Question;Review;Questions and Exercises;Completion Statements Fill in the;blank(s) to complete each statement.;1.;The variable overhead flexible-budget variance subdivides into which two;variances?;2.;To compute the budgeted variable overhead cost rate for a manufacturing;company, divide budgeted variable overhead costs by the budgeted quantity of;the;3.;To compute the budgeted fixed overhead cost rate for a manufacturing company;divide budgeted fixed overhead costs by the _) of the cost-allocation base.;4.;The __ variance is the difference between budgeted FOH and the FOH allocated on;the basis of actual output produced.;5.;Manufacturing companies treat fixed manufacturing overheadas ifit were a variable cost for which purpose of cost accounting?;6.;Fixed overhead is underallocated if the general ledger balance of the Fixed;Manufacturing Overhead Control account is __ than the balance of the Fixed;Manufacturing Overhead Allocated account.;7.;The amount of underallocated or overallocated total overhead is the same as the;amount of the ___ variance.;8.;Interpreting a cost variance for an activity area requires an understanding of;the _ __ used in ABC systems.;True-False;1. Budgeted overhead cost rates can be expressed as an amount per unit of;output or per unit of input.;2. There is no fundamental difference between the budgeted variable-overhead cost;rate per unit of input and the budgeted price of individual direct materials.;3. The variable-overhead spending variance is unfavorable if the actual;variable overhead cost rate per unit of input (the cost-allocation base) is;greater than the budgeted variable overhead cost rate per unit of input.;4. The variable overhead efficiency variance is computed similarly to the direct-labor;efficiency variance, and the meaning and interpretation of these variances are;basically the same.;5. If variable overhead is underallocated, this means the flexible-budget;variance for variable overhead is unfavorable.;F__ 6. The total amount of budgeted fixed manufacturing;overhead is affected by the production-denominator level chosen.;7.;The fixed manufacturing overhead cost per unit is inversely related to the;production-denominator level.;8. The production-volume variance is zero if actual output produced is equal to;the production-denominator level.;9. The production-volume variance is generally a good measure of the operating income;forgone by having unused capacity.;10. In 2-variance analysis of overhead costs, there is only one spending;variance.;11. Computing variances for fixed setup costs under an ABC system parallels the;computation of variances for fixed overhead costs under a non-ABC system.;Multiple Choice;Select;the best answer to each question. Space is provided for computations after the;quantitative questions.;B__ 1. (CPA) Information on Fire Company?s overhead;costs is as follows;Actual;variable overhead;$73,000;Actual;fixed overhead;$17,000;Budgeted;hours allowed for actual output produced;32,000;Budgeted;variable overhead cost rate per machine-hour;$2.50;Budgeted;fixed overhead cost rate per machine-hour;$0.50;The total overhead variance is;b.;$6,000 favorable.;A__ 2. (CPA adapted) Geyer Company uses standard costing.;For the month of April 2009, total overhead is budgeted at $80,000 based on;using 20,000 machine- hours. At standard, each finished unit of output requires;2 machine-hours. The following data are available for April 2011;Actual;units of output;produced;9,500;Machine-hours;used;19,500;Total;overhead incurred;$79,500;What;total amount of variable and fixed overhead should Geyer credit to the Manufacturing;Overhead Allocated account for April 2011?;a.;$76,000;C;3. The following information is for Pappillon Corporation?s variable;manufacturing overhead costs last month: favorable flexible-budget variance of;$3,000, unfavorable efficiency variance of $2,500.;The;spending variance is;c.;$5,500 favorable.;D___ 4. (CPA) Fawcett Company prepared the following;information on its manufacturing operations for 2010;Static Budget;Maximum Capacity;Percent of capacity;80%;100%;Machine-hours;3,200;4,000;Variable overhead;$64,000;$80,000;Fixed