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1. A key feature of a flexible budget is that actual results can be compared to budgeted
costs at the same level of activity.
2. Direct labor-hours would generally be a better measure of activity for a flexible budget
than direct labor cost.
3. In a flexible budget, when the activity declines, the variable costs per unit also
declines.
4. Fixed costs should not be included in a flexible budget because they do not change
when the level of activity changes.
5. To assess how well a production manager has controlled costs, actual costs should be
compared to what the costs should have been for the planned level of production.
7. The variable overhead efficiency variance provides a measure of how efficiently the
activity base which underlies the flexible budget is being utilized in production.
9. The higher the denominator activity level used to compute the predetermined overhead
rate, the higher the predetermined overhead rate.
10. In a standard costing system, if the actual fixed manufacturing overhead cost exceeds
the budgeted fixed manufacturing overhead cost for the period, then fixed
manufacturing overhead cost would be underapplied for the period.
11. When fixed manufacturing overhead cost is applied to work in process, it is treated as
if it were a variable cost.
12. A company has a standard cost system in which fixed and variable manufacturing
overhead costs are applied to products on the basis of direct labor-hours. The
company's choice of the denominator level of activity has no effect on the variable
portion of the predetermined overhead rate.
13. There can be a volume variance for either variable manufacturing overhead or fixed
manufacturing overhead.
15. A company has a standard cost system in which fixed and variable manufacturing
overhead costs are applied to products on the basis of direct labor-hours. A fixed
overhead volume variance will necessarily occur in a month in which actual direct
labor-hours differ from standard hours allowed.
17. When using a flexible budget, a decrease in activity within the relevant range:
A) decreases variable cost per unit.
B) decreases total costs.
C) increases total fixed costs.
D) increases variable cost per unit.
21. Which of the following variances is least significant from a standpoint of cost control?
A) materials price variance.
B) labor efficiency variance.
C) fixed overhead volume variance.
D) variable overhead spending variance.
23. If the denominator activity is less than the standard hours allowed for the actual
output, one would expect that:
A) the variable overhead efficiency variance would be unfavorable.
B) the fixed overhead volume variance would be favorable.
C) the fixed overhead budget variance would be unfavorable.
D) the variable overhead efficiency variance would be favorable.
27. The following costs appear in Malgorzata Company's flexible budget at an activity
level of 15,000 machine-hours:
Total Cost
Indirect materials............... $7,800
Factory rent........................ $18,000
What would be the flexible budget amounts at an activity level of 12,000 machine-
hours if indirect materials is a variable cost and factory rent is a fixed cost?
Solution:
The Inn's variable overhead costs are driven by the number of guests.
What would be the total budgeted overhead cost for a month if the activity level is 99
guests? Assume that the activity levels of 90 guests and 99 guests are within the same
relevant range.
A) $7,793.90
B) $61,541.00
C) $8,512.90
D) $7,739.00
The total overhead cost at an activity level of 9,200 patient-visits per month should be:
A) $260,360
B) $250,070
C) $249,300
D) $240,550
Solution:
The total overhead cost at an activity level of 9,700 guest-days per month should be:
A) $213,150
B) $237,650
C) $223,950
D) $224,920
Solution:
Solution:
Solution:
Solution:
Solution:
Solution:
Actual
Costs
Incurred
for Budget
Cost 19,700 Based on
Formula units 19,700
(per unit produce units
produced) d produced Variance
Variable overhead costs
(Supplies)......................... $2.17 X $42,749 $4,531 U
Solution:
Actual
Costs
Incurred Budget
Cost for Based on
Formula 11,600 11,600
(per machine- machine-
MH) hours hours Variance
Variable overhead costs
(Indirect materials)........... Y $28,420 X $3,828 U
What was the variable overhead spending variance for the month?
A) $2,000 favorable
B) $720 favorable
C) $1,260 unfavorable
D) $1,980 favorable
Solution:
Actual rate =
Actual total variable manufacturing overhead ÷ Actual machine-hours
Actual rate = $60,390 ÷ 9,900 = $6.10
Variable overhead spending variance = AH × (AR − SR)
9,900 × ($6.10 − $6.30) = 9,900 × (-$0.20) = $1,980 F
39. Teall Corporation has a standard cost system in which it applies manufacturing
overhead to products on the basis of standard machine-hours (MHs). The company has
provided the following data for the most recent month:
What was the fixed overhead budget variance for the month?
