Flexible Budgets and Overhead Analysis
True/False Questions
1. A key feature of a flexible budget is that actual results can be compared to budgeted costs at the same level of activity.
Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy
2. Direct labor-hours would generally be a better measure of activity for a flexible budget than direct labor cost.
Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy
3. In a flexible budget, when the activity declines, the variable costs per unit also declines.
Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Medium
4. Fixed costs should not be included in a flexible budget because they do not change when the level of activity changes.
Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Medium
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.
Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Medium
6. The overhead spending variance is not affected by excessive usage or waste of overhead materials.
Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Easy
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.
Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Medium
8. 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 affects the fixed overhead volume variance.
Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5; 6 Level: Medium
9. The higher the denominator activity level used to compute the predetermined overhead rate, the higher the predetermined overhead rate.
Ans: False AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Easy
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.
Ans: False AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Hard
11. When fixed manufacturing overhead cost is applied to work in process, it is treated as if it were a variable cost.
Ans: True AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Medium
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.
Ans: True AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Medium
13. There can be a volume variance for either variable manufacturing overhead or fixed manufacturing overhead.
Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Medium
14. If the denominator level of activity is less than the standard hours allowed for the output of the period, then the volume variance is unfavorable, indicating an overutilization of available facilities.
Ans: False AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Medium
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.
Ans: False AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Hard
Multiple Choice Questions
16. The purpose of a flexible budget is to:
A) allow management some latitude in meeting goals.
B) eliminate fluctuations in production reports by ignoring variable costs.
C) compare actual and budgeted results at virtually any level of activity.
D) reduce the time to prepare the annual budget.
Ans: C AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy Source: CPA; adapted
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.
Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy Source: CPA; adapted
18. The activity base that is used for a flexible budget for an overhead cost should be:
A) direct labor-hours.
B) units of output.
C) expressed in dollars, if possible.
D) the cause of the overhead cost.
Ans: D AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy
19. A budget that is based on the actual activity of a period is known as a:
A) continuous budget.
B) flexible budget.
C) static budget.
D) master budget.
Ans: B AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy
20. The fixed manufacturing overhead budget variance equals:
A) Actual fixed manufacturing overhead cost--Applied fixed manufacturing overhead cost.
B) Actual fixed manufacturing overhead cost--Budgeted fixed manufacturing overhead cost.
C) Budgeted fixed manufacturing overhead cost--Applied fixed manufacturing overhead cost.
D) Actual fixed manufacturing overhead cost-- (Actual hours x Standard fixed overhead rate).
Ans: B AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Medium
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.
Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Medium
22. The manufacturing overhead variance that is a measure of capacity utilization is:
A) the overhead spending variance.
B) the overhead efficiency variance.
C) the overhead budget variance.
D) the overhead volume variance.
Ans: D AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Medium
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.
Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Medium
24. The volume variance is nonzero whenever:
A) standard hours allowed for the output of a period differ from the denominator level of activity.
B) actual hours differ from the denominator level of activity.
C) standard hours allowed for the output of a period differ from the actual hours during the period.
D) actual fixed overhead costs incurred during a period differ from budgeted fixed overhead costs as contained in the flexible budget.
Ans: A AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Medium
25. A volume variance is computed for:
A) both variable and fixed overhead.
B) variable overhead only.
C) fixed overhead only.
D) direct labor costs as well as overhead costs.
Ans: C AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Easy
26. Which of the following standard cost variances would usually be least controllable by a production supervisor?
A) Fixed overhead volume variance.
B) Variable overhead efficiency variance.
C) Direct labor efficiency variance.
D) Materials usage (quantity) variance.
Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Hard Source: CPA; adapted
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?
| |Indirect Materials |Factory Rent |
|A) |$7,800 |$14,400 |
|B) |$7,800 |$18,000 |
|C) |$6,240 |$14,400 |
|D) |$6,240 |$18,000 |
Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy
Solution:
Budgeted number of machine hours: 15,000
| |Cost Formula |Activity |
| |(per machine-hour) |(in machine-hours): |
| | |12,000 |
|Variable costs: | | |
|Indirect materials |$0.52* |$6,240 |
|Fixed costs: | | |
|Factory rent | |$18,000 |
*$7,800 ÷ 15,000 MHs = $0.52 per MH
28. Mongelli Family Inn is a bed and breakfast establishment in a converted 100-year-old mansion. The Inn's guests appreciate its gourmet breakfasts and individually decorated rooms. The Inn's overhead budget for the most recent month appears below:
| |Activity level |90 guests |
| | | |
| |Variable overhead costs: | |
| |Supplies |$ 234 |
| |Laundry |315 |
| |Fixed overhead costs: | |
| |Utilities |220 |
| |Salaries and wages |4,290 |
| |Depreciation | 2,680 |
| |Total overhead cost |$7,739 |
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
Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy
Solution:
Budgeted number of guests: 90
| | |Cost Formula (per |Activity |
| | |guest) |(in guests): 99 |
| |Overhead Costs | | |
| |Variable overhead costs: | | |
| |Supplies ($234 ÷ 90 guests) |$2.60 |$ 257.40 |
| |Laundry ($315 ÷ 90 guests) |3.50 | 346.50 |
| |Total variable overhead cost |$6.10 | 603.90 |
| |Fixed overhead costs: | | |
| |Utilities | |220.00 |
| |Salaries and wages | |4,290.00 |
| |Depreciation | | 2,680.00 |
| |Total fixed overhead cost | | 7,190.00 |
| |Total budgeted overhead cost | |$7,793.90 |
29. Kerekes Manufacturing Corporation has prepared the following overhead budget for next month.
| |Activity level |2,500 |machine-hours |
| | | | |
| |Variable overhead costs: | | |
| |Supplies |$12,250 | |
| |Indirect labor |22,000 | |
| |Fixed overhead costs: | | |
| |Supervision |15,500 | |
| |Utilities |5,500 | |
| |Depreciation | 6,500 | |
| |Total overhead cost |$61,750 | |
The company's variable overhead costs are driven by machine-hours.
What would be the total budgeted overhead cost for next month if the activity level is 2,400 machine-hours rather than 2,500 machine-hours? Assume that the activity levels of 2,500 machine-hours and 2,400 machine-hours are within the same relevant range.
