What is the difference between Questions number 126 and 130 that makes the answer different?

Cost Accounting, 13e (Horngren et al.) Chapter 8 Flexible Budgets, Overhead Cost Variances, and Management Control 41) Overhead costs have been increasing due to all of the following EXCEPT: A) increased automation B) more complexity in distribution processes C) tracing more costs as direct costs with the help of technology D) product proliferation Answer: C Diff: 3 Terms: total-overhead variance Objective: 1 AACSB: Reflective thinking 42) Effective planning of variable overhead costs means that a company performs those variable overhead costs that primarily add value for: A) the current shareholders B) the customer using the products or services C) plant employees D) major suppliers of component parts Answer: B Diff: 2 Terms: total-overhead variance Objective: 1 AACSB: Reflective thinking 43) Variable overhead costs include: A) plant-leasing costs B) the plant manager's salary C) depreciation on plant equipment D) machine maintenance Answer: D Diff: 1 Terms: total-overhead variance Objective: 1 AACSB: Reflective thinking 44) 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 Terms: total-overhead variance Objective: 1 AACSB: Reflective thinking 1 45) Effective planning of fixed overhead costs includes all of the following EXCEPT: A) planning day-to-day operational decisions B) eliminating nonvalue-added costs C) planning to be efficient D) choosing the appropriate level of capacity Answer: A Diff: 3 Terms: total-overhead variance Objective: 1 AACSB: Reflective thinking 46) Effective planning of variable overhead includes all of the following EXCEPT: A) choosing the appropriate level of capacity B) eliminating nonvalue-adding costs C) redesigning products to use fewer resources D) redesigning the plant layout for more efficient processing Answer: A Diff: 2 Terms: total-overhead variance Objective: 1 AACSB: Reflective thinking 47) Choosing the appropriate level of capacity: A) is a key strategic decision B) may lead to loss of sales if overestimated C) may lead to idle capacity if underestimated D) All of these answers are correct. Answer: A Diff: 2 Terms: production-volume variance Objective: 1 AACSB: Ethical reasoning 48) 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: 3 Terms: production-volume variance Objective: 1 AACSB: Reflective thinking 49) In a standard costing system, a cost-allocation base would MOST likely be: A) actual machine-hours B) normal machine-hours C) standard machine-hours 2 D) Any of these answers is correct. Answer: C Diff: 3 Terms: standard costing Objective: 2 AACSB: Reflective thinking 50) For calculating the costs of products and services, a standard costing system: A) only requires a simple recording system B) uses standard costs to determine the cost of products C) does not have to keep track of actual costs D) All of these answers are correct. Answer: D Diff: 3 Terms: standard costing Objective: 2 AACSB: Reflective thinking 51) The variable overhead flexible-budget variance measures the difference between: A) actual variable overhead costs and the static budget for variable overhead costs B) actual variable overhead costs and the flexible budget for variable overhead costs C) the static budget for variable overhead costs and the flexible budget for variable overhead costs D) None of these answers is correct. Answer: B Diff: 2 Terms: variable overhead flexible-budget variance Objective: 2 AACSB: Reflective thinking 52) 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 Terms: variable overhead flexible-budget variance Objective: 2 AACSB: Analytical skills 53) Which of the following is NOT a step in developing budgeted variable overhead rates? A) identifying the variable overhead costs associated with each cost-allocation base B) estimating the budgeted denominator level based on expected utilization of available capacity C) selecting the cost-allocation bases to use D) choosing the period to be used for the budget Answer: B Diff: 2 3 Terms: denominator level Objective: 2 AACSB: Analytical skills 54) 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 Terms: total-overhead variance Objective: 2 AACSB: Reflective thinking Answer the following questions using the information below: Shimon Corporation manufactures industrial-sized water coolers and uses budgeted machinehours to allocate variable manufacturing overhead. The following information pertains to the company's manufacturing overhead data: Budgeted output units 15,000 units Budgeted machine-hours 5,000 hours Budgeted variable manufacturing overhead costs for 15,000 units$161,250 Actual output units produced Actual machine-hours used Actual variable manufacturing overhead costs 22,000 units 7,200 hours $242,000 55) What is the budgeted variable overhead cost rate per output unit? A) $10.75 B) $11.00 C) $32.25 D) $48.40 Answer: A Explanation: A) $161,250/15,000 = $10.75 Diff: 2 Terms: total-overhead variance Objective: 2 AACSB: Analytical skills 4 56) What is the flexible-budget amount for variable manufacturing overhead? A) $165,000 B) $236,500 C) $242,000 D) None of these answers is correct. Answer: B Explanation: B) 22,000 ($161,250/15,000) = $236,500 Diff: 3 Terms: variable overhead flexible-budget variance