A) $4,000 unfavorable
B) $4,000 favorable
C) $570 favorable
D) $570 unfavorable
Solution:
Budget variance = Actual fixed overhead cost − Budgeted fixed overhead cost
= $54,000 − $50,000 = $4,000 U
40. Alapai Corporation has a standard cost system in which it applies manufacturing
overhead to products on the basis of standard machine-hours (MHs). The company has
provided the following data for the most recent month:
What was the total of the variable overhead spending and fixed overhead budget
variances for the month?
A) $3,720 favorable
B) $2,280 unfavorable
C) $1,840 favorable
D) $1,880 unfavorable
Solution:
Actual rate =
Actual total variable manufacturing overhead ÷ Actual machine-hours =
$66,960 ÷ 7,200 = $9.30
Variable overhead spending variance = AH × (AR − SR)
= 7,200 × ($9.30 − $9.40)
= 7,200 × (−$0.10) = $720 F
Solution:
Solution:
43. Goolden Electronics Corporation has a standard cost system in which it applies
manufacturing overhead to products on the basis of standard machine-hours (MHs).
The company had budgeted its fixed manufacturing overhead cost at $58,000 for the
month and its level of activity at 2,500 MHs. The actual total fixed manufacturing
overhead was $61,200 for the month and the actual level of activity was 2,600 MHs.
What was the fixed overhead budget variance for the month to the nearest dollar?
A) $880 unfavorable
B) $880 favorable
C) $3,200 favorable
D) $3,200 unfavorable
Solution:
The company actually worked 3,900 machine-hours during the month. The standard
hours allowed for the actual output were 3,890 machine-hours for the month. What
was the overall variable overhead efficiency variance for the month?
A) $760 favorable
B) $104 unfavorable
C) $180 favorable
D) $656 favorable
(1)
Budget
Based on (2)
Cost 3,900 Budget
Formula MHs Based on (1) − (2)
(per (AH × 3,890 MHs Efficiency
MH) SR) (SH × SR) Variance
Overhead Costs
Variable overhead costs:
Supplies..................... $ 3.10 $12,090 * $12,059 $ 31 U
*
Indirect labor............. 7.30 28,470 * $28,397 73 U
$10.40 $40,560 $104 U
The original budget was based on 4,200 machine-hours. The company actually worked
4,350 machine-hours during the month and the standard hours allowed for the actual
output were 4,190 machine-hours. What was the overall variable overhead efficiency
variance for the month?
A) $130 unfavorable
B) $950 favorable
C) $1,310 favorable
D) $1,440 unfavorable
(1)
Budget
Based (2)
on 4,350 Budget
Cost MHs Based on (1) − (2)
Formula (AH × 4,190 MHs Efficiency
(per MH) SR) (SH × SR) Variance
Variable overhead costs:
Supplies..................... $1.90 $8,265 * $7,961 $ 304 U
Indirect labor............. $7.10 $30,885 ** $29,749 1,136 U
$1,440 U
Solution:
Solution:
48. Hermansen Corporation produces large commercial doors for warehouses and other
facilities. In the most recent month, the company budgeted production of 5,100 doors.
Actual production was 5,400 doors. According to standards, each door requires 3.8
machine-hours. The actual machine-hours for the month were 20,880 machine-hours.
The budgeted supplies cost is $7.90 per machine-hour. The actual supplies cost for the
month was $152,063. The variable overhead efficiency variance for supplies cost is:
A) $10,045 F
B) $10,045 U
C) $2,844 F
D) $2,844 U
Solution:
Solution:
21,00
Denominator activity level in machine-hours................. 0
20,00
Standard machine-hours allowed for actual output........ 0
22,05
Actual number of machine-hours incurred..................... 0
What amount of total fixed manufacturing overhead cost did Ronda apply to
production last year?