A) $59,830.00
B) $59,280.00
C) $60,380.00
D) $61,750.00
Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy
Solution:
| | |Budgeted variable overhead |Machine-hours |Per machine-hour |
| | |costs | | |
| |Supplies |$12,250 |2,500 |$4.90 |
| |Indirect labor |$22,000 |2,500 |$8.80 |
Budgeted number of machine-hours: 2,500
| | |Cost Formula (per MH) |Activity |
| | | |(in MHs): 2,400 |
| |Overhead Costs | | |
| |Variable overhead costs: | | |
| |Supplies |$ 4.90 |$11,760 |
| |Indirect labor | 8.80 | 21,120 |
| |Total variable overhead cost |$13.70 | 13,880 |
| |Fixed overhead costs: | | |
| |Supervision | |15,500 |
| |Utilities | |5,500 |
| |Depreciation | | 6,500 |
| |Total fixed overhead cost | | 27,500 |
| |Total overhead cost | |$60,380 |
30. Sharifi Hospital bases its budgets on patient-visits. The hospital's static budget for October appears below:
| |Budgeted number of patient-visits |8,500 |
| |Budgeted variable overhead costs: | |
| |Supplies (@$4.70 per patient-visit) |$ 39,950 |
| |Laundry (@$7.80 per patient-visit) | 66,300 |
| |Total variable overhead cost | 106,250 |
| |Budgeted fixed overhead costs: | |
| |Wages and salaries |50,150 |
| |Occupancy costs | 84,150 |
| |Total fixed overhead cost | 134,300 |
| |Total budgeted overhead cost |$240,550 |
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) $240,550
Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy
Solution:
Budgeted number of patient-visits: 8,500
| | |Cost Formula (per |Activity |
| | |patient-visit) |(in patient |
| | | |visits): |
| | | |9,200 |
| |Overhead Costs | | |
| |Variable overhead costs: | | |
| |Supplies |$ 4.70 |$ 43,240 |
| |Laundry | 7.80 | 71,760 |
| |Total variable overhead cost |$12.50 | 115,000 |
| |Fixed overhead costs: | | |
| |Wages and salaries | |50,150 |
| |Occupancy costs | | 84,150 |
| |Total fixed overhead cost | | 134,300 |
| |Total overhead cost | |$249,300 |
31. Ostler Hotel bases its budgets on guest-days. The hotel's static budget for April appears below:
| |Budgeted number of guest-days |8,700 |
| |Budgeted variable overhead costs: | |
| |Supplies (@$7.00 per guest-day) |$ 60,900 |
| |Laundry (@$3.80 per guest-day) | 33,060 |
| |Total variable overhead cost | 93,960 |
| |Budgeted fixed overhead costs: | |
| |Wages and salaries |80,910 |
| |Occupancy costs | 38,280 |
| |Total fixed overhead cost | 119,190 |
| |Total budgeted overhead cost |$213,150 |
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) $224,920
Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy
Solution:
Budgeted number of guest-days: 8,700
| | |Cost Formula (per |Activity |
| | |guest-day) |(in guest-days): |
| | | |9,700 |
| |Overhead Costs | | |
| |Variable overhead costs: | | |
| |Supplies |$ 7.00 |$ 67,900 |
| |Laundry | 3.80 | 36,860 |
| |Total variable overhead cost |$10.80 | 104,760 |
| |Fixed overhead costs: | | |
| |Wages and salaries | |80,910 |
| |Occupancy costs | | 38,280 |
| |Total fixed overhead cost | | 119,190 |
| |Total overhead cost | |$223,950 |
32. Riggs Enterprise's flexible budget cost formula for indirect materials, a variable cost, is $0.45 per unit of output. If the company's performance report for last month shows a $90 favorable variance for indirect materials and if 8,700 units of output were produced last month, then the actual costs incurred for indirect materials for the month must have been:
A) $4,005
B) $3,915
C) $3,825
D) $3,735
Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Medium
Solution:
Variable overhead spending variance = AH × (AR − SR) = 90 F
8,700 × (AR − 0.45) = -90
(8,700 × AR) − 3,915 = -90
(8,700 × AR) = 3,825
AR = 3,825 ÷ 8,700 = $0.4396
Actual indirect labor costs = 8,700 × $0.4396 = $3,825
33. Chmielewski Medical Clinic measures its activity in terms of patient-visits. Last month, the budgeted level of activity was 1,560 patient-visits and the actual level of activity was 1,530 patient-visits. The clinic's director budgets for variable overhead costs of $1.10 per patient-visit and fixed overhead costs of $19,900 per month. The actual variable overhead cost last month was $1,400 and the actual fixed overhead cost was $21,720. In the clinic's flexible budget performance report for last month, what would have been the variance for the total overhead cost?
A) $33 F
B) $1,504 U
C) $1,537 U
D) $283 F
Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Medium
Solution:
Budgeted number of patient-visits: 1,560
Actual number of patient-visits: 1,530
| | |Cost Formula (per|Actual Costs |Budget Based on |Variance |
| | |patient-visit) |Incurred for 1,530 |1,530 | |
| | | |patient-visits |patient-visits | |
| |Variable overhead costs |$1.10 |$1,400 |$1,683 |$ 283 F |
| |Fixed overhead costs | |$21,720 |$19,900 | 1,820 U |
| | | | | |$1,537 U |
34. Rodriques Tile Installation Corporation measures its activity in terms of square feet of tile installed. Last month, the budgeted level of activity was 1,630 square feet and the actual level of activity was 1,720 square feet. The company's owner budgets for supply costs, a variable overhead cost, at $3.40 per square foot. The actual supply cost last month was $6,750. In the company's flexible budget performance report for last month, what would have been the variance for supply costs?
A) $353 U
B) $306 U
C) $902 U
D) $1,208 U
Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy
Solution:
Budgeted number of square feet: 1,720
Actual number of square feet: 1,630
| | |Cost Formula (per|Actual Costs |Budget Based on |Variance |
| | |square foot) |Incurred for |1,720 square feet | |
| | | |1,720 square | | |
| | | |feet | | |
| |Variable overhead costs (Supply costs) |$3.40 |$6,750 |$5,848 |$902 U |
35. Rodabaugh Natural Dying Corporation measures its activity in terms of skeins of yarn dyed. Last month, the budgeted level of activity was 15,900 skeins and the actual level of activity was 16,100 skeins. The company's owner budgets for dye costs, a variable overhead cost, at $0.87 per skein. The actual dye cost last month was $14,800. In the company's flexible budget performance report for last month, what would have been the variance for dye costs?
