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

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Question 31

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

A) Variable overhead costs always have unused capacity.
B) Variable overhead costs have no production-volume variance.
C) Variable overhead costs have no spending variance.
D) Variable overhead costs have no efficiency variance.

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Question 32

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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?

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If variances are always written off to c...

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Question 33

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Bristol Fabricators, Inc., produces air purifiers in batches. To manufacture a batch of the purifiers, Bristol Fabricators, Inc., must set up the machines and assembly line tooling. Setup costs are batch-level costs because they are associated with batches rather than individual units of products. A separate Setup Department is responsible for setting up machines and tooling for different models of the air purifiers. Setup overhead costs consist of some costs that are variable and some costs that are fixed with respect to the number of setup-hours. The following information pertains to June 2015: Calculate the production-volume variance for fixed overhead setup costs. (Round all intermediary calculations to two decimal places and your final answer to the nearest whole number.)

A $5,000 unfavorable flexible-budget variance indicates that ________.

When variable overhead efficiency variance is favorable, it can be safely assumed that the ________.

Which of the following is not true of the 3 level variance analysis of operating income?

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?

Bristol Fabricators, Inc., produces air purifiers in batches. To manufacture a batch of the purifiers, Bristol Fabricators, Inc., must set up the machines and assembly line tooling. Setup costs are batch-level costs because they are associated with batches rather than individual units of products. A separate Setup Department is responsible for setting up machines and tooling for different models of the air purifiers. Setup overhead costs consist of some costs that are variable and some costs that are fixed with respect to the number of setup-hours. The following information pertains to June 2015: Calculate the spending variance for fixed overhead setup costs.

Hockey Accessories Corporation manufactured 22,400 duffle bags during March. The following fixed overhead data pertain to March: What is the flexible-budget amount?

Castleton Corporation manufactured 41,000 units during March. The following fixed overhead data relates to March: What is the amount of fixed overhead allocated to production?

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

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

When distribution costs are high, managers can use standard costing to analyze variances for spending and efficiency variances.

Which of the following is the mathematical expression for the budgeted fixed overhead cost per unit of cost allocation base?

If the production planners set the budgeted machine hours standards too tight, one could anticipate there would be a favorable variable overhead efficiency variance.

A favorable fixed overhead flexible-budget variance indicates that actual fixed costs exceeded the lump-sum amount budgeted.

Which of the following mathematical expression is used to calculate budgeted variable overhead cost rate per output unit?

Zitrik Corporation manufactured 130,000 buckets during February. The variable overhead cost-allocation base is $5.30 per machine-hour. The following variable overhead data pertain to February: What is the variable overhead efficiency variance?

Russo Corporation manufactured 17,000 air conditioners during November. The overhead cost-allocation base is $34.75 per machine-hour. The following variable overhead data pertain to November: What is the actual variable overhead cost?

Favorable overhead variances are always recorded with credits in a standard cost system.