A) $837,900
B) $840,000
C) $926,100
D) $972,405
Solution:
Solution:
Standard direct labor-hours per unit = 2,500 direct labor-hours ÷ 1,000 units
= 2.5 direct labor-hours per unit
Standard hours allowed = 2.5 direct labor hours per unit × 900 units
= 2,250 hours
52. Diehl Company uses a standard cost system in which it applies manufacturing
overhead to units of product on the basis of standard direct labor-hours. The
company's total applied factory overhead was $315,000 last year when the company
used 32,000 direct labor-hours as the denominator activity. If the variable factory
overhead rate was $8 per direct labor-hour, and if 30,000 standard labor-hours were
allowed for the output of the year, then the total budgeted fixed factory overhead for
the year must have been:
A) $60,000
B) $80,000
C) $90,000
D) $100,000
Solution:
Solution:
Actual units produced = Total direct labor-hours ÷ Standard direct labor-hours per unit
= 40,000 ÷ 0.5 = 80,000 units
Fixed manufacturing overhead cost per unit = $40,000 ÷ 80,000 units = $0.50 per unit
54. Bakos Corporation's abbreviated flexible budget for two levels of activity appears
below:
Cost Formula
(per machine- Activity
hour) (in machine-hours)
2,800 2,900
Total variable overhead cost....... $8.80 $ 24,640 $ 25,520
Total fixed overhead cost........... 100,688 100,688
$126,20
Total overhead cost..................... $125,328 8
If the denominator level of activity is 2,800 machine-hours, the variable element in the
predetermined overhead rate would be:
A) $44.76
B) $35.96
C) $43.52
D) $8.80
Solution:
Variable element = Total variable overhead cost ÷ Actual machine-hours
= $24,640 ÷ 2,800 machine-hours = $8.80 per machine-hour
55. Recht Corporation's summary flexible budget for two levels of activity appears below:
Cost Formula
(per machine- Activity
hour) (in machine-hours)
1,200 1,300
Total variable overhead cost....... $9.30 $ 11,160 $ 12,090
Total fixed overhead cost........... 17,940 17,940
Total overhead cost..................... $29,100 $30,030
If the denominator level of activity is 1,200 machine-hours, the fixed element in the
predetermined overhead rate would be:
A) $14.95
B) $930.00
C) $24.25
D) $9.30
Solution:
Solution:
Solution:
The company based its original budget on 6,100 machine-hours. The company
actually worked 6,480 machine-hours during the month. The standard hours allowed
for the actual output of the month totaled 6,370 machine-hours. What was the overall
fixed overhead budget variance for the month?
A) $500 favorable
B) $500 unfavorable
C) $1,570 favorable
D) $1,570 unfavorable
Solution:
Budget variance = Actual fixed overhead cost − Budgeted fixed overhead cost
= ($14,350 + $4,740 + $7,510) − ($14,500 + $5,200 + $7,400)
= $26,600 − $27,100 = $500 F
59. Songster Corporation applies manufacturing overhead to products on the basis of
standard machine-hours. Budgeted and actual overhead costs for the most recent
month appear below:
The company based its original budget on 3,500 machine-hours. The company
actually worked 3,700 machine-hours during the month. The standard hours allowed
for the actual output of the month totaled 3,820 machine-hours. What was the overall
fixed overhead budget variance for the month?
A) $2,432 favorable
B) $2,432 unfavorable
C) $420 favorable
D) $420 unfavorable
Solution:
Budget variance = Actual fixed overhead cost − Budgeted fixed overhead cost
= $26,180 − $26,600 = $420 F
60. Maertz Corporation applies manufacturing overhead to products on the basis of
standard machine-hours. The budgeted fixed overhead cost for the most recent month
was $10,890 and the actual fixed overhead cost for the month was $10,540. The
company based its original budget on 3,300 machine-hours. The standard hours
allowed for the actual output of the month totaled 3,240 machine-hours. What was the
overall fixed overhead budget variance for the month?
A) $198 unfavorable
B) $350 unfavorable
C) $198 favorable
D) $350 favorable
Solution:
Budget variance = Actual fixed overhead cost − Budgeted fixed overhead cost
= $10,540 − $10,890 = $350 F
The company based its original budget on 5,100 machine-hours. The company
actually worked 4,800 machine-hours during the month. The standard hours allowed
for the actual output of the month totaled 4,980 machine-hours. What was the overall
fixed overhead volume variance for the month?
