ACCY 309 Chapter 8

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

A

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

B

All of the following are possible causes of actual machine hours exceeding budgeted machine hours except: A) Poor scheduling B) Actual leasing costs for the machine were higher than expected C) Machines were not maintained in good operating condition D) Budgeted standards were set to tight

B

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 C) the fixed overhead cost-allocation base was not used efficiently D) the denominator level was more than planned

B

Effective planning of variable overhead costs means that managers must A) increase the expenditures in the variable overhead budgets B) focus on activities that add value for the customer and eliminate nonvalue-added activities C) increase the linearity between total costs and volume of production D) identify the product advertising requirements and factor those into the variable overhead budget

B

Fixed overhead costs include ________. A) the cost of sales commissions B) Leasing of machinery used in a factory C) energy costs D) indirect materials

B

For fixed manufacturing overhead, there is no ________. A) spending variance B) efficiency variance C) flexible-budget variance D) production-volume variance

B

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

B

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

B

When variances are immaterial, which of the following statements is true of the journal entry to write-off the variable overhead variance accounts? A) Cost of Goods Sold account will always be debited. B) Unfavorable efficiency variance will be credited. C) Favorable efficiency variance will be credited. D) Cost of Goods Sold account will always be credited.

B

Which of the following is the correct mathematical expression is used to calculate variable overhead efficiency variance? A) (Actual rate − Budgeted rate) × Budgeted quantity B) (Actual quantity × Budgeted rate) - (Budgeted input quantity allowed for actual output × Budgeted rate) C) (Actual quantity ÷ Budgeted rate) − (Budgeted quantity ÷ Budgeted rate) D) (Actual quantity ÷ Budgeted rate) × Budgeted quantity allowed for actual output

B

Which of the following is the correct mathematical expression to calculate the fixed overhead spending variance? A) Static-budget amount — Flexible-budget amount B) Actual costs incurred — Flexible-budget amount C) Static-budget amount — Fixed overhead allocated for actual output D) Flexible-budget amount — Fixed overhead allocated for actual output

B

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

B

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

B

Compared to variable overhead costs planning, fixed overhead cost planning has an additional strategic issue beyond undertaking only essential activities and efficient operations. That additional requirement is best described as: A) focusing on the highest possible quality B) increasing the linearity between total costs and volume of production C) choosing the appropriate level of capacity that will benefit the company in the long-run D) identifying essential value-adding activities

C

Effective planning of variable overhead costs includes ________. A) choosing the appropriate level of investment B) eliminating value-added costs C) redesigning products or processes to use fewer resources D) reorganizing management structure

C

In flexible budgets the costs that are not "flexed" because they remain the same within a relevant range of activity (such as sales or output) are called ________. A) total overhead costs B) total budgeted costs C) fixed costs D) variable costs

C

The amount reported for fixed overhead on the static budget is also reported ________. A) as actual fixed costs B) as allocated fixed overhead costs C) as flexible budget costs D) as committed variable costs

C

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

C

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

C

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

C

Which of the following best defines standard costing? A) It is the same as actual costing but done in real time. B) It is a system that traces direct cost to output by multiplying actual process or rates by actual quantities of inputs + allocates overhead by on the basis of actual quantities of the allocation base used. C) It is a system that traces direct costs to output produced by multiplying the standard prices or rates by the standard quantities of inputs allowed for the actual output produced. D) It is a system that allocates overhead costs on the basis of standard overhead cost rates times the actual quantities of the allocation based used.

C

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 investment in productive assets

D

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

D

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

D

Which of the following is a true statement of energy costs? A) Energy costs are not controllable B) Strategies to reduce energy costs will not impact variable cost budgets. C) Energy costs are a fixed cost of doing business for a manufacturer. D) Energy costs are a growing component of variable overhead costs.

D

Which of the following is the correct mathematical expression to calculate the fixed overhead production-volume variance? A) static-budget amount − flexible-budget amount B) flexible-budget amount − actual costs incurred C) actual costs incurred − fixed overhead allocated for actual output D) budgeted fixed overhead − fixed overhead allocated for actual output

D

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

D

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

F

An unfavorable production-volume variance indicates an overallocation of fixed overhead costs.

F

Causes of a favorable variable overhead efficiency variance might include using lower-skilled workers than expected.

F

Computing standard costs at the start of the budget period results in a complex record keeping system.

F

Fixed costs automatically increase or decrease with the level of activity within a relevant range of activity.

F

Fixed costs for the period are by definition a lump sum of costs that remain unchanged and therefore the fixed overhead spending variance is always zero.

F

If budgeted and actual machine hours are equal, spending variance will always be nil.

F

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

F

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

F

Lump-sum fixed costs of acquiring capacity decrease automatically if the capacity needed turns out to be less than the capacity acquired.

F

Managers can always view a favorable variable overhead spending variance as desirable.

F

Prorated allocation of production-volume variance results in a higher operating income for current year than if the entire favorable production-volume variance were credited to Cost of Goods Sold.

F

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.

F

Allocated fixed overhead can be expressed in terms of allocation-base units or in terms of the budgeted fixed cost per unit.

T

An effective plan for variable overhead costs will eliminate activities that do not add value.

T

At the start of the budget period, management will have made most decisions regarding the level of fixed overhead costs to be incurred.

T

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

T

If fixed overhead cost variances are always written off to Cost of Goods Sold, operating income can be manipulated for either financial reporting or income tax purposes.

T

If the company's fixed overhead spending variance was unfavorable it could be attributed to higher plant-leasing costs.

T

Prorated allocation of production-volume variance has the effect of approximating the allocation of fixed costs based on actual costs and actual output.

T

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.

T

The costs related to buildings (such as rent and insurance), equipment (such as lease payments or straight-line depreciation), and salaried labor in a factory are all examples of cost items that would be part of the fixed overhead budget.

T

The flexible budget highlights the differences between budgeted costs and budgeted quantities versus actual costs and actual quantities for the budgeted output level.

T

The planning of fixed overhead costs differs from the planning of variable overhead costs in terms of timing.

T

The variable overhead efficiency variance is the difference between actual quantity of the cost-allocation base used and budgeted quantity of the cost-allocation base allowed for actual output, multiplied by the budgeted variable overhead cost per unit of the cost-allocation base.

T

Tightly budgeted machine time standards can lead to unfavorable variable overhead efficiency variance.

T

Unskilled work force can lead to unfavorable efficiency variance.

T

When forecasting fixed costs, managers should concentrate on total lump-sum costs instead of unitized fixed overhead costs.

T