cost accounting test bank chapter 8
Cost Accounting, 15e (Horngren/Datar/Rajan)
Chapter 8 Flexible Budgets, Overhead Cost Variances, and Management Control Objective 8.1
1) Compared to variable overhead costs planning, fixed overhead costs planning have an additional strategic issue of ________.
A) eliminating activities that do not add value
B) increasing the linearity between total costs and volume of production
C) choosing the appropriate level of investment
D) identifying essential value-adding activities
Answer: C
Diff: 2
Objective: 1
AACSB: Analytical thinking
2) Effective planning of variable overhead costs means that a company performs those variable overhead costs that primarily ________.
A) increase the planned variable overhead budgets
B) add value for the customer using the products or services
C) increase the linearity between total costs and volume of production
D) identify the product advertising requirements
Answer: B
Diff: 1
Objective: 1
AACSB: Analytical thinking
3) Which of the following statements is true of variable overhead costs?
A) All the decisions determining the level of variable overhead costs are made at the start of a budget period.
B) Planning of variable overhead costs includes choosing the appropriate level of capacity.
C) Activities which add value are of least relevance while planning variable overhead costs.
D) The level of variable overhead costs incurred in a period is mainly determined by day-to-day operating decisions.
Answer: D
Diff: 2
Objective: 1
AACSB: Analytical thinking
4) Fixed overhead costs include ________.
A) the cost of sales commissions
B) property taxes paid on plant facilities
C) energy costs
D) indirect materials
Answer: B
Diff: 1
Objective: 1
AACSB: Analytical thinking
5) Effective planning of fixed overhead costs includes ________.
A) planning day-to-day operational decisions
B) eliminating value-added costs
C) determining which products are to be produced
D) choosing the appropriate level of capacity
Answer: D
Diff: 2
Objective: 1
AACSB: Analytical thinking
6) Effective planning of variable overhead costs includes ________.
A) choosing the appropriate level of investment
B) eliminating value-added costs
C) redesigning products to use fewer resources
D) reorganizing management structure
Answer: C
Diff: 2
Objective: 1
AACSB: Analytical thinking
7) Most of the decisions determining the level of fixed overhead costs to be incurred will be made ________.
A) by the end of a budget period
B) by the middle of a budget period
C) on a day-to-day ongoing basis
D) at the start of a budget period
Answer: D
Diff: 1
Objective: 1
AACSB: Analytical thinking
8) The major challenge when planning fixed overhead is ________.
A) calculating total costs
B) calculating the cost-allocation rate
C) choosing the appropriate level of capacity
D) choosing the appropriate planning period
Answer: C
Diff: 1
Objective: 1
AACSB: Analytical thinking
9) An effective plan for variable overhead costs will eliminate activities that do not add value. Answer: TRUE
Diff: 1
Objective: 1
AACSB: Analytical thinking
10) At the start of the budget period, management will have made most decisions regarding the level of fixed overhead costs to be incurred.
Answer: TRUE
Diff: 2
Objective: 1
AACSB: Analytical thinking
11) The planning of fixed overhead costs differs from the planning of variable overhead costs in terms of timing.
Answer: TRUE
Diff: 2
Objective: 1
AACSB: Analytical thinking
12) The planning of fixed overhead costs does not differ from the planning of variable overhead costs. Answer: FALSE
Explanation: The planning of fixed overhead costs differs from the planning of variable overhead costs in one important respect, timing. The level of fixed costs to be incurred will have been mostly decided upon at the start of the budget period, but the day-to-day ongoing operations decisions will be the main determinant in the level of variable overhead costs to be incurred in the period.
Diff: 1
Objective: 1
AACSB: Analytical thinking
Objective 8.2
1) Which of the following mathematical expression is used to calculate budgeted variable overhead cost rate per output unit?
A) Budgeted output allowed per input unit ×Budgeted variable overhead cost rate per input unit
B) Budgeted input allowed per output unit ÷Budgeted variable overhead cost rate per input unit
C) Budgeted output allowed per input unit ÷Budgeted variable overhead cost rate per input unit
D) Budgeted input allowed per output unit ×Budgeted variable overhead cost rate per input unit Answer: D
Diff: 2
Objective: 2
AACSB: Analytical thinking
2) While calculating the costs of products and services, a standard costing system ________.