Objective: 2 AACSB: Analytical skills 57) What is the flexible-budget variance for variable manufacturing overhead? A) $5,500 favorable B) $5,500 unfavorable C) $4,300 favorable D) None of these answers is correct. Answer: B Explanation: B) $242,000 - [22,000 ($161,250/15,000)] = $5,500 unfavorable Diff: 3 Terms: variable overhead flexible-budget variance Objective: 2 AACSB: Analytical skills 58) Variable manufacturing overhead costs were ________ for expected actual output. A) higher than B) the same as expected C) lower than expected D) indeterminable Answer: A Diff: 2 Terms: variable overhead flexible-budget variance Objective: 2 AACSB: Analytical skills Answer the following questions using the information below: White Corporation manufactures football jerseys and uses budgeted machine-hours to allocate variable manufacturing overhead. The following information pertains to the company's manufacturing overhead data: Budgeted output units 20,000 units Budgeted machine-hours 30,000 hours Budgeted variable manufacturing overhead costs for 20,000 units$360,000 Actual output units produced Actual machine-hours used Actual variable manufacturing overhead costs 18,000 units 28,000 hours $342,000 5 59) 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) $360,000/20,000 = $18.00 Diff: 2 Terms: total-overhead variance Objective: 2 AACSB: Analytical skills 60) What is the flexible-budget amount for variable manufacturing overhead? A) $324,000 B) $342,000 C) $380,000 D) None of these answers is correct. Answer: A Explanation: A) 18,000 ($360,000/20,000) = $324,000 Diff: 3 Terms: variable overhead flexible-budget variance Objective: 2 AACSB: Analytical skills 61) What is the flexible-budget variance for variable manufacturing overhead? A) $18,000 favorable B) $18,000 unfavorable C) zero D) None of these answers is correct. Answer: B Explanation: B) $342,000 - [18,000 ($360,000/20,000)] = $18,000 unfavorable Diff: 3 Terms: variable overhead flexible-budget variance Objective: 2 AACSB: Analytical skills 62) Variable-manufacturing overhead costs were ________ for actual output. A) higher than expected B) the same as expected C) lower than expected D) indeterminable Answer: A Diff: 2 Terms: variable overhead flexible-budget variance Objective: 2 AACSB: Analytical skills 6 Answer the following questions using the information below: Fearless Frank's Fertilizer Farm produces fertilizer and distributes the product by using his tanker trucks. Frank's uses budgeted fleet hours to allocate variable manufacturing overhead. The following information pertains to the company's manufacturing overhead data: Budgeted output units 300 truckloads Budgeted fleet hours 225 hours Budgeted pounds of fertilizer 12,000,000 pounds Budgeted variable manufacturing overhead costs for 300 loads $37,500 Actual output units produced and delivered Actual fleet hours Actual pounds of fertilizer produced and delivered Actual variable manufacturing overhead costs 315 truckloads 218 hours 12,600,000 pounds $38,250 63) What is the budgeted variable overhead cost rate per output unit? A) $120.00 B) $125.00 C) $166.67 D) $175.00 Answer: B Explanation: B) $37,500/300 = $125.00 Diff: 2 Terms: total-overhead variance Objective: 2 AACSB: Analytical skills 64) What is the flexible-budget amount for variable manufacturing overhead? A) $40,000 B) $39,375 C) $37,500 D) $38,250 Answer: B Explanation: B) 315 ($37,500/300) = $39,375 Diff: 3 Terms: variable overhead flexible-budget variance Objective: 2 AACSB: Analytical skills 7 65) What is the flexible-budget variance for variable manufacturing overhead? A) $1,125 favorable B) $1,125 unfavorable C) zero D) None of these answers are correct. Answer: A Explanation: A) $38,250 - [315 ($37,500/300)] = $1,125 favorable Diff: 3 Terms: variable overhead flexible-budget variance Objective: 2 AACSB: Analytical skills 66) Variable-manufacturing overhead costs were ________ for actual output. A) higher than expected B) the same as expected C) lower than expected D) indeterminable Answer: C Diff: 2 Terms: variable overhead flexible-budget variance Objective: 2 AACSB: Analytical skills 67) 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 Terms: variable overhead flexible-budget variance Objective: 3 AACSB: Reflective thinking 68) An unfavorable variable overhead spending variance indicates that: A) variable overhead items were not used efficiently B) the price of variable overhead items was more than budgeted C) the variable overhead cost-allocation base was not used efficiently D) the denominator level was not accurately determined Answer: B Diff: 2 Terms: variable overhead spending variance Objective: 3 AACSB: Reflective thinking 8 69) 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: 3 Terms: fixed overhead spending variance Objective: 3 AACSB: Reflective thinking 70) When machine-hours are used as an overhead cost-allocation base and the unexpected purchase of a new machine results in fewer expenditures for machine maintenance, the MOST likely result would be to report a(n): A) favorable variable overhead spending variance B) unfavorable variable overhead efficiency variance C) favorable fixed overhead flexible-budget variance D) unfavorable production-volume variance Answer: A Diff: 3 Terms: variable overhead