chapter 8 ACCT MC

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) actual rate per unit of cost-allocation base is higher than budgeted rate

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) fixed overhead costs are treated as if they are a variable cost

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) the actual variable overhead cost per unit and the budgeted variable overhead cost per unit

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) Actual costs incurred — Flexible-budget amount

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) Actual leasing costs for the machine were higher than expected

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) 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

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) Leasing of machinery used in a factory

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) Operating-income volume variance

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) Unfavorable efficiency variance will be credited.

A company is using a standard cost system and receives its electricity bill. Electricity is considered a variable cost of operations for this company. The bill is for $15,000 and will be paid next month. Which of the following entries would be the correct recording of the electricity bill? A) Work-in-Process Control $15,000 Variable Overhead Allocated $15,000 B) Variable Overhead Control $15,000 Accounts payable $15,000 C) Work-in-Process Control $15,000 Accounts Payable $15,000 D) Variable Overhead Control $15,000 Variable Overhead Allocated $15,000

B) Variable Overhead Control $15,000 Accounts payable $15,000

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) Variable overhead costs have no production-volume variance.

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) Work-in-Process Control 240,000 Variable Manufacturing Overhead Allocated 240,000

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) 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

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) denominator-level variance

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

B) efficiency variance

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) focus on activities that add value for the customer and eliminate nonvalue-added activities

) 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) the actual variable manufacturing overhead exceeded the flexible-budget amount by $5,000

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) the price of fixed overhead items cost more than budgeted

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 same as; differently than

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) uses standard costs to determine the cost of products

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) 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.

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) The difference between flexible budget costs and allocated overhead costs will give the production volume variance.

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) a decline in the cost of energy

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) as flexible budget costs

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) choosing the appropriate level of capacity

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) choosing the appropriate level of capacity that will benefit the company in the long-run

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) fixed costs

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) flexible budget amount is lower than actual costs incurred

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) have no efficiency variance

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) measures the amount of extra fixed costs planned for but not used

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) redesigning products or processes to use fewer resources

The variable overhead flexible-budget variance can be further explained by calculating 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) spending variance and the efficiency variance

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) unfavorable fixed overhead flexible-budget variance

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) Budgeted input allowed per output unit × Budgeted variable overhead cost rate per input unit

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) Energy costs are a growing component of variable overhead costs.

Which of the following is not true of the 3 level variance analysis of operating income? A) Level 1 shows the static budget variance for operating income B) Level 2 shows the direct material price and efficiency variances C) Level 2 shows the sales-volume variance for operating income D) Level 3 shows the fixed overhead production volume variance as a component of the sales-volume variance for operating income

D) Level 3 shows the fixed overhead production volume variance as a component of the sales-volume variance for operating income

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) actual quantity of the cost-allocation base used is lower than the budgeted quantity

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) at the start of a budget period

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) budgeted fixed overhead − fixed overhead allocated for actual output

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) choosing the appropriate level of investment in productive assets

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) flexible-budget variance and the production-volume variance

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) very tight standards for materials-handling time

D) very tight standards for materials-handling time