A) allocates overhead costs on the basis of the actual overhead-cost rates
B) uses standard costs to determine the cost of products
C) does not keep track of overhead cost
D) traces direct costs to output by multiplying the standard prices or rates by the actual quantities Answer: B
Diff: 2
Objective: 2
AACSB: Analytical thinking
3) Which of the following is a step in developing budgeted variable overhead rates?
A) identifying the fixed costs associated with direct manufacturing labor
B) estimating the budgeted denominator level based on expected utilization of available capacity
C) selecting the cost-allocation base to use in allocating machine-handling costs
D) choosing the appropriate level of capacity or investment
Answer: C
Diff: 1
Objective: 2
AACSB: Analytical thinking
4) Which of the following is the mathematical expression for the budgeted fixed overhead cost per unit of cost allocation base?
A) Budgeted fixed overhead cost per unit of cost allocation base = Actual total costs in fixed overhead cost pool ÷ Budgeted total quantity of cost allocation base
B) Budgeted fixed overhead cost per unit of cost allocation base = Budgeted total costs in fixed overhead cost pool ÷ Budgeted total quantity of cost allocation base
C) Budgeted fixed overhead cost per unit of cost allocation base = Actual total costs in fixed overhead cost pool ÷ Actual total quantity of cost allocation base
D) Budgeted fixed overhead cost per unit of cost allocation base = Budgeted total costs in fixed overhead cost pool ÷ Actual total quantity of cost allocation base
Answer: B
Diff: 2
Objective: 2
AACSB: Analytical thinking
5) In flexible budgets, costs that remain the same regardless of the output levels within the relevant range are ________.
A) allocated costs
B) budgeted costs
C) fixed costs
D) variable costs
Answer: C
Diff: 1
Objective: 2
AACSB: Analytical thinking
6) Alka Corporation manufactures industrial-sized gas furnaces and uses budgeted machine-hours to allocate variable manufacturing overhead. The following information pertains to the company's manufacturing overhead data:
Budgeted output units 29,000 units
Budgeted machine-hours 10,150 hours
Budgeted variable manufacturing overhead costs for 10,150 hours $324,800
Actual output units produced 31,000 units
Actual machine-hours used 14,400 hours
Actual variable manufacturing overhead costs $333,250
What is the budgeted variable overhead cost rate per output unit?
A) $11.70
B) $11.75
C) $11.20
D) $11.00
Answer: C
Explanation: C) Machine hour per unit = 10,150 ÷ 29,000 = 0.35
Budgeted cost per machine hour = $324,800 ÷ 10,150 = $32
Budgeted cost per unit = $32 × 0.35 = $11.20
Diff: 2
Objective: 2
AACSB: Application of knowledge
7) Christine Corporation manufactures baseball uniforms and uses budgeted machine-hours to allocate variable manufacturing overhead. The following information pertains to the company's manufacturing overhead data:
Budgeted output units 10,000 units
Budgeted machine-hours 15,000 hours
Budgeted variable manufacturing overhead costs for 15,000 hours $180,000
Actual output units produced 9,000 units
Actual machine-hours used 14,000 hours
Actual variable manufacturing overhead costs $171,000
What is the budgeted variable overhead cost rate per output unit?
A) $12.00
B) $12.21
C) $18.00
D) $19.00
Answer: C
Explanation: C) Budgeted rate = $180,000/15,000 = $12.00 per machine hour
Budgeted machine hours per unit = 15,000/10,000 = 1.5 hours per unit
Cost rate per output unit = $12.00 x 1.5 = $18.00
Diff: 2
Objective: 2
AACSB: Analytical thinking
8) Green Energy Inc. produces fertilizer and distributes the product by using his tanker trucks. Green Energy uses budgeted fleet hours to allocate variable manufacturing overhead. The following information relates to the company's manufacturing overhead data:
Budgeted output units 730 truckloads
Budgeted fleet hours 511 hours
Budgeted pounds of fertilizer 24,000,000 pounds
Budgeted variable manufacturing overhead costs for 730 loads $89,425
Actual output units produced and delivered 720 truckloads
Actual fleet hours 436 hours
Actual pounds of fertilizer produced and delivered 25,200,000 pounds
Actual variable manufacturing overhead costs $87,120
What is the budgeted variable overhead cost rate per output unit?