A) $967 U
B) $174 U
C) $184 U
D) $793 U
Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy
Solution:
Budgeted number of skeins: 15,900
Actual number of skeins: 16,100
| | |Cost Formula (per|Actual Costs |Budget Based on |Variance |
| | |skein) |Incurred for |16,100 skeins | |
| | | |16,100 skeins | | |
| |Variable overhead costs (Dye costs) |$0.87 |$14,800 |$14,007 |$793 U |
36. Andress Footwear Corporation's flexible budget cost formula for supplies, a variable overhead cost, is $2.17 per unit of output. The company's flexible budget performance report for last month showed a $4,531 unfavorable variance for supplies. During that month, 19,700 units were produced. Budgeted activity for the month had been 19,400 units. The actual costs incurred for indirect materials must have been closest to:
A) $2.17
B) $2.63
C) $2.67
D) $2.40
Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Hard
Solution:
Budgeted number of units produced: 19,400
Actual number of units produced: 19,700
| | |Cost Formula (per |Actual Costs |Budget Based on |Variance |
| | |unit produced) |Incurred for |19,700 units | |
| | | |19,700 units |produced | |
| | | |produced | | |
| |Variable overhead costs (Supplies) |$2.17 |X |$42,749 |$4,531 U |
Actual costs − Budgeted costs = Supplies variance
X − $42,749 = $4,531
X = $47,280
Per unit cost = Total actual costs ÷ Number of units produced
Per unit cost = $47,280 ÷ 19,700 = $2.40
37. Ocker Corporation's flexible budget performance report for last month shows that actual indirect materials cost, a variable overhead cost, was $28,420 and that the variance for indirect materials cost was $3,828 unfavorable. During that month, the company worked 11,600 machine-hours. Budgeted activity for the month had been 11,300 machine-hours. The cost formula per machine-hour for indirect materials cost must have been closest to:
A) $2.85
B) $2.18
C) $2.78
D) $2.12
Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Hard
Solution:
Budgeted number of machine-hours: 11,300
Actual number of machine-hours: 11,600
| | |Cost Formula |Actual Costs |Budget Based on |Variance |
| | |(per MH) |Incurred for |11,600 | |
| | | |11,600 |machine-hours | |
| | | |machine-hours | | |
| |Variable overhead costs (Indirect materials)|Y |$28,420 |X |$3,828 U |
Actual costs − Budgeted costs = Indirect materials variance
$28,420 − X = $3,828
X = $24,592
Y = Per machine-hour cost =
Per machine-hour cost = Actual cost ÷ Machine-hours =
Per machine-hour cost = $24,592 ÷ 11,600 = $2.12
38. Viger 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:
| |Budgeted level of activity |9,700 |MHs |
| |Actual level of activity |9,900 |MHs |
| |Cost formula for variable manufacturing overhead cost |$6.30 |per MH |
| |Budgeted fixed manufacturing overhead cost |$49,000 | |
| |Actual total variable manufacturing overhead |$60,390 | |
| |Actual total fixed manufacturing overhead |$47,000 | |
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
Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Medium
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:
| |Budgeted level of activity |8,500 |MHs |
| |Actual level of activity |8,600 |MHs |
| |Cost formula for variable manufacturing overhead cost |$5.70 |per MH |
| |Budgeted fixed manufacturing overhead cost |$50,000 | |
| |Actual total variable manufacturing overhead |$51,600 | |
| |Actual total fixed manufacturing overhead |$54,000 | |
What was the fixed overhead budget variance for the month?
A) $4,000 unfavorable
B) $4,000 favorable
C) $570 favorable
D) $570 unfavorable
Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Medium
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:
| |Budgeted level of activity |7,000 |MHs |
| |Actual level of activity |7,200 |MHs |
| |Cost formula for variable manufacturing overhead cost |$9.40 |per MH |
| |Budgeted fixed manufacturing overhead cost |$40,000 | |
| |Actual total variable manufacturing overhead |$66,960 | |
| |Actual total fixed manufacturing overhead |$37,000 | |
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
Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Medium
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
Fixed overhead budget variance
= Actual fixed overhead costs − Budgeted fixed overhead cost
= $37,000 − $40,000 = $3,000 F
Total overhead variance = $720 F + $3,000 F = $3,720 F
41. Bartoletti Fabrication Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company's cost formula for variable manufacturing overhead is $4.60 per MH. The company had budgeted its fixed manufacturing overhead cost at $65,000 for the month. During the month, the actual total variable manufacturing overhead was $22,080 and the actual total fixed manufacturing overhead was $63,000. The actual level of activity for the period was 4,600 MHs. What was the total of the variable overhead spending and fixed overhead budget variances for the month?
A) $1,080 unfavorable
B) $1,080 favorable
C) $920 unfavorable
D) $920 favorable
Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Easy
Solution:
Actual rate = Actual variable manufacturing overhead ÷ Actual machine-hours
= $22,080 ÷ 4,600 = $4.80
Variable overhead spending variance = AH × (AR − SR)
= 4,600 × ($4.80 − $4.60)
= 4,600 × $0.20 = $920 U
Fixed overhead budget variance
= Actual fixed overhead costs − Budgeted fixed overhead cost
= $63,000 − $65,000 = $2,000 F
Total overhead variance = $920 U + $2,000 F = $1,080 F
42. Amirault Manufacturing Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company's cost formula for variable manufacturing overhead is $4.00 per MH. During the month, the actual total variable manufacturing overhead was $18,040 and the actual level of activity for the period was 4,100 MHs. What was the variable overhead spending variance for the month?
A) $410 favorable
B) $1,640 unfavorable
C) $1,640 favorable
D) $410 unfavorable
Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Easy
Solution:
Actual rate = Actual variable manufacturing overhead ÷ Actual machine-hours
= $18,040 ÷ 4,100 = $4.40
Variable overhead spending variance = AH × (AR − SR)
= 4,100 × ($4.40 − $4.00) = 4,100 × $0.40 = $1,640 U
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
Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Medium
Solution:
Fixed overhead budget variance
= Actual fixed overhead cost − Budgeted fixed overhead cost
= $61,200 − $58,000 = $3,200 U
44. Wadding Corporation applies manufacturing overhead to products on the basis of standard machine-hours. For the most recent month, the company based its budget on 3,600 machine-hours. Budgeted and actual overhead costs for the month appear below:
| | |Original Budget|Actual Costs |
| | |Based on 3,600 | |
| | |Machine-Hours | |
| |Variable overhead costs: | | |
| |Supplies |$11,160 |$11,830 |
| |Indirect labor |26,280 |27,970 |
| |Fixed overhead costs: | | |
| |Supervision |19,700 |19,340 |
| |Utilities |5,900 |5,770 |
| |Factory depreciation | 6,900 | 7,210 |
| |Total overhead cost |$69,940 |$72,120 |
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
Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Hard
Solution:
| | |Variable overhead costs |Machine-hours |Per machine-hour |
| |Supplies |$11,160 |3,600 |$3.10 |
| |Indirect labor |$26,280 |3,600 |$7.30 |
Budgeted machine-hours: 3,600
Actual machine-hours: 3,900
Standard machine-hours allowed: 3,890
| | |Cost Formula |(1) | |(2) |(1) − (2) |
| | |(per MH) |Budget Based on | |Budget Based on |Efficiency |
| | | |3,900 MHs (AH × | |3,890 MHs (SH × SR)|Variance |
| | | |SR) | | | |
| |Overhead Costs | | | | | |
| |Variable overhead costs: | | | | |
| |Supplies |$ 3.10 |$12,090 |* |$12,059 |$ 31 U |
| |Indirect labor | 7.30 | 28,470 |** |$28,397 | 73 U |
| | |$10.40 |$40,560 | | |$104 U |
*3,900 machine-hours × $3.10 per machine-hour = $12,090
**3,900 machine-hours × $7.30 per machine-hour = $28,470
45. Mongar Corporation applies manufacturing overhead to products on the basis of standard machine-hours. Budgeted and actual overhead costs for the most recent month appear below:
| | |Original Budget |Actual Costs |
| |Variable overhead costs: | | |
| |Supplies |$ 7,980 |$ 8,230 |
| |Indirect labor | 29,820 | 29,610 |
| |Total variable overhead cost |$37,800 |$37,840 |
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
Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Medium
Solution:
| | |Variable overhead costs |Machine-hours |Per machine-hour |
| |Supplies |$7,980 |4,200 |$1.90 |
| |Indirect labor |$29,820 |4,200 |$7.10 |
Budgeted machine-hours: 4,200
Actual machine-hours: 4,350
Standard machine-hours allowed: 4,190
| | |Cost Formula |(1) | |(2) |(1) − (2) |
| | |(per MH) |Budget Based on| |Budget Based on |Efficiency |
| | | |4,350 MHs (AH ×| |4,190 MHs (SH × SR)|Variance |
| | | |SR) | | | |
| |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 |
*4,350 machine-hours × $1.90 per machine-hour = $8,265
**4,350 machine-hours × $7.10 per machine-hour = $30,885
46. Pleiss Corporation applies manufacturing overhead to products on the basis of standard machine-hours. The company's cost formula for variable overhead cost is $2.40 per machine-hour. The actual variable overhead cost for the month was $5,240. The original budget for the month was based on 2,100 machine-hours. The company actually worked 2,270 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 2,280 machine-hours. What was the variable overhead efficiency variance for the month?
