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Cost Accounting, 15e Global Edition (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
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
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.
4) Fixed overhead costs include ________.
A) the cost of sales commissions
B) property taxes paid on plant facilities
C) energy costs
D) indirect materials
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
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
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
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
9) An effective plan for variable overhead costs will eliminate activities that do not add value.
10) At the start of the budget period, management will have made most decisions regarding the level of
fixed overhead costs to be incurred.
11) The planning of fixed overhead costs differs from the planning of variable overhead costs in terms of
timing.
12) The planning of fixed overhead costs does not differ from the planning of variable overhead costs.
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
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
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
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
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
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
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
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
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.
10) Fixed costs automatically increase or decrease with the level of activity within a relevant range of
activity.
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.
12) Computing standard costs at the start of the budget period results in a complex record keeping
system.
13) List the four steps to develop budgeted variable overhead cost-allocation.
14) What is a standard costing system?
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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 the following questions using the information below:
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
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 the following questions using the information below:
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
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 the following questions using the information below:
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
23) What is the flexible-budget amount?
A) $49,490
B) $45,450
C) $46,350
D) $47,650
24) What is the variable overhead spending variance?
A) $980 favorable
B) $900 unfavorable
C) $980 unfavorable
D) $900 favorable
25) What is the variable overhead efficiency variance?
A) $4,040 unfavorable
B) $4,120 favorable
C) $4,040 favorable
D) $4,120 unfavorable.
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
27) What is the flexible-budget amount?
A) $121,500
B) $151,875
C) $165,000
D) $168,750
28) What is the variable overhead spending variance?
A) $3,750 favorable
B) $16,875 unfavorable
C) $13,125 unfavorable
D) $30,375 unfavorable
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 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
31) What is the flexible-budget amount?
A) $248,033
B) $252,000
C) $248,000
D) $279,000
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
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
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