A) $3,150 unfavorable
B) $3,150 favorable
C) $1,260 unfavorable
D) $1,260 favorable
62. Hoag Corporation applies manufacturing overhead to products on the basis of standard
machine-hours. Budgeted and actual fixed overhead costs for the most recent month
appear below:
The company based its original budget on 2,600 machine-hours. The company
actually worked 2,280 machine-hours during the month. The standard hours allowed
for the actual output of the month totaled 2,080 machine-hours. What was the overall
fixed overhead volume variance for the month?
A) $4,352 favorable
B) $4,352 unfavorable
C) $7,072 unfavorable
D) $7,072 favorable
Solution:
Solution:
Solution:
Capelli Hospital bases its budgets on patient-visits. The hospital's static budget for August
appears below:
65. The total variable overhead cost at an activity level of 9,300 patient-visits per month
should be:
A) $114,390
B) $149,730
C) $102,090
D) $133,630
Solution:
Solution:
Solution:
Mandalay Hotel bases its budgets on guest-days. The hotel's static budget for August appears
below:
Solution:
69. The total fixed overhead cost at an activity level of 5,500 guest-days per month should
be:
A) $139,700
B) $190,920
C) $244,200
D) $109,220
Solution:
Solution:
Isadore Hospital bases its budgets on patient-visits. The hospital's static budget for July
appears below:
Solution:
Actual
Costs Budget
Cost Incurred Based on
Formula for 7,800 7,800
(per patient- patient- patient-
visit) visits visits Variance
Variable overhead
costs (Supplies)....... $4.60 $38,250 $35,880 $2,370 U
72. The variance for laundry costs in the flexible budget performance report for the month
is:
A) $5,080 F
B) $5,080 U
C) $5,800 U
D) $5,800 F
Solution:
73. The variance for occupancy costs in the flexible budget performance report for the
month is:
A) $2,110 U
B) $2,990 U
C) $2,990 F
D) $2,110 F
Solution:
Moncrief Corporation bases its budgets on machine-hours. The company's static budget for
July appears below:
Solution:
Solution:
Solution:
Medlar Corporation's static budget for June appears below. The company bases its budgets on
machine-hours.
In June, the actual number of machine-hours was 9,300, the actual supplies cost was $19,760,
the actual power cost was $35,720, the actual salaries cost was $27,130, and the actual
equipment depreciation was $39,430.
77. The variance for supplies cost in the flexible budget performance report for the month
should be:
A) $180 U
B) $700 U
C) $700 F
D) $180 F
Actual
Cost Costs Budget
Formula Incurred for Based on
(per 9,300 9,300
machine- machine- machine-
hour) hours hours Variance
Variable overhead
costs (Supplies).... $2.20 $19,760 $20,460 $700 F
78. The variance for power cost in the flexible budget performance report for the month
should be:
A) $1,900 F
B) $1,900 U
C) $380 U
D) $380 F
Solution:
Solution:
A manufacturing company has a standard costing system based on standard direct labor-hours
(DLHs) as the measure of activity. Data from the company's flexible budget for
manufacturing overhead are given below:
The following data pertain to operations for the most recent period:
Solution:
81. How much overhead was applied to products during the period to the nearest dollar?
A) $18,050
B) $16,830
C) $15,974
D) $21,660
Solution:
Solution:
Actual
Cost Costs Budget
Formula Incurred Based on
(per 1,200 1,200 Spending
DLH) DLHs DLHs Variance
Variable overhead
costs....................... $3.80 * $4,380 $4,560 $180 F
Solution:
Cost Budget
Formula Based on Budget
(per 1,200 Based on Efficiency
DLH) DLHs 885 DLHs Variance
Variable overhead
costs....................... $3.80 * $4,560 $3,363 $1,197 U
84. What was the fixed overhead budget variance for the period to the nearest dollar?
A) $1,800 F
B) $3,268 F
C) $161 U
D) $4,650 U
Solution:
Solution:
Single Company has a standard cost system in which manufacturing overhead is applied to
units of product on the basis of standard direct labor-hours. The company has provided the
following data concerning its manufacturing overhead costs for last year:
Solution:
Solution:
A manufacturing company that has only one product has established the following standards
for its variable manufacturing overhead. The company uses machine-hours as its measure of
activity.