A) $24 favorable
B) $232 favorable
C) $208 favorable
D) $432 unfavorable
Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Easy
Solution:
Budgeted machine-hours: 2,100
Actual machine-hours: 2,270
Standard machine-hours allowed: 2,280
| | |Cost Formula (per |(1) |(2) |(1) − (2) |
| | |MH) |Budget Based on |Budget Based on |Efficiency Variance |
| | | |2,270 MHs (AH × SR)|2,280 MHs (SH × SR)| |
| |Variable overhead costs |$2.40 |$5,448 |$5,472 |$24 F |
47. Pyrdum Corporation produces metal telephone poles. In the most recent month, the company budgeted production of 3,500 poles. Actual production was 3,800 poles. According to standards, each pole requires 4.6 machine-hours. The actual machine-hours for the month were 17,800 machine-hours. The budgeted indirect labor is $5.40 per machine-hour. The actual indirect labor cost for the month was $96,712. The variable overhead efficiency variance for indirect labor is:
A) $2,320 U
B) $1,728 F
C) $2,320 F
D) $1,728 U
Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Easy
Solution:
Standard hours = Actual production in units × Standard machine-hours per unit
= 3,800 × 4.6 = 17,480
Variable overhead efficiency variance = SR × (AH − SH)
= $5.40 × (17,800 − 17,480) = $5.40 × 320 = $1,728 U
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
Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Easy
Solution:
Standard hours = Actual production in units × Standard machine-hours per unit
= 5,400 × 3.8 = 20,520
Variable overhead efficiency variance = SR × (AH − SH)
= $7.90 × (20,880 − 20,520) = $7.90 × 360 = $2,844 U
49. The following data have been provided by Moretta Corporation, a company that produces forklift trucks:
| |Budgeted production |3,400 |trucks |
| |Standard machine-hours per truck |2.9 |machine-hours |
| |Budgeted supplies cost |$1.50 |per machine-hour |
| |Actual production |3,800 |trucks |
| |Actual machine-hours |10,930 |machine-hours |
| |Actual supplies cost (total) |$17,496 | |
The variable overhead efficiency variance for supplies cost is:
A) $135 U
B) $135 F
C) $966 U
D) $966 F
Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Easy
Solution:
Standard hours = Actual production in units × Standard machine-hours per unit
= 3,800 × 2.9 = 11,020
Variable overhead efficiency variance = SR × (AH − SH)
= $1.50 × (10,930 − 11,020) = $1.50 × (-$90) = $135 F
50. Ronda Manufacturing Company uses a standard cost system with machine-hours as the activity base for overhead. Last year, Ronda incurred $840,000 of fixed manufacturing overhead and generated a $42,000 favorable fixed overhead budget variance. The following data relate to last year's operations:
| |Denominator activity level in machine-hours |21,000 |
| |Standard machine-hours allowed for actual output |20,000 |
| |Actual number of machine-hours incurred |22,050 |
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
Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5; 6 Level: Hard
Solution:
Predetermined overhead rate =
$882,000 ÷ 21,000 denominator machine-hours = $42 per machine-hour
Fixed overhead applied to production =
20,000 standard hours × $42 per machine-hour = $840,000
51. Blue Company's standards call for 2,500 direct labor-hours to produce 1,000 units. During May only 900 units were produced and the company worked 2,400 direct labor-hours. The standard hours allowed for May production would be:
A) 2,500 hours
B) 2,400 hours
C) 2,250 hours
D) 1,800 hours
Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Easy
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
Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Hard
Solution:
Predetermined overhead rate = $315,000 ÷ 30,000 DLHs = $10.50 per DLH
Fixed portion of predetermined overhead rate
= Total predetermined overhead rate − Variable overhead rate
= $10.50 per DLH − $8.00 per DLH = $2.50 per DLH
Budgeted fixed overhead = 32,000 DLHs × $2.50 per DLH = $80,000
53. The Marlow Company uses a standard cost system and applies manufacturing overhead to products on the basis of standard direct labor-hours. The denominator activity is set at 40,000 direct labor-hours per year. Budgeted fixed manufacturing overhead cost is $40,000 per year, and 0.5 direct labor-hours are required to manufacture one unit. The standard cost card would indicate fixed manufacturing overhead cost per unit to be:
A) $1.00
B) $2.00
C) $1.50
D) $0.50
Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Medium
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 |Activity |
| | |machine-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 |
| |Total overhead cost | |$125,328 |$126,208 |
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
Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Easy
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 |Activity |
| | |machine-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
Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Easy
Solution:
Fixed element = Total fixed overhead ÷ Actual machine-hours
= $17,940 ÷ 1,200 machine-hours = $14.95 per machine-hour
56. Billa Corporation's abbreviated flexible budget for two levels of activity appears below:
| | |Cost Formula (per |Activity |
| | |machine-hour) |(in machine-hours) |
| | | |4,600 |4,700 |
| |Total variable overhead cost |$11.70 |$ 53,820 |$ 54,990 |
| |Total fixed overhead cost | | 341,596 | 341,596 |
| |Total overhead cost | |$395,416 |$396,586 |
If the denominator level of activity is 4,700 machine-hours, the predetermined overhead rate would be:
A) $11.70
B) $72.68
C) $84.38
D) $1,170.00
Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Easy
Solution:
Predetermined overhead rate = Total overhead cost ÷ Actual machine-hours
= $396,586 ÷ 4,700 machine-hours = $84.38 per machine-hour
57. At the beginning of last year, Monze Corporation budgeted $600,000 of fixed manufacturing overhead and chose a denominator level of activity of 100,000 direct labor-hours. At the end of the year, Monze's fixed overhead budget variance was $8,000 unfavorable. Its fixed overhead volume variance was $21,000 favorable. Actual direct labor-hours for the year were 96,000. What was Monze's actual fixed overhead for last year?