spending variance Objective: 3 AACSB: Analytical skills 71) For variable manufacturing overhead, there is no: A) spending variance B) efficiency variance C) flexible-budget variance D) production-volume variance Answer: D Diff: 2 Terms: production-volume variance Objective: 3 AACSB: Reflective thinking 9 Answer the following questions using the information below: Kellar Corporation manufactured 1,500 chairs during June. The following variable overhead data pertain to June: Budgeted variable overhead cost per unit Actual variable manufacturing overhead cost Flexible-budget amount for variable manufacturing overhead Variable manufacturing overhead efficiency variance 72) What is the variable overhead flexible-budget variance? A) $1,200 favorable B) $360 unfavorable C) $1,560 favorable D) $1,200 unfavorable Answer: A Explanation: A) $16,800 - $18,000 = $1,200 (F) Diff: 2 Terms: variable overhead flexible-budget variance Objective: 3 AACSB: Analytical skills 73) What is the variable overhead spending variance? A) $840 unfavorable B) $1,200 favorable C) $1,200 unfavorable D) $1,560 favorable Answer: D Explanation: D) $1,200 (F) - $360 (U) = $1,560 (F) Diff: 2 Terms: variable overhead spending variance Objective: 3 AACSB: Analytical skills 10 $ 12.00 $16,800 $18,000 $360 unfavorable Answer the following questions using the information below: Patel Corporation manufactured 1,000 coolers during October. The following variable overhead data pertain to October: Budgeted variable overhead cost per unit Actual variable manufacturing overhead cost Flexible-budget amount for variable manufacturing overhead Variable manufacturing overhead efficiency variance 74) What is the variable overhead flexible-budget variance? A) $600 favorable B) $420 unfavorable C) $780 favorable D) $600 unfavorable Answer: A Explanation: A) $8,400 - $9,000 = $600 (F) Diff: 2 Terms: variable overhead flexible-budget variance Objective: 3 AACSB: Analytical skills 75) What is the variable overhead spending variance? A) $420 unfavorable B) $600 favorable C) $600 unfavorable D) $780 favorable Answer: D Explanation: D) $600 (F) - $180 (U) = $780 (F) Diff: 2 Terms: variable overhead spending variance Objective: 3 AACSB: Analytical skills 11 $ 9.00 $8,400 $9,000 $180 unfavorable Answer the following questions using the information below: Roberts Corporation manufactured 100,000 buckets during February. The overhead costallocation base is $5.00 per machine-hour. The following variable overhead data pertain to February: Actual Budgeted Production 100,000 units 100,000 units Machine-hours 9,800 hours 10,000 hours Variable overhead cost per machine-hour $5.25 $5.00 76) What is the actual variable overhead cost? A) $49,000 B) $50,000 C) $51,450 D) None of these answers is correct. Answer: C Explanation: C) 9,800 mh $5.25 = $51,450 Diff: 1 Terms: total-overhead variance Objective: 3 AACSB: Analytical skills 77) What is the flexible-budget amount? A) $49,000 B) $50,000 C) $51,450 D) None of these answers is correct. Answer: B Explanation: B) 10,000 mh $5.00 = $50,000 Diff: 2 Terms: variable overhead flexible-budget variance Objective: 3 AACSB: Analytical skills 78) What is the variable overhead spending variance? A) $1,000 favorable B) $1,450 unfavorable C) $2,450 unfavorable D) None of these answers is correct. Answer: C Explanation: C) ($5.25 - $5.00) 9,800 mh = $2,450 unfavorable Diff: 2 Terms: variable overhead spending variance Objective: 3 AACSB: Analytical skills 79) What is the variable overhead efficiency variance? 12 A) $1,000 favorable B) $1,450 unfavorable C) $2,450 unfavorable D) None of these answers is correct. Answer: A Explanation: A) [9,800 - 10,000] $5.00 = $1,000 favorable Diff: 2 Terms: variable overhead efficiency variance Objective: 3 AACSB: Analytical skills 13 Answer the following questions using the information below: Roberson Corporation manufactured 30,000 ice chests during September. The overhead costallocation 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 80) 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: 1 Terms: total-overhead variance Objective: 3 AACSB: Analytical skills 81) 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: 3 Terms: variable overhead flexible-budget variance Objective: 3 AACSB: Analytical skills 82) What is the variable overhead spending variance? 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 Terms: variable overhead spending variance Objective: 3 AACSB: Analytical skills 83) What is the variable overhead efficiency variance? 