91. What is the variable overhead spending variance for the month?
A) $9,855 U
B) $1,125 F
C) $1,125 U
D) $9,855 F
Solution:
Solution:
Crispy Company manufactures smoke detectors and has developed the following flexible
budget for its overhead costs. Manufacturing overhead at Crispy is applied to production on
the basis of standard direct labor-hours:
Crispy was expecting to produce 40,000 detectors last year. The actual results for the year
were as follows:
Solution:
Actual
Cost Costs Budget
Formula Incurred Based on
(per 62,640 62,640 Spending
DLH) DLHs DLHs Variance
Variable overhead costs.. $4.50 * $278,748 $281,880 $3,132 F
Solution:
Solution:
Dagle Corporation has provided the following data for a recent month:.
Solution:
Solution:
98. The variable overhead spending variance for indirect labor is:
A) $32,854 F
B) $32,854 U
C) $37,398 F
D) $4,544 F
Solution:
Solution:
Macchi Corporation has provided the following data for a recent period:
Solution:
Solution:
Solution:
Solution:
Byers Corporation, which produces cellular transmission towers, has provided the following
data:
Solution:
Budget Budget
Cost Based on Based on
Formula 18,380 19,040 Efficiency
(per MH) MHs MHs Variance
Variable overhead costs (Indirect
labor)........................ $7.40 $136,012 $140,896 $4,884 F
Solution:
Czlapinski Corporation, which produces highway lighting poles, has provided the following
data:
106. The variable overhead efficiency variance for indirect labor is:
A) $918 F
B) $1,160 F
C) $918 U
D) $1,160 U
Solution:
Solution:
Quickle Corporation, which produces commercial windows, has provided the following data:
Solution:
Solution:
Geschke Corporation, which produces commercial safes, has provided the following data:
Solution:
Solution:
Bagley Company has a standard cost system in which manufacturing overhead is applied to
units of product on the basis of standard machine-hours. The company has provided the
following data concerning its manufacturing overhead costs for last year:
$260,00
Actual total overhead cost.......................... 0
$180,00
Budgeted fixed overhead cost.................... 0
Variable overhead rate............................... $2 per hour
Fixed overhead rate.................................... $6 per hour
Standard hours allowed for the output....... 32,000 hours
112. The volume variance for the year was:
A) $12,000 F
B) $4,000 F
C) $4,000 U
D) $16,000 U
Solution:
Fixed overhead rate = Budgeted fixed overhead cost ÷ Denominator activity level
= $6 per hour = $180,000 ÷ Denominator activity level
Denominator activity level × $6 per hour = $180,000
Denominator activity level = $180,000 ÷ $6 per hour = 30,000 hours
Volume variance = Fixed portion of predetermined overhead rate × (Denominator
hours − Standard hours allowed)
= $6 per hour × (30,000 hours − 32,000 hours)
= $6 per hours × 2,000 hours = $12,000 F
113. The denominator activity level used to compute predetermined overhead rates was:
A) 32,000 hours
B) 22,500 hours
C) 30,000 hours
D) it is impossible to determine from the data given
Solution:
Fixed overhead rate = Budgeted fixed overhead cost ÷ Denominator activity level
$6 per hour = $180,000 ÷ Denominator activity level
Denominator activity level × $6 per hour = $180,000
Denominator activity level = $180,000 ÷ $6 per hour = 30,000 hours
Use the following to answer questions 114-117:
A furniture manufacturer has a standard costing system based on standard direct labor-hours
(DLHs) as the measure of activity. Data from the company's flexible budget for
manufacturing overhead are given below:
The following data pertain to operations for the most recent period:
Solution:
Solution:
116. What was the fixed overhead budget variance for the period to the nearest dollar?
A) $265 F
B) $1,850 F
C) $2,671 U
D) $2,945 U
Solution:
Budget variance = Actual fixed overhead cost − Budgeted fixed overhead cost
= $91,225 − $93,075 = $1,850 F
117. What was the fixed overhead volume variance for the period to the nearest dollar?
A) $274 U
B) $1,095 F
C) $798 F
D) $821 F
Solution:
The following data pertain to operations for the most recent period:
Solution:
119. How much fixed overhead was applied to products during the period to the nearest
dollar?