A) $563,000
B) $579,000
C) $608,000
D) $592,000
Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Hard
Solution:
Fixed overhead budget variance
= Actual fixed overhead cost − Budgeted fixed overhead cost
= Actual fixed overhead cost − $600,000 = $8,000 U
Actual fixed overhead = $8,000 + $600,000 = $608,000
58. Mclellan Corporation applies manufacturing overhead to products on the basis of standard machine-hours. Budgeted and actual overhead costs for the month appear below:
| | |Original Budget |Actual Costs |
| |Variable overhead costs: | | |
| |Supplies |$ 9,760 |$10,200 |
| |Indirect labor |42,090 |43,720 |
| |Fixed overhead costs: | | |
| |Supervision |14,500 |14,350 |
| |Utilities |5,200 |4,740 |
| |Factory depreciation | 7,400 | 7,510 |
| |Total overhead cost |$78,950 |$80,520 |
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
Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Medium
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:
| | |Original Budget |Actual Costs |
| |Fixed overhead costs: | | |
| |Supervision |$14,100 |$13,650 |
| |Utilities |5,300 |5,060 |
| |Factory depreciation | 7,200 | 7,470 |
| |Total overhead cost |$26,600 |$26,180 |
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
Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Medium
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
Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Easy
Solution:
Budget variance = Actual fixed overhead cost − Budgeted fixed overhead cost
= $10,540 − $10,890 = $350 F
61. Lossing 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:
| | |Original Budget |Actual Costs |
| |Variable overhead costs: | | |
| |Supplies |$11,220 |$10,670 |
| |Indirect labor |8,670 |8,030 |
| |Fixed overhead costs: | | |
| |Supervision |5,610 |5,940 |
| |Utilities |8,160 |7,990 |
| |Factory depreciation | 39,780 | 39,950 |
| |Total overhead cost |$73,440 |$72,580 |
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
Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Hard
Solution:
Fixed portion of predetermined overhead rate
= Total budgeted fixed overhead ÷ Budgeted machine-hours
= ($5,610 + $8,160 + $39,780) ÷ 5,100 MHs
= $53,550 ÷ 5,100 MHs = $10.50 per MH
Volume variance = $10.50 per MH × (5,100 MHs − 4,980 MHs)
= $10.50 per MH × 120 MHs = $1,260 U
62. Hoag Corporation applies manufacturing overhead to products on the basis of standard machine-hours. Budgeted and actual fixed overhead costs for the most recent month appear below:
| | |Original Budget |Actual Costs |
| |Fixed overhead costs: | | |
| |Supervision |$ 9,880 |$ 9,970 |
| |Utilities |4,160 |4,440 |
| |Factory depreciation | 21,320 | 21,190 |
| |Total fixed overhead cost |$35,360 |$35,600 |
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
Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Medium
Solution:
Predetermined overhead rate = Total overhead ÷ Budgeted hours
= $35,360 ÷ 2,600 MHs = $13.60 per MH
Volume variance = $13.60 per MH × (2,600 MHs − 2,080 MHs)
= $13.60 per MH × 520 MHs = $7,072 U
63. Merone Corporation applies manufacturing overhead to products on the basis of standard machine-hours. The company bases its predetermined overhead rate on 2,300 machine-hours. The company's total budgeted fixed manufacturing overhead is $5,060. In the most recent month, the total actual fixed manufacturing overhead was $4,660. The company actually worked 2,200 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 2,320 machine-hours. What was the overall fixed overhead volume variance for the month?
A) $220 unfavorable
B) $400 favorable
C) $44 favorable
D) $220 favorable
Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Easy
Solution:
Predetermined overhead rate = Total overhead ÷ Budgeted hours
= $5,060 ÷ 2,300 MHs = $2.20 per MH
Volume variance = $2.20 per MH × (2,300 MHs − 2,320 MHs)
= $2.20 per MH × 20 MHs = $44 F
64. Rodarta Corporation applies manufacturing overhead to products on the basis of standard machine-hours. The company's predetermined overhead rate for fixed manufacturing overhead is $1.20 per machine-hour and the denominator level of activity is 6,600 machine-hours. In the most recent month, the total actual fixed manufacturing overhead was $8,340 and the company actually worked 6,400 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 6,480 machine-hours. What was the overall fixed overhead volume variance for the month?
A) $240 favorable
B) $144 unfavorable
C) $240 unfavorable
D) $96 favorable
Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Easy
Solution:
Volume variance = $1.20 per MH × (6,600 MHs − 6,480 MHs)
= $1.20 per MH × 120 MHs = $144 U
Use the following to answer questions 65-67:
Capelli Hospital bases its budgets on patient-visits. The hospital's static budget for August appears below:
| |Budgeted number of patient-visits |8,300 |
| |Budgeted variable overhead costs: | |
| |Supplies (@$5.00 per patient-visit) |$ 41,500 |
| |Laundry (@$7.30 per patient-visit) | 60,590 |
| |Total variable overhead cost | 102,090 |
| |Budgeted fixed overhead costs: | |
| |Wages and salaries |60,590 |
| |Occupancy costs | 73,040 |
| |Total fixed overhead cost | 133,630 |
| |Total budgeted overhead cost |$235,720 |
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) $133,630
Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy
Solution:
Budgeted number of patient-visits: 8,300
| | |Cost Formula (per |Activity |
| | |patient-visit) |(in patient-visits): |
| | | |9,300 |
| |Variable overhead costs: | | |
| |Supplies |$ 5.00 |$ 46,500 |
| |Laundry | 7.30 | 67,890 |
| |Total variable overhead cost |$12.30 |$114,390 |
66. The total fixed overhead cost at an activity level of 9,600 patient-visits per month should be:
A) $133,630
B) $154,560
C) $235,720
D) $272,640
Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy
Solution:
Budgeted number of patient-visits: 9,600
| | |Activity |
| | |(in patient-visits): |
| | |9,300 |
| |Fixed overhead costs: | |
| |Wages and salaries |$ 60,590 |
| |Occupancy costs | 73,040 |
| |Total fixed overhead cost |$133,630 |
67. The total overhead cost at an activity level of 9,400 patient-visits per month should be:
A) $235,720
B) $249,250
C) $266,960
D) $250,640
Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy
Solution:
Budgeted number of patient-visits: 8,300
| | |Cost Formula (per |Activity (in patient |
| | |patient-visit) |visits): 9,400 |
| |Overhead Costs | | |
| |Variable overhead costs: | | |
| |Supplies |$ 5.00 |$ 47,000 |
| |Laundry | 7.30 | 68,620 |
| |Total variable overhead cost |$12.30 | 115,620 |
| |Fixed overhead costs: | | |
| |Wages and salaries | |60,590 |