14 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 Terms: variable overhead efficiency variance Objective: 3 AACSB: Analytical skills Answer the following questions using the information below: Russo Corporation manufactured 16,000 space heaters during November. The overhead costallocation base is $15.75 per machine-hour. The following variable overhead data pertain to November: Actual Production 16,000 units Machine-hours 7,875 hours Variable overhead cost per machine-hour: $15.50 Budgeted 18,000 units 9,000 hours $15.75 84) What is the actual variable overhead cost? A) $122,063 B) $ 139,500 C) $124,031 D) $125,000 Answer: A Explanation: A) 7,875 mh $15.50 = $122,063 Diff: 1 Terms: variable overhead flexible-budget variance Objective: 3 AACSB: Analytical skills 85) What is the flexible-budget amount? A) $ 124,031.30 B) $126,000.00 C) $124,000.00 D) $139,500.00 Answer: B Explanation: B) 16,000 (9,000/18,000) $15.75 = $126,000 Diff: 3 Terms: variable overhead flexible-budget variance Objective: 3 AACSB: Analytical skills 86) What is the variable overhead spending variance? A) $2,250 unfavorable 15 B) $1,968.75 unfavorable C) $2,250 favorable D) $1,968.75 favorable Answer: D Explanation: D) ($15.50- $15.75) 7,875 mh = $1,968.75 favorable Diff: 3 Terms: variable overhead spending variance Objective: 3 AACSB: Analytical skills 87) What is the variable overhead efficiency variance? A) $1,968.75 favorable B) $1,968.75 unfavorable C) $2,250 favorable D) $2,250 unfavorable Answer: A Explanation: A) [7,875 - (16,000 9,000/18,000) mh] $15.75 = $1,968.75 favorable Diff: 3 Terms: variable overhead efficiency variance Objective: 3 AACSB: Analytical skills 88) What is the total variable overhead variance A) $3,937.50 unfavorable B) $1,968.75 unfavorable C) $3,937.50 favorable D) $1,968.75 favorable Answer: C Explanation: C) Actual variable overhead - Flexible budgeted variable overhead (7,875 mh $15.50) - [16,000 (9,000/18,000) mh $15.75] $122,062..50 - $126,000 = $3,937.50 favorable Diff: 3 Terms: variable overhead flexible-budget variance Objective: 3 AACSB: Analytical skills 89) The variable overhead efficiency variance is computed ________ and interpreted ________ the direct-cost efficiency variance. A) the same as; the same as B) the same as; differently than C) differently than; the same as D) differently than; differently than Answer: B Diff: 2 Terms: variable overhead efficiency variance Objective: 3 AACSB: Reflective thinking 16 90) An unfavorable variable overhead efficiency variance indicates that: A) variable overhead items were not used efficiently B) the price of variable overhead items was less than budgeted C) the variable overhead cost-allocation base was not used efficiently D) the denominator level was not accurately determined Answer: C Diff: 2 Terms: variable overhead efficiency variance Objective: 3 AACSB: Reflective thinking 91) Variable overhead costs can be managed by: A) reducing the consumption of the cost-allocation base B) eliminating nonvalue-adding variable costs C) planning for appropriate capacity levels D) Both A and B are correct. Answer: D Diff: 2 Terms: total-overhead variance Objective: 3 AACSB: Reflective thinking 92) When machine-hours are used as a cost-allocation base, the item MOST likely to contribute to a favorable variable overhead efficiency variance is: A) excessive machine breakdowns B) the production scheduler's impressive scheduling of machines C) a decline in the cost of energy D) strengthened demand for the product Answer: B Diff: 3 Terms: variable overhead efficiency variance Objective: 3 AACSB: Reflective thinking 93) When machine-hours are used as a cost-allocation base, the item MOST likely to contribute to an unfavorable variable overhead efficiency variance is: A) using more machine hours than budgeted B) workers wastefully using variable overhead items C) unused capacity D) more units being produced than planned Answer: A Diff: 3 Terms: variable overhead efficiency variance Objective: 3 AACSB: Reflective thinking 94) When machine-hours are used as an overhead cost-allocation base, a rush order resulting in unplanned overtime that used less-skilled workers on the machines would MOST likely 17 contribute to reporting a(n): A) favorable variable overhead spending variance B) unfavorable variable overhead efficiency variance C) favorable fixed overhead flexible-budget variance D) unfavorable production-volume variance Answer: B Diff: 3 Terms: variable overhead efficiency variance Objective: 3 AACSB: Ethical reasoning 95) When machine-hours are used as an overhead cost-allocation base and annual leasing costs for equipment unexpectedly increase, the MOST likely result would be to report a(n): A) unfavorable variable overhead spending variance B) favorable variable overhead efficiency variance C) unfavorable fixed overhead flexible-budget variance D) favorable production-volume variance Answer: C Diff: 3 Terms: fixed overhead flexible-budget variance Objective: 5 AACSB: Analytical skills 96) The fixed overhead cost variance can be further subdivided into the: A) price variance and the efficiency variance B) spending variance and flexible-budget variance C) production-volume variance and the efficiency variance D) flexible-budget variance and the production-volume variance Answer: D Diff: 1 Terms: total-overhead variance Objective: 5 AACSB: Reflective thinking 97) The amount reported for fixed overhead on the static budget is also reported: A) as actual fixed costs B) as allocated fixed overhead C) on the flexible budget D) Both B and C are correct. Answer: C Diff: 1 Terms: fixed overhead flexible-budget variance Objective: 4,5 AACSB: Reflective thinking 98) An unfavorable fixed overhead spending variance indicates that: A) there was more excess capacity than planned B) the price of fixed overhead items cost more than budgeted 18 C) the fixed overhead cost-allocation base was not used efficiently D) the denominator level was more than planned Answer: B Diff: 2 Terms: fixed overhead spending variance Objective: 5 