A) $71,470
B) $69,275
C) $71,720
D) $69,731
Solution:
120. What was the fixed overhead budget variance for the period to the nearest dollar?
A) $1,739 F
B) $471 U
C) $250 F
D) $2,195 F
Solution:
Budget variance = Actual fixed overhead cost − Budgeted fixed overhead cost
= $71,470 − $71,720 = $250 F
121. What was the fixed overhead volume variance for the period to the nearest dollar?
A) $2,038 U
B) $456 F
C) $2,445 U
D) $1,989 U
Solution:
Rodriquez Manufacturing Company uses a standard cost system with machine-hours as the
activity base for overhead. Rodriquez used a denominator activity level of 15,000 machine-
hours last year. At this level, budgeted variable manufacturing overhead totaled $108,000 and
budgeted fixed manufacturing overhead totaled $378,000. During the year, 18,000 machine-
hours were actually incurred. The standard machine-hours allowed for actual output were
20,000. Total actual manufacturing overhead was $135,000 for variable overhead and
$394,200 for fixed overhead.
Solution:
Budget variance = Actual fixed overhead cost − Budgeted fixed overhead cost
= $394,200 − $378,000 = $16,200 U
123. What is Rodriquez's total under- or overapplied overhead cost?
A) $21,600 underapplied
B) $43,200 underapplied
C) $54,000 overapplied
D) $118,800 overapplied
Solution:
The following data pertain to operations for the most recent period:
Solution:
Predetermined overhead rate = ($12,760 + $29,810) ÷ 2,200 DLHs = $19.35 per DLH
125. How much overhead was applied to products during the period to the nearest dollar?
A) $42,570
B) $40,790
C) $40,635
D) $41,750
Solution:
Muscato Corporation's flexible budget for two levels of activity appears below:
Cost
Formula
(per
machine- Activity (in machine-
hour) hours)
7,500 7,600
Variable overhead costs:
Supplies................................ $ 9.70 $ 72,750 $ 73,720
Indirect labor........................ 9.30 69,750 70,680
Total variable overhead cost.... $19.00 142,500 144,400
Fixed overhead costs:
Salaries................................. 672,600 672,600
Occupancy costs................... 769,500 769,500
Total fixed overhead cost........ 1,442,100 1,442,100
$1,586,50
Total overhead cost.................. $1,584,600 0
126. If the denominator level of activity is 7,500 machine-hours, the variable element in the
predetermined overhead rate would be:
A) $208.75
B) $192.28
C) $211.28
D) $19.00
Solution:
Solution:
Solution:
Keeran Corporation's flexible budget for two levels of activity appears below:
Cost
Formula
(per
machine- Activity
hour) (in machine-hours)
6,100 6,200
Variable overhead costs:
Lubricants............................. $3.70 $ 22,570 $ 22,940
Power.................................... 1.50 9,150 9,300
Total variable overhead cost.... $5.20 31,720 32,240
Fixed overhead costs:
Depreciation.......................... 173,972 173,972
Taxes..................................... 68,076 68,076
Total fixed overhead cost......... 242,048 242,048
Total overhead cost.................. $273,768 $274,288
129. If the denominator level of activity is 6,100 machine-hours, the variable element in the
predetermined overhead rate would be:
A) $5.20
B) $44.24
C) $39.68
D) $44.88
Solution:
Solution:
Solution:
Kasteron Corporation has a standard cost system in which manufacturing overhead is applied
to units of product on the basis of standard machine-hours. The company has provided the
following data concerning its manufacturing overhead costs for last year:
Solution:
Budget variance = Actual fixed overhead cost − Budgeted fixed overhead cost
= $2,000 − $2,100 = $100 F
Solution:
Solution:
Budget variance = Actual fixed overhead cost − Budgeted fixed overhead cost
= $259,960 − $266,420 = $6,460 F
Solution:
The following data for May has been provided by Mccawley Corporation.