A) $120.00
B) $122.50
C) $123.69
D) $121.00
Answer: B
Explanation: B) Budgeted fleet hours per unit = 511 ÷ 730= 0.7
Budgeted cost per fleet hour = $89,425 ÷ 511 = $175
Budgeted cost per unit = $175 × 0.7 = $122.5
Diff: 2
Objective: 2
AACSB: Application of knowledge
9) Standard costing is a costing system that allocates overhead costs on the basis of the standard overhead-cost rates times the standard quantities of the allocation bases allowed for the actual outputs produced.
Answer: TRUE
Diff: 1
Objective: 2
AACSB: Analytical thinking
10) Fixed costs automatically increase or decrease with the level of activity within a relevant range of activity.
Answer: FALSE
Explanation: Fixed costs do not automatically increase or decrease with the level of activity within the relevant range.
Diff: 1
Objective: 2
AACSB: Analytical thinking
11) Standard costing is a cost system that allocates overhead costs on the basis of overhead cost rates based on actual overhead costs times the standard quantities of the allocation bases allowed for the actual outputs produced.
Answer: FALSE
Explanation: Standard costing is a costing system that traces direct costs to output produced by multiplying the standard prices or rates by the standard quantities of inputs allowed for actual outputs produced.
Diff: 2
Objective: 2
AACSB: Analytical thinking
12) Computing standard costs at the start of the budget period results in a complex record keeping system.
Answer: FALSE
Explanation: Computing standard costs at the start of the budget period simplifies record keeping because no records are needed of the actual overhead costs or of the actual quantities of the
cost-allocation bases used.
Diff: 2
Objective: 2
AACSB: Analytical thinking
13) List the four steps to develop budgeted variable overhead cost-allocation.
Answer: Step 1: Choose the period to be used for the budget.
Step 2: Select the cost-allocation bases to use in allocating the variable overhead costs to the output produced.
Step 3: Identify the variable overhead costs associated with each cost-allocation base.
Step 4: Compute the rate per unit of each cost-allocation base used to allocate the variable overhead costs to the output produced.
Diff: 2
Objective: 2
AACSB: Analytical thinking
14) What is a standard costing system?
Answer: Standard costing is a costing system that (1) traces direct costs to output produced by multiplying the standard prices or rates by the standard quantities of inputs allowed for actual outputs produced and (2) allocates overhead costs on the basis of the standard overhead-cost rates times the standard quantities of the allocation bases allowed for the actual outputs produced.
Diff: 2
Objective: 2
AACSB: Analytical thinking
Objective 8.3
1) The variable overhead spending variance measures the difference between ________, multiplied by the actual quantity of variable overhead cost-allocation base used.
A) the actual variable overhead cost per unit and the budgeted variable overhead cost per unit
B) the standard variable overhead cost rate and the budgeted variable overhead cost rate
C) the actual variable overhead cost per unit and the budgeted fixed overhead cost per unit
D) the actual quantity per unit and the budgeted quantity per unit
Answer: A
Diff: 2
Objective: 3
AACSB: Analytical thinking
2) A $5,000 unfavorable flexible-budget variance indicates that ________.
A) the flexible-budget amount exceeded actual variable manufacturing overhead by $5,000
B) the actual variable manufacturing overhead exceeded the flexible-budget amount by $5,000
C) the flexible-budget amount exceeded standard variable manufacturing overhead by $5,000
D) the standard variable manufacturing overhead exceeded the flexible-budget amount by $5,000 Answer: B
Diff: 2
Objective: 3
AACSB: Analytical thinking
Use the following information to answer the following questions:
Autogas Corporation manufactures industrial-sized gas furnaces and uses budgeted machine hours to allocate variable manufacturing overhead. The following information relates to the company's manufacturing overhead data:
Budgeted output units 31,000 units
Budgeted machine-hours 16,585 hours
Budgeted variable manufacturing overhead costs for 16,585 hours $348,285
Actual output units produced 33,000 units
Actual machine-hours used 14,400 hours
Actual variable manufacturing overhead costs $384,000
3) What is the flexible-budget amount for variable manufacturing overhead?
