Cost Exam Chapter 8
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
A
3) When variable overhead spending variance is unfavorable, it can be safely assumed that ________. A) actual rate per unit of cost-allocation base is higher than budgeted rate B) actual quantity of cost-allocation base used is higher than budgeted quantity C) actual rate per unit of cost-allocation base is lower than budgeted rate D) actual quantity of cost-allocation base used is lower than budgeted quantity
A
4) Under standard costing, ________. A) fixed overhead costs are treated as if they are a variable cost B) fixed overhead costs are treated as if they are a fixed cost C) variable overhead costs are treated as if they are a fixed cost D) fixed overhead costs are treated as if they are a sunk cost
A
1) Which of the following statements is true of variable overhead costs? A) Variable overhead costs always have unused capacity. B) Variable overhead costs have no production-volume variance. C) Variable overhead costs have no spending variance. D) Variable overhead costs have no efficiency variance.
B
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
B
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
B
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
B
18) Which of the following journal entries is used to record fixed overhead costs allocated? A) Fixed Overhead Allocated Work-in-Process Control B) Work-in-Process Control Fixed Overhead Allocated C) Fixed Overhead Control Work-in-Process Control D) Fixed Overhead Allocated Fixed Overhead Control
B
19) Bismith Company reported: Actual fixed overhead $500,000 Fixed manufacturing overhead spending variance $30,000 unfavorable Fixed manufacturing production-volume variance $20,000 unfavorable To record the write-off of these variances at the end of the accounting period, Bismith would ________. A) credit Fixed Manufacturing Overhead Allocated for $500,000 B) debit Fixed Manufacturing Overhead Spending Variance for $30,000 C) credit Fixed Manufacturing Production-Volume Variance for $20,000 D) debit Fixed Manufacturing Control for $500,000
B
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
B
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
B
2) 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
B
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
B
3) 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
3) Which of the following is a component of sales-volume variance? A) Net-income volume variance B) Operating-income volume variance C) Taxable-income volume variance D) Budgeted revenue variance
B
39) 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
4) Fixed overhead costs include ________. A) the cost of sales commissions B) property taxes paid on plant facilities C) energy costs D) indirect materials
B
4) Which of the following is the correct mathematical expression to calculate the fixed overhead spending variance? A) Static-budget amount — Flexible-budget amount B) Flexible-budget amount — Actual costs incurred C) Static-budget amount — Fixed overhead allocated for actual output D) Flexible-budget amount — Fixed overhead allocated for actual output
B
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
B
41) 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) skillful workforce C) additional machinery D) strengthened demand for the product
B
43) 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
5) For fixed manufacturing overhead, there is no ________. A) spending variance B) efficiency variance C) flexible-budget variance D) production-volume variance
B
6) 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
B
differently than
B
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
C
1) Standard costing can provide managers with reliable and timely information on variable distribution overhead ________. A) efficiency variances and production variances B) production-volume variances and spending variances C) efficiency variances and spending variances D) production-volume variances and sales variances
C
1) 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
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
C
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
C
2) Fixed overhead costs ________. A) never have any unused capacity B) have no spending variance C) have no efficiency variance D) have no production-volume variance
C
2) 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
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
C
37) An unfavorable variable overhead efficiency variance indicates that ________. A) the actual rate of variable overhead was more than budgeted rate B) the price of variable overhead items was less than budgeted C) the variable overhead cost-allocation base was not used efficiently D) the variable overhead cost-allocation base was used efficiently
C
4) When fixed overhead spending variance is unfavorable, it can be safely assumed that ________. A) flexible budget amount is higher than actual costs incurred B) fixed overhead allocated for actual output is lower than actual costs incurred C) flexible budget amount is lower than actual costs incurred D) fixed overhead allocated for actual output is higher than actual costs incurred
C
5) An unfavorable production-volume variance ________. A) is not a good measure of a lost production opportunity B) indicates that the company had reduced its per unit fixed overhead cost to improve sales 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
C
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
C
5) Which of the following statements is true of fixed overhead cost variances? A) The difference between actual costs and flexible budget costs will give the production volume variance. B) The difference between actual costs and static budget costs will give the production volume variance. C) The difference between flexible budget costs and allocated overhead costs will give the production volume variance. D) The difference between static budget costs and flexible budget costs will give the production volume variance.
C
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
C
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
C
1) 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
D
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
D
11) One possible reason for unfavorable variable overhead efficiency variance for materials handling is ________. A) inefficient layout of product distribution channels B) loosely budgeted standard hours C) very low wait time at work centers D) experienced but unmotivated employees
D
16) Which of the following statements is true of fixed overhead variances? A) The difference between actual costs and static budget costs will give the production volume variance. B) The difference between actual costs and static budget costs will always be nil. C) The difference between actual costs and flexible budget costs will give the production volume variance. D) The difference between flexible budget costs and static budget costs will always be nil.
D
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
D
17) 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
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
D
36) Mendel Company makes the following journal entry: Variable Manufacturing Overhead Allocated 200,000 Variable Manufacturing Overhead Efficiency Variance 5,000 Variable Manufacturing Overhead Control 175,000 Variable Manufacturing Overhead Spending Variance 30,000 Which of the following statements is true of the given journal entry? A) A variable manufacturing overhead cost of $175,000 is written-off. B) An unfavorable spending variance of $30,000 is recorded. C) A favorable efficiency variance of $5,000 is recorded. D) A favorable flexible-budget variance of $25,000 is recorded.
D
38) Osium Company made the following journal entry: Variable Manufacturing Overhead Allocated 200,000 Variable Manufacturing Overhead Efficiency Variance 60,000 Variable Manufacturing Overhead Control 250,000 Variable Manufacturing Overhead Spending Variance 10,000 Which of the following statements is true of the given journal entry? A) Osium overallocated variable manufacturing overhead. B) A $10,000 unfavorable spending variance was recorded. C) Work-in-Process is currently overstated. D) A $60,000 unfavorable efficiency variance was recorded.
D
40) Marshall Company uses a standard cost system. In April, $266,000 of variable manufacturing overhead costs were incurred and the flexible-budget amount for the month was $300,000. Which of the following variable manufacturing overhead entries would have been recorded for March? A) Accounts Payable Control and other accounts 300,000 Work-in-Process Control 300,000 B) Variable Manufacturing Overhead Allocated 300,000 Accounts Payable and other accounts 300,000 C) Work-in-Process Control 266,000 Accounts Payable Control and other accounts 266,000 D) Variable Manufacturing Overhead Control 266,000 Accounts Payable Control and other accounts 266,000
D
42) Which of the following journal entries is used to record actual variable overhead costs incurred? A) Accounts Payable Variable Overhead Control B) Variable Overhead Control Accounts Receivable C) Work-in-Process Control Variable Overhead Control D) Variable Overhead Control Accounts Payable
D
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
D
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
D