Solution:
Budget variance = Actual fixed overhead cost − Budgeted fixed overhead cost
= $56,290 − $53,820 = $2,470 U
Solution:
Variable costs:
Indirect materials............ $3,625 $3,780
Power.............................. $2,648 $2,576
Fixed costs:
Supervision..................... $9,670 $9,700
Depreciation.................... $4,210 $4,200
Required:
Prepare a report that would be useful in assessing how well costs were controlled in
this department.
Ans:
Flexible
budget
Cost Actual based on
formula costs actual
per unit incurred activity Variance
Variable costs:
Indirect materials.... $13.50 $3,625 $3,915 $290 F
Power...................... 9.20 2,648 2,668 20 F
Total variable cost..... $22.70 6,273 6,583 310 F
Fixed costs:
Supervision............. 9,670 9,700 30 F
Depreciation........... 4,210 4,200 10 U
Total fixed cost.......... 13,880 13,900 20 F
Total cost................... $20,153 $20,483 $330 F
Required:
What three criteria should be used when selecting an activity base for constructing a
flexible budget? Why are these criteria important?
Ans: The three criteria and the reasons for their importance are:
1. There should be a causal relationship between the activity base and the
overhead costs in the flexible budget. If variations in the activity base do not
cause variations in the costs, then the performance report will have little value.
3. The activity base should be simple and easy to understand. If the activity base
is complex or difficult to understand, it will probably cause confusion and
misunderstanding rather than serve as a means of positive cost control.
Required:
Prepare a flexible budget for an activity level of 5,300 patient-visits per month.
Ans:
Flexible
Cost Formula Budget Based
(per patient- on 5,300
visit) Patient-Visits
Variable overhead costs:
Supplies.................................... $2.70 $14,310
Laundry.................................... 3.00 15,900
Total variable overhead cost....... $5.70 30,210
Fixed overhead costs:
Wages and salaries................... 16,830
Occupancy costs...................... 16,830
Total fixed overhead cost............ 33,660
Total overhead cost..................... $63,870
Required:
Prepare a flexible budget in good form for an activity level of 6,400 machine-hours
per month.
Ans:
Cost Formula Flexible Budget Based
(per machine-hour) on 6,400 Machine-Hours
Variable overhead costs:
Supplies................................. $6.90 $44,160
Power..................................... 3.70 23,680
Total variable overhead cost..... $10.60 67,840
Fixed overhead costs:
Salaries.................................. 51,600
Equipment depreciation......... 26,400
Total fixed overhead cost......... 78,000
Total overhead cost................... $145,840
Required:
Required:
Required:
Ans:
Actual Flexible
Cost Costs Budget
Formula Incurred Based on
(per for 4,500 4,500
unit) Units Units Variances
Variable overhead costs:
Power.................................. $6.50 $31,840 $29,250 $2,590 U
Supplies............................... 1.10 4,730 4,950 220 F
Total variable overhead cost. . $7.60 36,570 34,200 2,370 U
Fixed overhead costs:
Salaries................................ 32,480 34,020 1,540 F
Occupancy costs................. 4,800 4,620 180 U
Total fixed overhead cost....... 37,280 38,640 1,360 F
Total overhead cost................ $73,850 $72,840 $1,010 U
Required:
b
. Actual output............................... 11,500 units
× Standard DLH per unit............. 2 DLH per unit
= Standard DLHs allowed........... 23,000 DLHs
Required:
a. The denominator activity level is 150,000 units. What are the predetermined
variable and fixed manufacturing overhead rates?
b. Actual data for the year were as follows:
$211,68
Actual variable manufacturing overhead cost................. 0
$343,00
Actual fixed manufacturing overhead cost..................... 0
Actual machine-hours incurred....................................... 126,000
Units produced and sold.................................................. 120,000
Compute the variable overhead spending and efficiency variances and the fixed
overhead budget and volume variances for the year.
Ans:
Required:
Compute the variable overhead spending variances for indirect labor and for power for
March. Indicate whether each of the variances is favorable (F) or unfavorable (U).