A) $348,750
B) $370,755
C) $384,000
D) $360,727
Answer: B
Explanation: B) Budgeted machine hours per unit = 16,585 ÷ 31,000 = 0.535
Budgeted machine hours allowed for 33000 units = 33,000 × 0.535= 17,655
Budgeted variable overhead rate per machine hour = $348,285 ÷ 16,585 = $21.00
Flexible-budget amount = 17,655 × $21.00 = $370,755
Diff: 2
Objective: 3
AACSB: Application of knowledge
4) What is the flexible-budget variance for variable manufacturing overhead?
A) $13,245 unfavorable
B) $35,715 unfavorable
C) $13,245 favorable
D) $35,715 favorable
Answer: A
Explanation: A) Budgeted machine hours per unit = 16,585 ÷ 31,000 = 0.535
Budgeted machine hours allowed for 33000 units = 33,000 × 0.535 = 17,655
Budgeted variable overhead rate per machine hour = $348,285 ÷ 16,585 = $21.00
Flexible-budget amount = 17,655 × $21.00 = $370,755
Flexible-budget variance = $384,000 ? $370,755 = $13,245 unfavorable
Diff: 3
Objective: 3
AACSB: Application of knowledge
5) What is the amount of the budgeted variable manufacturing overhead cost per unit?
A) $11.745
B) $10.570
C) $11.235
D) $11.636
Answer: C
Explanation: C) Budgeted machine hours per unit = 16,585 ÷ 31,000 = 0.535
Budgeted variable overhead rate per machine hour = $348,285 ÷ 16,585 = $21.00
Budgeted variable manufacturing overhead cost per unit = 0.535 × $21.00 = $11.235
Diff: 3
Objective: 3
AACSB: Application of knowledge
Use the following information to answer the questions below:
Baseballic Corporation manufactures baseball uniforms and uses budgeted machine-hours to allocate variable manufacturing overhead. The following information relates to the company's manufacturing overhead data:
Budgeted output units 11,250 units
Budgeted machine-hours 22,500 hours
Budgeted variable manufacturing overhead costs for 22,500 hours $213,750
Actual output units produced 11,500 units
Actual machine-hours used 22,000 hours
Actual variable manufacturing overhead costs $225,000
6) What is the flexible-budget amount for variable manufacturing overhead?
A) $225,000
B) $218,500
C) $213,750
D) $221,750
Answer: B
Explanation: B) Budgeted machine hours per unit = 22,500 ÷ 11,250 = 2
Budgeted machine hours allowed for 11,500 units = 11,500 × 2 = 23,000
Budgeted variable overhead rate per machine hour = $213,750 ÷ 22,500 = $9.5
Flexible-budget amount = 23,000 × $9.5 = $218,500
Diff: 3
Objective: 3
AACSB: Application of knowledge
7) What is the flexible-budget variance for variable manufacturing overhead?
A) $6,500 unfavorable
B) $6,500 favorable
C) $11,250 unfavorable
D) $11,250 favorable
Answer: A
Explanation: A) Budgeted machine hours per unit = 22,500 ÷ 11,250 = 2
Budgeted machine hours allowed for 11,500 units = 11,500 × 2 = 23,000
Budgeted variable overhead rate per machine hour = $213,750 ÷ 22,500 = $9.5
Flexible-budget amount = 23,000 × $9.5 = $218,500
Flexible-budget variance = $225,000 ? $218,500 = $6,500 unfavorable
Diff: 3
Objective: 3
AACSB: Application of knowledge
8) What is the amount of the budgeted variable manufacturing overhead cost per unit?