AACSB: Reflective thinking 99) A favorable fixed overhead spending variance might indicate that: A) more capacity was used than planned B) the denominator level was less than planned C) the fixed overhead cost-allocation base was not used efficiently D) a plant expansion did not proceed as originally planned Answer: D Diff: 3 Terms: fixed overhead spending variance Objective: 5 AACSB: Reflective thinking 100) For fixed manufacturing overhead, there is no: A) spending variance B) efficiency variance C) flexible-budget variance D) production-volume variance Answer: B Diff: 2 Terms: total-overhead variance Objective: 5 AACSB: Reflective thinking Answer the following questions using the information below: Jenny's Corporation manufactured 25,000 grooming kits for horses during March. The fixedoverhead cost-allocation rate is $20.00 per machine-hour. The following fixed overhead data pertain to March: Production Machine-hours Fixed overhead costs for March Actual 25,000 units 6,100 hours $123,000 Static Budget 24,000 units 6,000 hours $120,000 101) What is the flexible-budget amount? A) $120,000 B) $122,000 C) $123,000 D) $125,000 Answer: A Explanation: A) $120,000, the same lump sum as the static budget 19 Diff: 2 Terms: total-overhead variance Objective: 5 AACSB: Analytical skills 102) What is the amount of fixed overhead allocated to production? A) $120,000 B) $122,000 C) $123,000 D) $125,000 Answer: D Explanation: D) 25,000 (6,000/24,000) $20.00 = $125,000 Diff: 3 Terms: production-volume variance Objective: 5 AACSB: Analytical skills 103) What is the fixed overhead spending variance? A) $1,000 unfavorable B) $2,000 favorable C) $3,000 unfavorable D) $5,000 favorable Answer: C Explanation: C) $123,000 actual costs - $120,000 budgeted cost = $3,000 unfavorable Diff: 3 Terms: fixed overhead spending variance Objective: 5 AACSB: Analytical skills 104) What is the fixed overhead production-volume variance? A) $1,000 unfavorable B) $2,000 favorable C) $3,000 unfavorable D) $5,000 favorable Answer: D Explanation: D) $120,000 - [25,000 (6,000/24,000) $20.00] = $5,000 favorable Diff: 3 Terms: production-volume variance Objective: 5 AACSB: Analytical skills Answer the following questions using the information below: Rutch Corporation manufactured 54,000 door jambs during September. The fixed-overhead costallocation rate is $50.00 per machine-hour. The following fixed overhead data pertain to September: Actual 20 Static Budget Production Machine-hours Fixed overhead costs for September 54,000 units 985 hours $53,400 60,000 units 1150 hours $57,500 105) What is the flexible-budget amount? A) $100,000 B) $53,400 C) $57,500 D) $51,750 Answer: C Explanation: C) $57,500, the same lump sum as the static budget Diff: 2 Terms: total-overhead variance Objective: 5 AACSB: Analytical skills 106) What is the amount of fixed overhead allocated to production? A) $51,750 B) $100,000 C) $53,400 D) $57,500 Answer: A Explanation: A) Rate for applying budgeted overhead = $57,500/1150 = $50/hr 54,000 (1150/60,000) 50.00 = $51,750 Diff: 3 Terms: production-volume variance Objective: 5 AACSB: Analytical skills 107) What is the fixed overhead spending variance? A) $5,750 unfavorable B) $5,750 favorable C) $4,100 favorable D) $4,100 unfavorable Answer: C Explanation: C) $53,400 actual costs - $57,500 budgeted cost = $4,100 favorable Diff: 3 Terms: fixed overhead spending variance Objective: 5 AACSB: Analytical skills Answer the following questions using the information below: Matthew's Corporation manufactured 10,000 golf bags during March. The fixed overhead costallocation rate is $20.00 per machine-hour. The following fixed overhead data pertain to March: Production Machine-hours Actual 10,000 units 5,100 hours 21 Static Budget 12,000 units 6,000 hours Fixed overhead cost for March $122,000 $120,000 108) What is the flexible-budget amount? A) $100,000 B) $102,000 C) $120,000 D) $122,000 Answer: C Explanation: C) $120,000, the same lump sum as the static budget Diff: 2 Terms: total-overhead variance Objective: 5 AACSB: Analytical skills 109) What is the amount of fixed overhead allocated to production? A) $100,000 B) $102,000 C) $120,000 D) $122,000 Answer: A Explanation: A) 10,000 (6,000/12,000) $20.00 = $100,000 Diff: 3 Terms: production-volume variance Objective: 5 AACSB: Analytical skills 110) What is the fixed overhead production-volume variance? A) $2,000 unfavorable B) $18,000 favorable C) $20,000 unfavorable D) $22,000 unfavorable Answer: C Explanation: C) $120,000 - [10,000 (6,000/12,000) $20.00] = $20,000 unfavorable Diff: 3 Terms: production-volume variance Objective: 5 AACSB: Analytical skills 22 111) Fixed overhead is: A) overallocated by $2,000 B) underallocated by $2,000 C) overallocated by $22,000 D) underallocated by $22,000 Answer: D Explanation: D) $122,000 - [10,000 (6,000/12,000) $20.00] = $22,000 underallocated Diff: 3 Terms: production-volume variance Objective: 5 AACSB: Analytical skills 112) The production-volume variance may also be referred to as the: A) flexible-budget variance B) denominator-level variance C) spending variance D) efficiency variance Answer: B Diff: 1 Terms: denominator level, denominator-level variance Objective: 5 AACSB: Analytical skills 113) A favorable production-volume variance indicates