overhead;$160,000;$160,000;Fawcett;operated at 90% of maximum capacity during 2010. Actual manufacturing overhead;for 2010 is $252,000. Fawcett uses the 2-variance analysis of manufacturing;overhead. The total overhead flexible-budget variance for the year is;d.;$20,000 unfavorable.;Budgeted VOH cost rate = $64,000/3,200 = $20 per machine-hour;(or;$80,000/4,000 = $20 per machine-hour);TOH flexible-budget variance = $252,000?;[$160,000 + (4,000*0.90)($20)];= $252,000? ($160,000 + $72,000);= $252,000? $232,000 = $20,000, or $20,000 U;E;5. (CMA adapted) Edney Company uses standard costing. The standard cost of its;product is as follows;Direct;materials;$14.50;Direct;manufacturing labor;16.00;Manufacturing;overhead;2;machine-hours @ $11;22.00;Total;standard cost;$52.50;The;manufacturing overhead cost rate is based on a denominator level of 600,000 machine-hours.;Edney planned to produce 25,000 units each month during 2010. The budgeted;manufacturing overhead for 2010 is as follows;Variable;$3,600,000;Fixed;3,000,000;Total;$6,600,000;During;November 2010, Edney Company produced 26,000 units. Edney used 53,500;machine-hours in November. Actual manufacturing overhead for the month is;$315,000 variable and $260,000 fixed. The total manufacturing overhead;allocated during November is $572,000. The variable overhead spending variance;for November is;e.;$6,000 favorable.;B__ 6. Using the information in question 5, the variable;overhead efficiency variance for November is:b.;$9,000 unfavorable.;B__ 7. Using the information in question 5, the fixed;overhead flexible-budget (spending) variance for November is;b.;$10,000 unfavorable.;A__ 8. Using the information in question 5, the production-volume;variance for November is;a.;$10,000 favorable.;D;9. Considering questions 5 through 8, Edney Company is using which type of overhead;variance analysis?;d.;4-variance analysis;Review Exercises;1.;Regal Company provides the following information on its manufacturing;operations for April;Production in output units;400;Budgeted variable overhead cost rate per output unit;$3;Actual machine-hours used;700;Actual variable overhead costs;$1,350;Budgeted machine-hours allowed per output unit;1.50;a.;Compute the budgeted variable overhead cost rate per machine-hour.;b.;Compute the budgeted machine-hours allowed for actual output produced.;c.;Using the columnar format below, compute the variable overhead spending and;efficiency variances.;Use;F for favorable variances and U for unfavorable variances.;Actual Costs Incurred;Actual Input Quantity;? Budgeted Rate;Flexible Budget;Budgeted Input Quantity;Allowed for Actual Output;? Budgeted Rate;? VOH spending;variance? VOH efficiency variance?;d.;Prepare the journal entries to record variable overhead incurred, variable;overhead allocated, and the;variable;overhead spending and efficiency variances.;2.;The following information pertains to the manufacturing operations of Payton;Corporation;Budgeted fixed overhead;$1,800;Actual fixed overhead costs;$1,750;Denominator level in machine-hours;300;Budgeted machine-hours allowed for;actual output produced;280;a.;Compute the budgeted fixed overhead cost rate per machine-hour.;b.;Using the columnar format below, compute the fixed overhead spending and;production-volume variances. Use F for favorable variances and U for unfavorable;variances.;Actual;Costs Incurred;Same;Budgeted Lump-;Sum;Regardless of;Output;Level;Allocated;Budgeted;Input;Quantity;Allowed for Actual Output;?;Budgeted Rate;$1,750;$1,800 280 x $6 = $1,680;$50 F;$120 U;? FOH spending variance? Production-volume variance?;3.;(CPA) The following information relates to the manufacturing operations of;Herman Company for;March;Actual total overhead costs;$178,500;Flexible-budget formula based on machine-hours (MH);$110,000 + $0.50 per MH;Budgeted total overhead cost rate per MH;$1.50 per MH;Total overhead spending variance;$8,000 unfavorable;Production-volume variance;$5,000 favorable;Herman;uses the 3-variance analysis of overhead costs.;a.;Compute the actual machine-hours used.;b.;Compute the budgeted machine-hours allowed for actual output produced.
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