| |Occupancy costs | | 73,040 |
| |Total fixed overhead cost | | 133,630 |
| |Total overhead cost | |$249,250 |
Use the following to answer questions 68-70:
Mandalay Hotel bases its budgets on guest-days. The hotel's static budget for August appears below:
| |Budgeted number of guest-days |4,300 |
| |Budgeted variable overhead costs: | |
| |Supplies (@$9.60 per guest-day) |$ 41,280 |
| |Laundry (@$9.40 per guest-day) | 40,420 |
| |Total variable overhead cost | 81,700 |
| |Budgeted fixed overhead costs: | |
| |Wages and salaries |57,190 |
| |Occupancy costs | 52,030 |
| |Total fixed overhead cost | 109,220 |
| |Total budgeted overhead cost |$190,920 |
68. The total variable overhead cost at an activity level of 5,000 guest-days per month should be:
A) $127,000
B) $109,220
C) $95,000
D) $81,700
Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy
Solution:
Budgeted number of guest-days: 4,300
| | |Cost Formula (per |Activity (in |
| | |guest-days) |guest-days): 5,000 |
| |Variable overhead costs: | | |
| |Supplies |$ 9.60 |$48,000 |
| |Laundry | 9.40 | 47,000 |
| |Total variable overhead cost |$19.00 |$95,000 |
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) $109,220
Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy
Solution:
Budgeted number of guest-days: 4,300
| | |Activity (in |
| | |guest-days): 5,500 |
| |Fixed overhead costs: | |
| |Wages and salaries |$ 57,190 |
| |Occupancy costs | 52,030 |
| |Total fixed overhead cost |$109,220 |
70. The total overhead cost at an activity level of 5,200 guest-days per month should be:
A) $208,020
B) $230,880
C) $209,940
D) $190,920
Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy
Solution:
Budgeted number of guest-days: 4,300
| | |Cost Formula (per |Activity (in |
| | |guest-days) |guest-days): 5,200 |
| |Overhead Costs | | |
| |Variable overhead costs: | | |
| |Supplies |$ 9.60 |$ 49,920 |
| |Laundry | 9.40 | 48,880 |
| |Total variable overhead cost |$19.00 | 98,800 |
| |Fixed overhead costs: | | |
| |Wages and salaries | |57,190 |
| |Occupancy costs | | 52,030 |
| |Total fixed overhead cost | | 109,220 |
| |Total overhead cost | |$208,020 |
Use the following to answer questions 71-73:
Isadore Hospital bases its budgets on patient-visits. The hospital's static budget for July appears below:
| |Budgeted number of patient-visits |7,700 |
| |Budgeted variable overhead costs: | |
| |Supplies (@ $4.60 per patient-visit) |$ 35,420 |
| |Laundry (@ $7.20 per patient-visit) | 55,440 |
| |Total variable overhead cost | 90,860 |
| |Budgeted fixed overhead costs: | |
| |Salaries |46,200 |
| |Occupancy costs | 67,760 |
| |Total fixed overhead cost | 113,960 |
| |Total budgeted overhead cost |$204,820 |
| | | |
| |Actual results for the month were: | |
| |Actual number of patient-visits |7,800 |
| |Supplies |$38,250 |
| |Laundry |$61,240 |
| |Salaries |$46,190 |
| |Occupancy costs |$65,650 |
71. The variance for supplies costs in the flexible budget performance report for the month is:
A) $2,370 U
B) $2,370 F
C) $2,830 F
D) $2,830 U
Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy
Solution:
Budgeted number of patient-visits: 7,700
Actual number of patient-visits: 7,800
| | |Cost Formula (per |Actual Costs |Budget Based on |Variance |
| | |patient-visit) |Incurred for 7,800|7,800 | |
| | | |patient-visits |patient-visits | |
| |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
Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy
Solution:
Budgeted number of patient-visits: 7,700
Actual number of patient-visits: 7,800
| | |Cost Formula (per |Actual Costs Incurred |Budget Based on 7,800 |Variance |
| | |patient-visit) |for 7,800 |patient-visits | |
| | | |patient-visits | | |
| |Variable overhead costs |$7.20 |$61,240 |$56,160 |$5,080 U |
| |(Laundry) | | | | |
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
Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy
Solution:
Budgeted number of patient-visits: 7,700
Actual number of patient-visits: 7,800
| | |Actual Costs Incurred |Budget Based on 7,800 |Variance |
| | |for 7,800 |patient-visits | |
| | |patient-visits | | |
| |Fixed overhead costs (Occupancy costs) |$65,650 |$67,760 |$2,110 F |
Use the following to answer questions 74-76:
Moncrief Corporation bases its budgets on machine-hours. The company's static budget for July appears below:
| |Budgeted number of machine-hours |1,000 |
| |Budgeted variable overhead costs: | |
| |Supplies (@ $8.60 per machine-hour) |$ 8,600 |
| |Power (@ $8.80 per machine-hour) | 8,800 |
| |Total variable overhead cost | 17,400 |
| |Budgeted fixed overhead costs: | |
| |Salaries |11,300 |
| |Equipment depreciation | 9,900 |
| |Total fixed overhead cost | 21,200 |
| |Total budgeted overhead cost |$38,600 |
| | | |
| |Actual results for the month were: | |
| |Actual number of machine-hours |1,200 |
| |Supplies |$10,290 |
| |Power |$10,860 |
| |Salaries |$11,690 |
| |Equipment depreciation |$9,990 |
74. The variance for supplies costs in the flexible budget performance report for the month should be:
A) $30 F
B) $1,690 F
C) $1,690 U
D) $30 U
Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy
Solution:
Budgeted number of machine-hours: 1,000
Actual number of machine-hours: 1,200
| | |Cost Formula (per |Actual Costs Incurred |Budget Based on 1,200 |Variance |
| | |machine-hour) |for 1,200 |machine-hours | |
| | | |machine-hours | | |
| |Variable overhead costs |$8.60 |$10,290 |$10,320 |$30 F |
| |(Supplies) | | | | |
75. The variance for power costs in the flexible budget performance report for the month should be:
A) $2,060 F
B) $2,060 U
C) $300 F
D) $300 U
Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy
Solution:
Budgeted number of machine-hours: 1,000
Actual number of machine-hours: 1,200
| | |Cost Formula (per |Actual Costs Incurred |Budget Based on 1,200 |Variance |
| | |machine-hour) |for 1,200 |machine-hours | |
| | | |machine-hours | | |
| |Variable overhead costs |$8.80 |$10,860 |$10,560 |$300 U |
| |(Power) | | | | |
76. The variance for equipment depreciation in the flexible budget performance report for the month should be:
A) $1,890 U
B) $90 F
C) $90 U
D) $1,890 F
Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy
Solution:
Budgeted number of machine-hours: 1,000
Actual number of machine-hours: 1,200
| | |Actual Costs Incurred |Budget Based on 1,200 |Variance |
| | |for 1,200 |machine-hours | |
| | |machine-hours | | |
| |Fixed overhead costs (Equipment depreciation) |$9,990 |$9,900 |$90 U |
Use the following to answer questions 77-79:
Medlar Corporation's static budget for June appears below. The company bases its budgets on machine-hours.
