Question 1

Bluetop Company uses a standard cost system. For the month of April, the firm budgeted $160,000 for total factory overhead based on 40,000 machine hours. The standard calls for 4.0 machine hours for each finished unit. During April, the firm used 39,000 machine hours to manufacture 9,500 units, and incurred $159,000 in total factory overhead.
Required:
1. Determine (to the nearest whole dollar) the total amount of standard factory overhead cost charged to production in April.
2. Provide the correct journal entry to record the application of standard factory overhead costs to production. (Assume that the company uses a single overhead account, Manufacturing Overhead.)

Accepted Answer

The answer of Bluetop Company uses a standard cost system....

Question 2

When there is a standard batch size for production activity:

Accepted Answer

DA modification of the traditional approach allows for detailed analysis of batch-related overhead costs, and the variable portion of the flexible-budget variance can be decomposed into spending and volume variances for better cost control.

Question 3

Which of the following is a characteristic of calculating standard cost variances for manufacturing overhead costs under an activity-based cost (ABC) system?

Accepted Answer

In an ABC system, there are typically more cost pools and cost drivers used for allocating manufacturing overhead costs, which will result in a greater number of standard cost variances being reported each period compared to a traditional cost system.

Question 4

What are the four (4) steps in determining the standard fixed factory overhead application rate? Does the procedure differ for product-costing versus cost-control purposes? Explain.

Accepted Answer

The answer of What are the four (4) steps in...

Question 5

The most appropriate end-of-period disposition of underapplied or overapplied factory overhead

Accepted Answer

The most appropriate method for handling underapplied or overapplied factory overhead depends on the significance of the variance. If the variance is small, it might be closed to cost of goods sold directly. If it's significant, it might be allocated between work in process, finished goods, and cost of goods sold based on a more detailed analysis.

Question 6

The term used to refer to persistent variances (i.e., those that are likely to recur until corrected) is

Accepted Answer

Systematic variance refers to variances that are persistent and likely to recur until corrected. Random variance, on the other hand, refers to variances that occur by chance and are unpredictable. Standard cost variance is a measure of the difference between actual and budgeted costs based on a predetermined standard cost. Non-controllable variance refers to variances that are beyond the control of the entity, while flexible-budget variance refers to the difference between actual and flexible budget amounts. None of these terms specifically refer to persistent variances.

Question 7

Which of the following would not be considered a possible cause of a controllable (i.e., a systematic) variance?

Accepted Answer

Random error is not a controllable or systematic variance as it is unpredictable and uncontrollable. All the other options (implementation error, modeling error, prediction error, and measurement error) can be controlled or minimized through careful planning and execution of research methods.

Question 8

Ben Simon Corp. has the following information about its standards and production activity for the month of November:Required:
Calculate (to the nearest whole dollar) and show supporting calculations for each of the following variances:
1. Variable overhead flexible-budget variance.
2. Fixed overhead spending variance.
3. Fixed overhead production volume variance.

Accepted Answer

The answer of Ben Simon Corp. has the following information...

Question 9

Bike Pedals manufactures bicycle seats. The company budgeted to manufacture 25,000 seats in April, with 0.05 standard machine hours per seat. Total variable factory overhead was budgeted at $30,000 for April. During April, the company manufactured 30,000 seats using 1,600 machine hours. It incurred $34,000 of variable factory overhead (VOH) costs.
Required:
Determine each of the following variances. Round all answers to nearest dollar.
1. Variable overhead spending variance.
2. Variable overhead efficiency variance.
3. Variable overhead flexible-budget variance.

Accepted Answer

The answer of Bike Pedals manufactures bicycle seats. The company...

Question 10

The following information is available from the Terry Company:$\begin{array}{lrr}
\text { Actual total factory overhead cost incurred } & \$ 25,000 \
\text { Actual fixed overhead cost incurred } & \$ 10,400 \
\text { Budgeted fixed overhead expenses } & \$ 11,000 \
\text { Actual direct labor hours (DLH) worked } & 4,400 \
\text { Standard DLHs for this period's production (output) } & 4,000 \
\text { Standard variable overhead rate per DLH } & \$  3.00 \
\text { Standard fixed overhead rate per DLH } & \$  2.50
\end{array}$The total overhead flexible-budget (FB) variance for the period, to the nearest dollar, is:

Accepted Answer

The answer of The following information is available from the...

Question 11

For which one of the following reasons is the calculation of overhead variances in conjunction with an activity-based cost (ABC) system desirable from the standpoint of management?