that the company: A) has good management B) has allocated more fixed overhead costs than budgeted C) has a total economic gain from using excess capacity D) should increase capacity Answer: B Diff: 2 Terms: production-volume variance Objective: 5 AACSB: Analytical skills 114) An unfavorable production-volume variance of $40,000 indicates that the company has: A) unused fixed manufacturing overhead capacity B) overallocated $40,000 of fixed manufacturing overhead costs C) $40,000 more capacity than needed D) an economic loss of $40,000 from selling fewer products than planned Answer: A Diff: 3 Terms: production-volume variance Objective: 5 AACSB: Analytical skills 23 115) When machine-hours are used as a cost-allocation base, the item MOST likely to contribute to a favorable production-volume variance is: A) an increase in the selling price of the product B) the purchase of a new manufacturing machine costing considerably less than expected C) a decline in the cost of energy D) strengthened demand for the product Answer: D Diff: 3 Terms: production-volume variance Objective: 5 AACSB: Analytical skills 116) When machine-hours are used as a cost-allocation base, the item MOST likely to contribute to an unfavorable production-volume variance is: A) a new competitor gaining market share B) a new manufacturing machine costing considerably more than expected C) an increase in the cost of energy D) strengthened demand for the product Answer: A Diff: 3 Terms: production-volume variance Objective: 5 AACSB: Analytical skills 117) Excess capacity is a sign: A) that capacity should be reduced B) that capacity may need to be re-evaluated C) that the company is suffering a significant economic loss D) of good management decisions Answer: B Diff: 2 Terms: production-volume variance Objective: 5 AACSB: Reflective thinking 118) An unfavorable production-volume variance: A) is not a good measure of a lost production opportunity B) measures the total economic gain or loss due to unused capacity C) measures the amount of extra fixed costs planned for but not used D) takes into account the effect of additional revenues due to maintaining higher prices Answer: C Diff: 3 Terms: production-volume variance Objective: 5 AACSB: Reflective thinking 24 119) The difference between budgeted fixed manufacturing overhead and the fixed manufacturing overhead allocated to actual output units achieved is called the fixed overhead: A) efficiency variance B) flexible-budget variance C) combined-variance analysis D) production-volume variance Answer: D Diff: 1 Terms: production-volume variance Objective: 5 AACSB: Reflective thinking 120) Variable overhead costs: A) never have any unused capacity B) have no production-volume variance C) allocated are always the same as the flexible-budget amount D) All of these answers are correct. Answer: D Diff: 2 Terms: total-overhead variance Objective: 6 AACSB: Reflective thinking 121) Fixed overhead costs: A) never have any unused capacity B) should be unitized for planning purposes C) are unaffected by the degree of operating efficiency in a given budget period D) Both A and B are correct. Answer: C Diff: 2 Terms: total-overhead variance Objective: 6 AACSB: Reflective thinking 122) Fixed overhead costs must be unitized for: A) financial reporting purposes B) planning purposes C) calculating the production-volume variance D) Both A and C are correct. Answer: D Diff: 2 Terms: production-volume variance Objective: 6 AACSB: Reflective thinking 25 123) Generally Accepted Accounting Principles require that unitized fixed manufacturing costs be used for: A) pricing decisions B) costing decisions C) external reporting D) All of these answers are correct. Answer: C Diff: 1 Terms: production-volume variance Objective: 6 AACSB: Reflective thinking 124) A nonfinancial measure of performance evaluation is: A) increased sales B) reducing distribution costs C) energy used per machine-hour D) All of these answers are correct. Answer: C Diff: 2 Terms: total-overhead variance Objective: 6 AACSB: Reflective thinking 125) Variance information regarding nonmanufacturing costs can be used to: A) plan capacity in the service sector B) control distribution costs in the retail sector C) determine the most profitable services offered by a bank D) All of these answers are correct. Answer: D Diff: 2 Terms: total-overhead variance Objective: 6 AACSB: Reflective thinking 126) Tucker Company uses a standard cost system. In March, $133,000 of variable manufacturing overhead costs were incurred and the flexible-budget amount for the month was $150,000. Which of the following variable manufacturing overhead entries would have been recorded for March? A) Accounts Payable Control and other accounts 150,000 Work-in-Process Control 150,000 B) Variable Manufacturing Overhead Allocated 150,000 Accounts Payable and other accounts 150,000 C) Work-in-Process Control 133,000 Accounts Payable Control and other accounts 133,000 D) Variable Manufacturing Overhead Control 133,000 Accounts Payable Control and other accounts 133,000 Answer: D Diff: 2 26 Terms: standard costing Objective: 6 AACSB: Analytical skills 127) Alvarado Company made the following journal entry: Variable Manufacturing Overhead Allocated 100,000 Variable Manufacturing Overhead