A) $9.50 per unit
B) $18.58 per unit
C) $19.00 per unit
D) $19.56 per unit
Answer: C
Explanation: C) Budgeted machine hours per unit = 22,500 ÷ 11,250 = 2
Budgeted variable overhead rate per machine hour = $213,750 ÷ 22,500 = $9.5 Budgeted variable manufacturing overhead cost per unit = 2 × $9.5 = $19.00
Diff: 3
Objective: 3
AACSB: Application of knowledge
Use the following information to answer the questions below:
Mynarc Corporation produces fertilizer and distributes the product by using his tanker trucks. Mynarc uses budgeted fleet hours to allocate variable manufacturing overhead. The following information pertains to the company's manufacturing overhead data:
Budgeted output units 675 truckloads
Budgeted fleet hours 540 hours
Budgeted variable manufacturing overhead costs for 675 loads $82,350
Actual output units produced and delivered 630 truckloads
Actual fleet hours 436 hours
Actual variable manufacturing overhead costs $77,490
9) What is the flexible-budget amount for variable manufacturing overhead?
A) $83,025
B) $82,350
C) $76,860
D) $77,490
Answer: C
Explanation: C) Budgeted fleet hours per unit = 540 ÷ 675 = 0.8
Budgeted fleet hours allowed for 630 truckloads = 630 × 0.8 = 504
Budgeted variable overhead rate per machine hour = $82,350 ÷ 540 = $152.5
Flexible-budget amount = 504 × $152.5 = $76,860
Diff: 2
Objective: 3
AACSB: Application of knowledge
10) What is the flexible-budget variance for variable manufacturing overhead?
A) $4,860 favorable
B) $4,860 unfavorable
C) $630 favorable
D) $630 unfavorable
Answer: D
Explanation: D) Budgeted fleet hours per unit = 540 ÷ 675 = 0.8
Budgeted fleet hours allowed for 630 truckloads = 630 × 0.8 = 504
Budgeted variable overhead rate per machine hour = $82,350 ÷ 540 = $152.5
Flexible-budget amount = 504 × $152.5 = $76,860
Flexible-budget variance = $77,490 ? $76,860 = $630 U
Diff: 3
Objective: 3
AACSB: Application of knowledge
11) What is the budgeted variable manufacturing overhead cost per unit?
A) $183.00 per unit
B) $178.89 per unit
C) $119.25 per unit
D) $122.00 per unit
Answer: D
Explanation: D) Budgeted fleet hours per unit = 540 ÷ 675 = 0.8
Budgeted variable overhead rate per machine hour = $82,350 ÷ 540 = $152.5
Budgeted variable manufacturing overhead cost per unit = 0.8 × $152.5 = $122.00
Diff: 3
Objective: 3
AACSB: Application of knowledge
12) The variable overhead flexible-budget variance can be further subdivided into the ________.
A) price variance and the efficiency variance
B) static-budget variance and sales-volume variance
C) spending variance and the efficiency variance
D) sales-volume variance and the spending variance
Answer: C
Diff: 1
Objective: 3
AACSB: Analytical thinking
13) Teddy Company uses a standard cost system. In May, $234,000 of variable manufacturing overhead costs were incurred and the flexible-budget amount for the month was $240,000. Which of the following variable manufacturing overhead entries would have been recorded for May?
A) Accounts Payable Control and other accounts 240,000
Work-in-Process Control 240,000
B) Work-in-Process Control 240,000
Variable Manufacturing Overhead Allocated 240,000
C) Work-in-Process Control 234,000
Accounts Payable Control and other accounts 234,000
D) Accounts Payable Control and other accounts 234,000
Variable Manufacturing Overhead Control 234,000
Answer: B
Diff: 2
Objective: 3
AACSB: Analytical thinking
14) The flexible budget enables to highlight the differences ________.
A) between actual costs and actual quantities versus budgeted costs and budgeted quantities for the actual output level
B) between budgeted costs and budgeted quantities versus actual costs and budgeted quantities for the budgeted output level
C) between budgeted costs and actual quantities versus budgeted costs and budgeted quantities for the actual output level
D) between actual costs and actual quantities versus budgeted costs and budgeted quantities for the budgeted output level
Answer: B
Diff: 2
Objective: 3
AACSB: Analytical thinking
15) When machine-hours are used as an overhead cost-allocation base, the most likely cause of a favorable variable overhead spending variance is ________.
A) excessive machine breakdowns
B) the production scheduler efficiently scheduled jobs
C) a decline in the cost of energy
D) strengthened demand for the product
Answer: C
Diff: 2
Objective: 3
AACSB: Analytical thinking
16) The variable overhead efficiency variance measures the difference between the ________, multiplied by the budgeted variable overhead cost per unit of the cost-allocation base.