Accepted Answer

Activity-based cost (ABC) systems are designed to focus on managing activities instead of just focusing on costs. By calculating overhead variances in conjunction with an ABC system, managers can better understand the costs associated with different activities and determine areas for improvement or cost reduction. This approach aligns with the goal of managing activities rather than cost.

Question 12

McAllister Company's master budget for the year just completed was based on 100% capacity and included 40,000 machine hours and $240,000 total factory overhead. Budgeted fixed overhead at 75% of factory capacity would be $160,000 (and 30,000 machine hours). The company operated at 90% capacity for the year, and incurred $252,000 total factory overhead cost.

Required:
1. Determine the total overhead flexible-budget variance (to the nearest whole dollar) for the year. Show calculations.
2. Calculate the fixed overhead production-volume variance (to the nearest whole dollar) for the year. Show calculations.

Accepted Answer

The answer of McAllister Company's master budget for the year...

Question 13

Dillard, Inc., has developed the following standard cost data based on a denominator volume of 60,000 direct labor hours (DLHs). Budgeted fixed overhead is $360,000 and budgeted variable overhead is $180,000 at this level of activity.Required:
Determine (to the nearest dollar each) all variances for direct materials, direct labor, and factory overhead. Use a 4-variance breakdown (decomposition) of the total overhead variance for the period. Assume that the direct materials price variance is calculated at point of production, not point of purchase. Note: this problem requires knowledge from Chapter 14.

Accepted Answer

The answer of Dillard, Inc., has developed the following standard...

Question 14

A comprehensive management accounting and control system regarding manufacturing overhead costs:

Accepted Answer

A comprehensive management accounting and control system regarding manufacturing overhead costs includes both financial performance indicators and nonfinancial performance indicators. It provides financial-control information to operating personnel while both financial and nonfinancial performance indicators to managers. This system provides a complete picture of the manufacturing overhead costs, including both quantitative and qualitative aspects of performance, facilitating effective decision-making. Hence, option E is the correct choice.

Question 15

"Firms need to use the capacity of the equipment or division that is the 'bottleneck' of the manufacturing process as the denominator volume in setting the fixed overhead allocation rate. In cases where there is more than one 'bottleneck,' the denominator should be the smallest capacity among the bottleneck production processes."

Required:
1. What type of variance is related to this "denominator?" Explain.
2. Define the terms theoretical capacity, practical capacity, and budgeted capacity utilization. Of the three, which is considered most relevant for setting the predetermined overhead application rate for internal reporting purposes, particularly for fixed overhead costs? Explain.

Accepted Answer

The answer of "Firms need to use the capacity of...

Question 16

Which one of the following characteristics is associated with standard cost variance analysis for manufacturing overhead under a traditional versus an activity-based cost (ABC) system?

Accepted Answer

The answer of Which one of the following characteristics is...

Question 17

Which one of the following standard cost variances is not available when analyzing batch-related manufacturing overhead costs using an activity-based cost (ABC) system?

Accepted Answer

Sales volume variance is related to the difference between the actual and budgeted sales in terms of the number of units sold or revenue, which is not directly associated with analyzing batch-related manufacturing overhead costs in an activity-based costing (ABC) system. ABC focuses on the costs of activities necessary for production, not on sales volume.

Question 18

Which of the following is not a cost system proposed as an extension to ABC systems, with the overall goal of more accurately allocating manufacturing overhead costs to outputs?

Accepted Answer

Variable costing is not a cost system proposed as an extension to ABC systems.

Question 19

Erie Co. uses machine hours to apply standard overhead cost to production. The following data pertain to October:$\begin{array}{lr}
\text { Master budget data: } & \
\text { Units } & 100,500 \
\text { Total machine hours (denominator volume) } & \$ 250,000 \
\text { Total variable overhead cost } & \$ 50,000\\text { Actual operating results: }\
\text { Variable overhead cost incurred } & \$ 265,000 \
\text { Fixed overhead cost incurred } & \$ 54,000 \
\text { Units manufactured } & 2,250 \
\text { Total machine hours } & 96,000
\end{array}$Required:
Compute the following variances using machine hours as the activity variable used to assign standard overhead costs to production. Show calculations.
1. Variable overhead spending variance
2. Variable overhead efficiency variance
3. Fixed overhead spending variance
4. Fixed overhead production-volume variance

Accepted Answer

The answer of Erie Co. uses machine hours to apply...

Question 20

What are the three steps in establishing the standard application rate for variable factory overhead cost? Does this procedure differ for product-costing versus cost control purposes? Explain.

Accepted Answer

The answer of What are the three steps in establishing...

Quiz 15: Operational Performance Measurement: Indirect-Cost Variances and Resource-Capacity Management