Show your work!
Ans:
Actual Costs Flexible
Cost Formula Incurred Budget Based
(per 41,160 on 41,160
machine- Machine- Machine- Spending
hour) Hours Hours Variance
Indirect labor.. $9.30 $363,400 $382,788 $19,388 F
Power............. $2.40 $94,821 $98,784 $3,963 F
Required:
Compute the variable overhead spending variances for indirect labor and for power for
November. Indicate whether each of the variances is favorable (F) or unfavorable (U).
Show your work!
Ans:
Actual Flexible
Costs Budget
Incurred Based on
Cost Formula 35,350 35,350
(per machine- Machine- Machine- Spending
hour) Hours Hours Variance
Indirect labor.. $8.80 $313,923 $311,080 $2,843 U
Power............. $2.40 $83,310 $84,840 $1,530 F
Required:
Compute the variable overhead spending variances for lubricants and for supplies for
October. Indicate whether each of the variances is favorable (F) or unfavorable (U).
Show your work!
Ans:
Actual Costs Flexible Budget
Cost Formula Incurred Based on
(per machine- 14,220 14,220 Spending
hour) Machine-Hours Machine-Hours Variance
Lubricants...... $1.00 $13,974 $14,220 $246 F
Supplies......... $1.60 $23,558 $22,752 $806 U
Required:
Compute the variable overhead spending variances for lubricants and for supplies.
Indicate whether each of the variances is favorable (F) or unfavorable (U). Show your
work!
Ans:
Cost Formula Actual Costs Flexible Budget
(per machine- Incurred 8,080 Based on 8,080 Spending
hour) Machine-Hours Machine-Hours Variance
Lubricants...... $4.20 $35,151 $33,936 $1,215 U
Supplies......... $2.90 $23,038 $23,432 $394 F
Required:
Prepare a variable overhead performance report in good form showing the total
variances, the spending variances, and the efficiency variances.
Ans:
Osika Corporation
Variable Overhead Performance Report
For the Month Ended November 30
Required:
Prepare a variable overhead performance report in good form showing the total
variances, the spending variances, and the efficiency variances.
Ans:
Koppa Corporation
Variable Overhead Performance Report
For the Month Ended January 31
Required:
Determine the total variance, the spending variance, and the efficiency variance for the
variable overhead item supplies cost that would appear on the company's variable
overhead performance report. Show your work!
Ans:
Required:
Determine the total variance, the spending variance, and the efficiency variance for the
variable overhead item power cost that would appear on the company's variable
overhead performance report. Show your work!
Ans:
Cost
Formula
(per
machine- Activity
hour) (in machine-hours)
3,000 3,100
Variable overhead costs:
Supplies................................. $4.40 $ 13,200 $ 13,640
Indirect labor......................... 4.40 13,200 13,640
Total variable overhead cost.... $8.80 26,400 27,280
Fixed overhead costs:
Salaries.................................. 55,800 55,800
Depreciation.......................... 58,590 58,590
Total fixed overhead cost......... 114,390 114,390
Total overhead cost.................. $140,790 $141,670
Required:
Ans:
Cost
Formula
(per
machine- Activity
hour) (in machine-hours)
5,600 5,700
Variable overhead costs:
Supplies....................................... $ 4.60 $ 25,760 $ 26,220
Wearing tools.............................. 8.60 48,160 49,020
Total variable overhead cost.......... $13.20 73,920 75,240
Fixed overhead costs:
Salaries........................................ 201,096 201,096
Occupancy costs......................... 354,312 354,312
Total fixed overhead cost............... 555,408 555,408
$630,64
Total overhead cost........................ $629,328 8
Required:
Determine the predetermined overhead rate for the denominator level of activity of
5,700 machine-hours. Show your work!
Ans:
Required:
Ans:
a. Budget variance = Actual fixed overhead cost − Budgeted fixed overhead cost
= $193,710 − $196,560 = $2,850 F
158. Holl Corporation has provided the following data for November.
Required:
Required:
Ans:
a. Budget variance = Actual fixed overhead cost − Budgeted fixed overhead cost
= $245,640 − $240,810 = $4,830 U