A) budgeted quantity of the cost-allocation base used and the budgeted quantity of the cost-allocation base that should have been used to produce the actual output
B) actual quantity of the cost-allocation base used and the budgeted quantity of the cost-allocation base that should have been used to produce the actual output
C) actual cost incurred and the budgeted quantity of the cost-allocation base that should have been used to produce the actual output
D) budgeted cost and the actual cost used to produce the actual output
Answer: B
Diff: 2
Objective: 3
AACSB: Analytical thinking
17) When variable overhead efficiency variance is favorable, it can be safely assumed that the ________.
A) actual rate per unit of the cost-allocation base is higher than the budgeted rate
B) actual quantity of the cost-allocation base used is higher than the budgeted quantity
C) actual rate per unit of the cost-allocation base is lower than the budgeted rate
D) actual quantity of the cost-allocation base used is lower than the budgeted quantity
Answer: D
Diff: 2
Objective: 3
AACSB: Analytical thinking
Neocomfort Corporation manufactured 3,000 chairs during June. The following variable overhead data relates to June:
Budgeted variable overhead cost per unit $ 12.00
Actual variable manufacturing overhead cost $49,900
Flexible-budget amount for variable manufacturing overhead $47,800
Variable manufacturing overhead efficiency variance $720 unfavorable
18) What is the variable overhead flexible-budget variance?
A) $2,100 favorable
B) $1,380 favorable
C) $2,100 unfavorable
D) $1,380 unfavorable
Answer: C
Diff: 2
Objective: 3
AACSB: Application of knowledge
19) What is the variable overhead spending variance?
A) $1,380 favorable
B) $2,820 favorable
C) $2,820 unfavorable
D) $1,380 unfavorable
Answer: D
Explanation: D) Variable overhead flexible-budget variance = $2,100 (U)
Variable overhead efficiency variance = $720 (U)
Variable overhead spending variance = $2,100 (U) ? $720 (U) = $1,380 (U)
Diff: 3
Objective: 3
AACSB: Application of knowledge
Ecocomfort Corporation manufactured 1,000 coolers during October. The following variable overhead data relates to October:
Variable overhead spending variance $1,230 Unfavorable
Variable overhead efficiency variance $175 Unfavorable
Budgeted machine hours allowed for actual output 615 machine hours
Actual cost per machine hour $27
Budgeted cost per machine hour $25
20) Calculate the actual machine hours used by Stark during October.
A) 622 hours
B) 615 hours
C) 608 hours
D) 620 hours
Answer: A
Explanation: A) (Actual machine hours ? 615 budgeted machine hours) × $25 = $175
Actual machine hours = 7 hours + 615 hours = 622 hours
Diff: 2
Objective: 3
AACSB: Application of knowledge
21) Calculate the variable overhead flexible-budget variance.
A) $1,055 unfavorable
B) $1,055 favorable
C) $1,405 unfavorable
D) $1,405 favorable
Answer: C
Explanation: C) Variable overhead flexible-budget variance = $1,230 (U) + $175 (U) = $1,405 (U) Diff: 3
Objective: 3
AACSB: Application of knowledge
Zitrik Corporation manufactured 90,000 buckets during February. The variable overhead cost-allocation base is $5.05 per machine-hour. The following variable overhead data pertain to February:
Actual Budgeted
Production 90,000 units 90,000 units
Machine-hours 9,800 hours 9,000 hours
Variable overhead cost per machine-hour $5.15 $5.05
22) What is the actual variable overhead cost?
A) $463,500
B) $436,500
C) $50,470
D) $49,490
Answer: C
Explanation: C) Actual variable overhead cost = 9,800 mh × $5.15 = $50,470
Diff: 2
Objective: 3
AACSB: Application of knowledge
23) What is the flexible-budget amount?
A) $49,490
B) $45,450
C) $46,350
D) $47,650
Answer: B
Explanation: B) Flexible-budget amount = 9,000 mh × $5.05 = $45,450
Diff: 2
Objective: 3
AACSB: Application of knowledge
24) What is the variable overhead spending variance?