| |Budgeted number of machine-hours |8,900 |
| |Budgeted variable overhead costs: | |
| |Supplies (@ $2.20 per machine-hour) |$ 19,580 |
| |Power (@ $3.80 per machine-hour) | 33,820 |
| |Total variable overhead cost | 53,400 |
| |Budgeted fixed overhead costs: | |
| |Salaries |26,700 |
| |Equipment depreciation | 39,160 |
| |Total fixed overhead cost | 65,860 |
| |Total budgeted overhead cost |$119,260 |
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
Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy
Solution:
Budgeted number of machine-hours: 8,900
Actual number of machine-hours: 9,300
| | |Cost Formula |Actual Costs |Budget Based on |Variance |
| | |(per |Incurred for 9,300 |9,300 | |
| | |machine-hour) |machine-hours |machine-hours | |
| |Variable overhead costs |$2.20 |$19,760 |$20,460 |$700 F |
| |(Supplies) | | | | |
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
Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy
Solution:
Budgeted number of machine-hours: 8,900
Actual number of machine-hours: 9,300
| | |Cost Formula (per |Actual Costs Incurred |Budget Based on 9,300 |Variance |
| | |machine-hour) |for 9,300 |machine-hours | |
| | | |machine-hours | | |
| |Variable overhead costs (Power) |$3.80 |$35,720 |$35,340 |$380 U |
79. The variance for equipment depreciation in the flexible budget performance report for the month should be:
A) $1,490 F
B) $1,490 U
C) $270 U
D) $270 F
Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy
Solution:
Budgeted number of machine-hours: 8,900
Actual number of machine-hours: 9,300
| | |Actual Costs Incurred |Budget Based on 9,300 |Variance |
| | |for 9,300 |machine-hours | |
| | |machine-hours | | |
| |Fixed overhead costs (Equipment depreciation) |$39,430 |$39,160 |$270 U |
Use the following to answer questions 80-85:
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:
| |Denominator level of activity |1,000 |DLHs |
| |Overhead costs at the denominator activity level: | | |
| |Variable overhead cost |$3,800 | |
| |Fixed overhead cost |$14,250 | |
The following data pertain to operations for the most recent period:
| |Actual hours |1,200 |DLHs |
| |Standard hours allowed for the actual output |885 |DLHs |
| |Actual total variable overhead cost |$4,380 | |
| |Actual total fixed overhead cost |$12,450 | |
80. What is the predetermined overhead rate to the nearest cent?
A) $14.03
B) $16.83
C) $15.04
D) $18.05
Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Medium
Solution:
Predetermined overhead rate = Total overhead ÷ Denominator level of activity
= ($3,800 + $14,250) ÷ 1,000 DLHs
= $18,050 ÷ 1,000 DLHs = $18.05 per DLH
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
Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Medium
Solution:
Predetermined overhead rate = Total overhead ÷ Denominator level of activity
= ($3,800 + $14,250) ÷ 1,000 DLHs
= $18,050 ÷ 1,000 DLHs = $18.05 per DLH
Applied overhead = 885 DLHs × $18.05 per DLH = $15,974
82. What was the variable overhead spending variance for the period to the nearest dollar?
A) $180 U
B) $180 F
C) $580 U
D) $580 F
Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Medium
Solution:
Budgeted direct-labor hours: 1,100
Actual direct-labor hours: 1,200
Standard direct-labor hours allowed: 800
| | |Cost Formula | |Actual Costs |Budget Based on |Spending Variance |
| | |(per DLH) | |Incurred 1,200 DLHs|1,200 DLHs | |
| |Variable overhead costs |$3.80 |* |$4,380 |$4,560 |$180 F |
* $3,800 ÷ 1,000 DLHs = $3.80 per DLH
83. What was the variable overhead efficiency variance for the period to the nearest dollar?
A) $133 U
B) $580 U
C) $1,150 U
D) $1,197 U
Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Medium
Solution:
Budgeted direct-labor hours: 1,000
Actual direct-labor hours: 1,200
Standard direct-labor hours allowed: 885
| | |Cost Formula | |Budget Based on |Budget Based on 885|Efficiency Variance |
| | |(per DLH) | |1,200 DLHs |DLHs | |
| |Variable overhead costs |$3.80 |* |$4,560 |$3,363 |$1,197 U |
*$3,800 ÷ 1,000 = $3.80
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
Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Medium
Solution:
Fixed overhead budget variance
= Actual fixed overhead cost − Budgeted fixed overhead cost
= $12,450 − $14,250 = $1,800 F
85. What was the fixed overhead volume variance for the period to the nearest dollar?
A) $4,489 U
B) $1,618 U
C) $2,850 F
D) $1,639 U
Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Medium
Solution:
Fixed portion of predetermined overhead rate
= $14,250 ÷ 1,000 DLHs = $14.25 per DLH
Volume variance = Fixed portion of predetermined overhead rate × (Denominator hours − Standard hours allowed)
= $14.25 per DLH × (1,000 DLHs − 885 DLHs)
= $14.25 per DLH × 115 DLHs = $1,639 U
Use the following to answer questions 86-88:
Azzurra Company manufactures computer chips used in aircraft and automobiles. Manufacturing overhead at Azzurra is applied to production on the basis of standard machine-hours.
86. Which overhead variance(s) at Azzurra would be affected in a favorable manner if more computer chips are produced during the year than originally budgeted?
A) variable overhead spending variance
B) variable overhead efficiency variance
C) fixed overhead budget variance
D) fixed overhead volume variance
E) none of the above would be affected favorably
Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3; 4; 6 Level: Medium
87. Which overhead variance(s) at Azzurra would be affected in an unfavorable manner if some indirect materials were “inadvertently” taken home by a few of the indirect laborers?
A) variable overhead spending variance
B) variable overhead efficiency variance
C) fixed overhead budget variance
D) fixed overhead volume variance
E) none of the above would be affected unfavorably
Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3; 4; 6 Level: Medium
88. Which overhead variance(s) at Azzurra would be affected in an unfavorable manner if fire and theft insurance rates increase by 25% unexpectedly during the period?
A) variable overhead spending variance
B) variable overhead efficiency variance
C) fixed overhead budget variance
D) fixed overhead volume variance
E) both C and D above
Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3; 4; 6 Level: Medium
Use the following to answer questions 89-90:
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:
| |Standard direct labor-hours allowed for the output |32,000 |hours |
| |Actual direct labor-hours worked |33,000 |hours |
| |Denominator activity |30,000 |hours |
| |Actual variable factory overhead cost |$166,000 | |
| |Variable overhead rate |$5 |per hour |
89. Given these data, the variable overhead spending variance for the year would be:
A) $1,000 U
B) $6,000 U
C) $1,000 F
D) $16,000 U
Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3; 4 Level: Medium
Solution:
Budgeted direct-labor hours: 30,000
Actual direct-labor hours: 33,000
Standard direct-labor hours allowed: 32,000
| | |Cost Formula (per |Actual Costs |Budget Based on |Spending Variance |
| | |DLH) |Incurred 33,000 |33,000 DLHs | |
| | | |DLHs | | |
| |Variable overhead costs |$5.00 |$166,000 |$165,000 |$1,000 U |
90. The variable overhead efficiency variance would be:
A) $10,000 U
B) $5,000 F
C) $15,000 U
D) $5,000 U
Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3; 4 Level: Easy
Solution:
Budgeted direct-labor hours: 30,000
Actual direct-labor hours: 33,000
Standard direct-labor hours allowed: 32,000
| | |Cost Formula (per |Budget Based on |Budget Based on |Efficiency Variance |
| | |DLH) |33,000 DLHs |32,000 DLHs | |
| |Variable overhead costs |$5.00 |$165,000 |$160,000 |$5,000 U |
Use the following to answer questions 91-92:
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.
