Question 1

The total production-volume variance should be ________.

Accepted Answer

Total production-volume variance = $90,000 U + 0 = $90,000

Question 2

Explain how fixed manufacturing overhead costs are treated under Generally Accepted Accounting Principles?

Accepted Answer

The answer of Explain how fixed manufacturing overhead costs are...

Question 3

When fixed overhead spending variance is unfavorable, it can be safely assumed that ________.

Accepted Answer

An unfavorable fixed overhead spending variance occurs when the actual fixed overhead costs exceed the budgeted (flexible budget) fixed overhead costs.

Question 4

Explain why there is no production-volume variance for variable manufacturing overhead costs.

Accepted Answer

The answer of Explain why there is no production-volume variance...

Question 5

When variable overhead spending variance is unfavorable, it can be safely assumed that ________.

Accepted Answer

An unfavorable variable overhead spending variance occurs when the actual rate per unit of the cost-allocation base exceeds the budgeted rate, leading to higher costs than expected.

Question 6

In a combined 3-variance analysis, the total spending variance would be ________.

Accepted Answer

Spending variance = $7,200 F + $27,800 U = $20,600 U

Question 7

The following overhead variances would result in a total-overhead variance of $15,000 favorable: spending variance $5,000 U, efficiency variance $20,000 F, and production-volume variance $30,000 U.

Accepted Answer

It would be $15,000 unfavorable.

Question 8

Abby Company has just implemented a new cost accounting system that provides two variances for fixed manufacturing overhead. While the company's managers are familiar with the concept of spending variances, they are unclear as to how to interpret the production-volume overhead variances. Currently, the company has a production capacity of 54,000 units a month, although it generally produces only 46,000 units. However, in any given month the actual production is probably something other than 46,000.
Required:
a.Does the production-volume overhead variance measure the difference between the 54,000 and 46,000, or the difference between the 46,000 and the actual monthly production? Explain.
b.What advice can you provide the managers that will help them interpret the production-volume overhead variances?

Accepted Answer

The answer of Abby Company has just implemented a new...

Question 9

Skizone Company's 4-Variance Analysis:

If Skizone's combined 4-Variance Analysis shows an unfavorable spending variance of $2,900, what is the fixed overhead spending variance (a)?

Accepted Answer

Fixed overhead spending variance = $2,900 U - $6,900 F = $9,800 U

Question 10

Variable overhead has no production-volume variance.

Accepted Answer

The answer of Variable overhead has no production-volume variance....

Question 11

The accounting for 3-variance analysis is simpler than the 4-variance analysis, but some
information is lost because the variable and fixed overhead spending variances are combined
into a single total overhead spending variance.

Accepted Answer

The statement is true. In a 3-variance analysis, the variable and fixed overhead spending variances are combined into the total overhead spending variance, which means that some information is lost. This makes the accounting simpler but reduces the level of detail available for analysis.

Question 12

What are the arguments for prorating a production-volume variance that has been deemed to be material among work-in-process, finished goods, cost and cost of goods sold as opposed to writing it all off to cost of goods sold?

Accepted Answer

The answer of What are the arguments for prorating a...

Question 13

Which of the following statements is true of fixed overhead cost variances?

Accepted Answer

The production volume variance is calculated as the difference between the flexible budget costs and the allocated overhead costs. This variance reflects the difference between the expected and actual production levels.

Question 14

Fixed overhead costs ________.

Accepted Answer

Fixed overhead costs do not have an efficiency variance because efficiency variances are related to how efficiently a company uses its variable inputs. Fixed overhead costs, by definition, do not vary with the level of production or efficiency in the use of inputs.

Question 15

Which of the following statements is true of variable overhead costs?

Accepted Answer

Variable overhead costs are directly tied to production levels, meaning they do not have a production-volume variance. This variance typically applies to fixed overhead costs, which remain constant regardless of production levels. Variable costs, however, fluctuate with production volume, eliminating the concept of a production-volume variance for them.

Question 16

Skizone Company's 4-Variance Analysis:

Which of the following statements is true of Skizone's overhead variances?

Accepted Answer

The answer of Skizone Company's 4-Variance Analysis:

Which of the following...

Question 17

Explain two concerns when interpreting the production-volume variance as a measure of the economic cost of unused capacity.

Accepted Answer

The answer of Explain two concerns when interpreting the production-volume...

Question 18

The above table is a ________.

Accepted Answer

The answer of 
The above table is a ________.
...

Question 19

In the above table, the amounts for (A) and (B), respectively, are ________.

Accepted Answer

The answer of 
In the above table, the amounts for...

Question 20

The total overhead variance should be ________.

Accepted Answer

Total overhead variance = $7,500 F + $27,500 U + $38,000 U + $81,000 U = $139,000 U

Quiz 8: Flexible Budgets, Overhead Cost Variances, and Management Control