A) $980 favorable
B) $900 unfavorable
C) $980 unfavorable
D) $900 favorable
Answer: C
Explanation: C) Variable overhead spending variance = ($5.15 ? $5.05) × 9,800 mh = $980 unfavorable Diff: 3
Objective: 3
AACSB: Application of knowledge
A) $4,040 unfavorable
B) $4,120 favorable
C) $4,040 favorable
D) $4,120 unfavorable.
Answer: A
Explana tion: A) Variable overhead efficiency variance = *9,800 ? 9,000+ × $5.05 = $4,040 unfavorable Diff: 3
Objective: 3
AACSB: Application of knowledge
Answer the following questions using the information below:
Roberson Corporation manufactured 30,000 ice chests during September. The variable overhead cost-allocation base is $11.25 per machine-hour. The following variable overhead data pertain to September:
Actual Budgeted
Production 30,000 units 24,000 units
Machine-hours 15,000 hours 10,800 hours
Variable overhead cost per machine-hour: $11.00 $11.25
26) What is the actual variable overhead cost?
A) $121,500
B) $151,875
C) $165,000
D) $168,750
Answer: C
Explanation: C) 15,000 mh × $11.00 = $165,000
Diff: 2
Objective: 3
AACSB: Analytical thinking
27) What is the flexible-budget amount?
A) $121,500
B) $151,875
C) $165,000
D) $168,750
Answer: B
Explanation: B) 30,000 × (10,800/24,000) × $11.25 = $151,875
Diff: 2
Objective: 3
AACSB: Analytical thinking
A) $3,750 favorable
B) $16,875 unfavorable
C) $13,125 unfavorable
D) $30,375 unfavorable
Answer: A
Explanation: A) ($11.00 - $11.25) × 15,000 mh = $3,750 favorable
Diff: 3
Objective: 3
AACSB: Analytical thinking
29) What is the variable overhead efficiency variance?
A) $3,750 favorable
B) $16,875 unfavorable
C) $13,125 unfavorable
D) $30,375 unfavorable
Answer: B
Explanation: B) [15,000 - (30,000 × 10,800/24,000) mh] × $11.25 = $16,875 unfavorable
Diff: 3
Objective: 3
AACSB: Analytical thinking
Answer the following questions using the information below:
Russo Corporation manufactured 16,000 air conditioners during November. The overhead cost-allocation base is $31.50 per machine-hour. The following variable overhead data pertain to November:
Actual Budgeted
Production 16,000 units 18,000 units
Machine-hours 7,875 hours 9,000 hours
Variable overhead cost per machine-hour: $31.00 $31.50
30) What is the actual variable overhead cost?
A) $244,125
B) $279,000
C) $248,063
D) $250,000
Answer: A
Explanation: A) 7,875 mh × $31.00 = $244,125
Diff: 2
Objective: 3
AACSB: Analytical thinking
31) What is the flexible-budget amount?
A) $248,033
B) $252,000
C) $248,000
D) $279,000
Answer: B
Diff: 2
Objective: 3
AACSB: Analytical thinking
32) What is the variable overhead spending variance?
A) $4,500 unfavorable
B) $3,937.50 unfavorable
C) $4,500 favorable
D) $3,937.50 favorable
Answer: D
Explanation: D) ($31.00- $31.50) × 7,875 mh = $3,937.50 favorable
Diff: 3
Objective: 3
AACSB: Analytical thinking
33) What is the variable overhead efficiency variance?
A) $3,937.50 favorable
B) $3,937.50 unfavorable
C) $4,500 favorable
D) $4,500 unfavorable
Answer: A
Explanation: A) [7,875 - (16,000 × 9,000/18,000) mh] × $31.50 = $3,937.50 favorable Diff: 3
Objective: 3
AACSB: Analytical thinking
34) What is the total variable overhead variance
A) $7,875 unfavorable
B) $3,937.50 f unfavorable
C) $7,875 favorable
D) $3,937.50 f favorable
Answer: C
Explanation: C) Actual variable overhead - Flexible budgeted variable overhead (7,875 mh × $31.00) - [16,000 × (9,000/18,000) mh × $31.50]
$244,125 - $252,000 = $7,875 favorable
Diff: 3
Objective: 3
AACSB: Analytical thinking