 units at $6 per unit, totaling $165,000. The actual sales commissions were $171,400, resulting in a cost variance of $6,400 unfavorable (U).

Question 17

Zhou, Inc.is planning its overhead costs 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 overhead budget would best be based on:

Accepted Answer

A flexible overhead budget should take into account the range of expected activity levels. In this case, the expected range of machine hours is from 78,000 to 94,000 hours. Therefore the best choice(s) would be a flexible overhead budget based on 78,000 hours, 85,000 hours and 94,000 hours.

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 20,000 hours would reveal total overhead costs of:

Accepted Answer

The total overhead cost is the sum of variable and fixed overhead costs. The variable overhead cost is $90,000 and the fixed overhead cost is $120,000. Therefore, the total overhead cost for 15,000 hours is $90,000 + $120,000 = $210,000. The variable overhead cost per hour is $90,000 / 15,000 hours = $6.00 per hour. The fixed overhead cost per hour is $120,000 / 15,000 hours = $8.00 per hour. Therefore, the total overhead cost for 20,000 hours is (20,000 hours * $6.00 per hour) + (20,000 hours * $8.00 per hour) = $240,000.

Question 19

Award: 1.00 point

Accepted Answer

The answer of Award: 1.00 point 
...

Question 20

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