Efficiency Variance30,000 Variable Manufacturing Overhead Control 125,000 Variable Manufacturing Overhead Spending Variance 5,000 A) Alvarado overallocated variable manufacturing overhead. B) A $5,000 favorable spending variance was recorded. C) Work-in-Process is currently overstated. D) This entry may be recorded yearly to provide timely feedback to managers. Answer: B Diff: 2 Terms: standard costing, variable overhead spending/efficiency variance Objective: 6 AACSB: Analytical skills 128) John's Football Manufacturing Company reported: Actual fixed overhead $800,000 Fixed manufacturing overhead spending variance $20,000 favorable Fixed manufacturing production-volume variance $30,000 unfavorable To isolate these variances at the end of the accounting period, John would debit Fixed Manufacturing Overhead Allocated for: A) $780,000 B) $790,000 C) $800,000 D) $810,000 Answer: B Explanation: B) $800,000 + $20,000 - $30,000 Diff: 2 Terms: fixed overhead spending variance, production-volume variance Objective: 6 AACSB: Analytical skills 129) Brandon's Basketball Manufacturing Company reported: Actual fixed overhead $1,000,000 Fixed manufacturing overhead spending variance $60,000 unfavorable Fixed manufacturing production-volume variance $40,000 unfavorable To isolate these variances at the end of the accounting period, Brandon would: A) debit Fixed Manufacturing Overhead Allocated for $1,000,000 B) debit Fixed Manufacturing Overhead Spending Variance for $60,000 C) credit Fixed Manufacturing Production-Volume Variance for $40,000 27 D) credit Fixed Manufacturing Control Allocated for $900,000 Answer: B Diff: 2 Terms: standard costing, fixed overhead spending variance, production-volume variance Objective: 6 AACSB: Analytical skills 130) Jovana Company uses a standard cost system. In March, $117,000 of variable manufacturing overhead costs were incurred and the flexible-budget amount for the month was $120,000. Which of the following variable manufacturing overhead entries would have been recorded for March? A) Accounts Payable Control and other accounts 120,000 Work-in-Process Control 120,000 B) Work-in-Process Control 120,000 Variable Manufacturing Overhead Allocated 120,000 C) Work-in-Process Control 117,000 Accounts Payable Control and other accounts 117,000 D) Accounts Payable Control and other accounts 117,000 Variable Manufacturing Overhead Control 117,000 Answer: B Diff: 2 Terms: standard costing Objective: 6 AACSB: Analytical skills 131) Tate Company makes the following journal entry: Variable Manufacturing Overhead Allocated 150,000 Variable Manufacturing Overhead Efficiency Variance 5,000 Variable Manufacturing Overhead Control Variable Manufacturing Overhead Spending Variance 125,000 30,000 A) Tate underallocated variable manufacturing overhead. B) A $30,000 unfavorable spending variance was recorded. C) Work-in-Process is currently understated. D) A $25,000 favorable flexible-budget variance was recorded. Answer: D Diff: 2 Terms: standard costing, variable overhead efficiency/spending variance Objective: 6 AACSB: Analytical skills 28 132) Jeremy's Football Manufacturing Company reported: Actual fixed overhead $500,000 Fixed manufacturing overhead spending variance $30,000 favorable Fixed manufacturing production-volume variance $20,000 unfavorable To isolate these variances at the end of the accounting period, Jeremy would debit Fixed Manufacturing Overhead Allocated for: A) $480,000 B) $490,000 C) $500,000 D) $510,000 Answer: D Diff: 2 Terms: standard costing, fixed overhead spending variance, production-volume variance Objective: 6 AACSB: Analytical skills 133) Kristin's Basketball Manufacturing Company reported: Actual fixed overhead $800,000 Fixed manufacturing overhead spending variance $60,000 favorable Fixed manufacturing production-volume variance $40,000 favorable To isolate these variances at the end of the accounting period, Kristin would debit: A) Fixed Manufacturing Overhead Allocated for $900,000 B) Fixed Manufacturing Overhead Spending Variance for $60,000 C) Fixed Manufacturing Production-Volume Variance for $40,000 D) All of these answers are correct. Answer: A Diff: 2 Terms: standard costing, fixed overhead spending variance, production-volume variance Objective: 6 AACSB: Analytical skills Answer the following questions using the information below: Variances Variable manufacturing overhead Fixed manufacturing overhead Spending $ 4,500 F $10,000 U ProductionEfficiency $15,000 U (A) 134) Above is a: A) 4-variance analysis B) 3-variance analysis C) 2-variance analysis D) 1-variance analysis Answer: A Diff: 1 Terms: total-overhead variance 29 Volume (B) $40,000 U Objective: 6 AACSB: Analytical skills 135) In the above chart, the amounts for (A) and (B), respectively, are: A) $10,500 U; $55,000 U B) $10,500 U; Zero C) Zero; $55,000 U D) Zero; Zero Answer: D Diff: 1 Terms: total-overhead variance Objective: 6 AACSB: Analytical skills 136) In a 3-variance analysis the spending variance should be: A) $ 4,500 F B) $10,000 U C) $ 5,500 U D) $10,500 U Answer: C Explanation: C) $4,500 F + $10,000 U = $5,500 U Diff: 1 Terms: total-overhead variance Objective: 6 AACSB: Analytical skills 137) In a 2-variance analysis the flexible-budget variance and the production-volume variance should be ________, respectively. A) $5,500 U; $55,000 U B) $20,500 U; $40,000 U C) $10,500 U; $50,000 U D) $60,500 U; Zero Answer: B Explanation: B) $4,500 F + $10,000 U + $15,000 U = $20,500 U; $40,000 U Diff: 2 Terms: total-overhead variance Objective: 6 AACSB: Analytical skills 138) In a 1-variance analysis the total overhead variance should be: A) $20,500 U B) $60,500 U C) $121,000 U D) None of these answers is correct. Answer: B Explanation: B) $4,500 F + $10,000 U + $15,000 U + $40,000 U = $60,500 U Diff: 2 Terms: total-overhead variance 30 Objective: 6 AACSB: Analytical skills Answer the following questions using the information below: Munoz, Inc., produces a special line of plastic toy racing cars. Munoz, Inc., produces the cars in batches. To manufacture a batch of the cars, Munoz, Inc., must set up the machines and molds. 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 molds for different styles of car. 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 2004: Units produced and sold Batch size (number of units per batch) Setup-hours per batch Variable overhead cost per setup-hour Total fixed setup overhead costs Actual Amounts 15,000 250 5 $40 $14,400 Static-budget Amounts 11,250 225 5.25 $38 $14,000 139) Calculate the efficiency variance for variable setup overhead costs. A) $1,900 unfavorable B) $600 unfavorable C) $1,900 favorable D) $600 favorable Answer: c Explanation: C) {[(15,000/ 250) 5] - [(15,000 / 225) 5.25] } $38 = $1,900 (F) Diff: 3 Terms: variable overhead efficiency variance Objective: 7 AACSB: Analytical skills 140) Calculate the spending variance for variable setup overhead costs. A) $1,900 unfavorable B) $1,900 favorable C) $600 unfavorable D) $600 favorable Answer: C Explanation: C) (15,000 / 250) 5 ($38 - $40) = $600 (U) Diff: 3 Terms: variable overhead spending variance Objective: 7 AACSB: Analytical skills 141) Calculate the flexible-budget variance for variable setup overhead costs. A) $600 favorable 31 B) $1,300 favorable C) $600 unfavorable D) $1,300 unfavorable Answer: B Explanation: B) $1,900 (F) + $600 (U) = $1,300 (F) Diff: 3 Terms: variable overhead flexible-budget variance Objective: 7 AACSB: Analytical skills 142) Calculate the spending variance for fixed setup overhead costs. A) $3,200 unfavorable B) $400 unfavorable C) $3,600 unfavorable D) $400 favorable Answer: B Explanation: B) $14,000 - $14,400 = $400 (U) Diff: 3 Terms: fixed overhead spending variance Objective: 7 AACSB: Analytical skills 143) Calculate the production-volume variance for fixed setup overhead costs. A) $4,666.67 unfavorable B) $400 unfavorable C) $4,666.67 favorable D) $400 favorable Answer: C Explanation: C) Normal setup hours = (11,250 / 225) 5.25 = 262.5 hours OH rate = $14,000 / 262.5 = $53.33 per setup hour [(15,000 / 225) 5.25 $53.33] - $14,000 = $4,666.67 favorable Diff: 3 Terms: production-volume variance Objective: 7 AACSB: Analytical skills 32 Answer the following questions using the information below: Lukehart Industries, Inc., produces air purifiers. Lukehart, Inc., produces the air purifiers in batches. To manufacture a batch of the purifiers, Lukehart, 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 2008: Units produced and sold Batch size (number of units per batch) Setup-hours per batch Variable overhead cost per setup-hour Total fixed setup overhead costs Budget Amounts 10,000 400 6 $50 $18,000 Actual Amounts 9,000 375 5.5 $52 $17,750 144) Calculate the efficiency variance for variable setup overhead costs. A) $150 favorable B) $114 favorable C) $264 unfavorable D) $264 favorable Answer: A Explanation: A) {[(9,000/ 375) 5.5] - [(9,000 / 400) 6] } $50 = $150 (F) Diff: 3 Terms: variable overhead efficiency variance Objective: 7 AACSB: Analytical skills 145) Calculate the spending variance for variable setup overhead costs. A) $150 unfavorable B) $150 favorable C) $264 unfavorable D) $264 favorable Answer: C Explanation: C) (9,000 / 375) 5.5 ($50 - $52) = $264 (U) Diff: 3 Terms: variable overhead spending variance Objective: 7 AACSB: Analytical skills 146) Calculate the flexible-budget variance for variable setup overhead costs. A) $114 favorable B) $264 favorable C) $264 unfavorable D) $114 unfavorable 33 Answer: D Explanation: D) $150 (F) - $264 (U) = $114 (U) Diff: 3 Terms: variable overhead flexible-budget variance Objective: 7 AACSB: Analytical skills 147) Calculate the spending variance for fixed setup overhead costs. A) $250 unfavorable B) $150 unfavorable C) $250 favorable D) $150 favorable Answer: C Explanation: B) $18,000 - $17,750 = $250 (F) Diff: 3 Terms: fixed overhead spending variance Objective: 7 AACSB: Analytical skills 148) Calculate the production-volume variance for fixed setup overhead costs. A) $1,800 favorable B) $1,800 unfavorable C) $250 unfavorable D) $250 favorable Answer: B Explanation: B) Normal setup hours = (10,000 / 400) 6 = 150 hours OH rate = $18,000 / 150 = $120.00 per setup hour [(9,000 / 400) 6 $120] - $18,000 = $1,800 unfavorable Diff: 3 Terms: production-volume variance Objective: 7 AACSB: Analytical skills 149) Fixed and variable cost variances can ________ be applied to activity-based costing systems. A) always B) most times C) seldom D) never Answer: A Diff: 1 Terms: total-overhead variance Objective: 7 AACSB: Analytical skills 34