| |Standard hours per unit of output |2.7 |machine-hours |
| |Standard variable overhead rate |$19.40 |per machine-hour |
The following data pertain to operations for the last month:
| |Actual hours |4,500 |machine-hours |
| |Actual total variable overhead cost |$88,425 | |
| |Actual output |1,500 |units |
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
Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3; 4 Level: Medium
Solution:
Actual machine-hours: 4,500
Standard machine-hours: 4,050*
| | |Cost Formula (per |Actual Costs |Budget Based on |Spending Variance |
| | |MH) |Incurred 4,500 MHs |4,500 MHs | |
| |Variable overhead costs |$19.40 |$88,425 |$87,300 |$1,125 U |
*1,500 units × 2.7 machine-hours per unit = 4,050 machine-hours
92. What is the variable overhead efficiency variance for the month?
A) $8,842 U
B) $1,013 F
C) $8,843 F
D) $8,730 U
Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3; 4 Level: Medium
Solution:
Actual machine-hours: 4,500
Standard machine-hours: 4,050*
| | |Cost Formula (per |Budget Based on |Budget Based on |Efficiency Variance |
| | |MH) |4,500 MHs |4,050 MHs | |
| |Variable overhead costs |$19.40 |$87,300 |$78,570 |$8,730 U |
*1,500 units × 2.7 machine-hours per unit = 4,050 machine-hours
Use the following to answer questions 93-95:
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:
| |Direct labor-hours |56,000 |70,000 |84,000 |
| |Detectors produced |40,000 |50,000 |60,000 |
| |Variable overhead cost |$252,000 |$315,000 |$378,000 |
| |Fixed overhead cost |$672,000 |$672,000 |$672,000 |
Crispy was expecting to produce 40,000 detectors last year. The actual results for the year were as follows:
| |Number of detectors produced |43,200 |
| |Direct labor-hours incurred |62,640 |
| |Variable overhead cost |$278,748 |
| |Fixed overhead cost |$714,000 |
93. What was Crispy's variable overhead spending variance?
A) $3,132 favorable
B) $9,720 unfavorable
C) $13,608 unfavorable
D) $115,884 favorable
Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Medium
Solution:
| | |Cost Formula | |Actual Costs |Budget Based on |Spending Variance|
| | |(per DLH) | |Incurred 62,640 |62,640 DLHs | |
| | | | |DLHs | | |
| |Variable overhead costs |$4.50 |* |$278,748 |$281,880 |$3,132 F |
*$252,000 ÷ 56,000 DLHs = $4.50 per DLH
94. What was Crispy's fixed overhead budget variance?
A) $11,760 favorable
B) $37,680 favorable
C) $42,000 unfavorable
D) $53,760 favorable
Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Easy
Solution:
Fixed overhead budget variance
= Actual fixed overhead cost − Budgeted fixed overhead cost
= $714,000 − $672,000 = $42,000 U
95. What total amount of manufacturing overhead cost (variable and fixed) did Crispy apply to the 43,200 detectors produced?
A) $712,800
B) $924,000
C) $997,920
D) $1,033,560
Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Hard
Solution:
Predetermined overhead rate = Total overhead ÷ Per detector
= ($252,000 + $672,000) ÷ 40,000 detectors
= $924,000 ÷ 40,000 detectors = $23.10 per detector
Applied overhead = 43,200 detectors × $23.10 per detector = $997,920
Use the following to answer questions 96-97:
Dagle Corporation has provided the following data for a recent month:.
| |Budgeted production |4,700 |motors |
| |Actual production |4,800 |motors |
| |Standard machine-hours per motor |5.1 |machine-hours |
| |Budgeted machine-hours (5.1 × 4,700) |23,970 |machine-hours |
| |Standard machine-hours allowed for the actual output (5.1 × |24,480 |machine-hours |
| |4,800) | | |
| |Actual machine-hours |24,740 |machine-hours |
| | | | |
| |Budgeted variable overhead cost per machine-hour: | |
| |Indirect labor |$6.30 |per machine-hour |
| |Power |$2.20 |per machine-hour |
| | | | |
| |Actual total variable overhead costs: | | |
| |Indirect labor |$151,506 | |
| |Power |$56,700 | |
96. The variable overhead spending variance for indirect labor is:
A) $4,356 U
B) $2,718 F
C) $4,356 F
D) $1,638 U
Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Easy
Solution:
Budgeted machine-hours: 23,970
Actual machine-hours: 24,740
Standard machine-hours allowed: 24,480
| | |Cost Formula (per |Actual Costs |Budget Based on |Spending Variance |
| | |MH) |Incurred 24,740 MHs|24,740 MHs | |
| |Variable overhead costs (Indirect labor) |$6.30 |$151,506 |$155,862 |$4,356 F |
97. The variable overhead spending variance for power is:
A) $2,844 U
B) $2,844 F
C) $572 U
D) $2,272 U
Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Easy
Solution:
Budgeted machine-hours: 23,970
Actual machine-hours: 24,740
Standard machine-hours allowed: 24,480
| | |Cost Formula (per |Actual Costs |Budget Based on |Spending Variance |
| | |MH) |Incurred 24,740 MHs|24,740 MHs | |
| |Variable overhead costs (Power) |$2.20 |$56,700 |$54,428 |$2,272 U |
Use the following to answer questions 98-99:
The following data have been provided by Furr Corporation:
| |Budgeted production |7,000 |motors |
| |Standard machine-hours per motor |8.6 |machine-hours |
| |Standard indirect labor |$7.10 |per machine-hour |
| |Standard power |$1.40 |per machine-hour |
| | | | |
| |Actual production |7,300 |motors |
| |Actual machine-hours (total) |62,140 |machine-hours |
| |Actual indirect labor (total) |$408,340 | |
| |Actual power (total) |$94,989 | |
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
Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Easy
Solution:
Actual machine-hours: 62,140
Standard machine-hours: 60,200
| | |Cost Formula (per |Actual Costs |Budget Based on |Spending Variance |
| | |MH) |Incurred 62,140 MHs|62,140 MHs | |
| |Variable overhead costs (Indirect labor) |$7.10 |$408,340 |$441,194 |$32,854 F |
99. The variable overhead spending variance for power is:
A) $7,097 U
B) $7,097 F
C) $896 F
D) $7,993 U
Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Easy
Solution:
Actual machine-hours: 62,140
| | |Cost Formula (per |Actual Costs |Budget Based on |Spending Variance |
| | |MH) |Incurred 62,140 MHs|62,140 MHs | |
| |Variable overhead costs (Power) |$1.40 |$94,989 |$86,996 |$7,993 U |
Use the following to answer questions 100-101:
Macchi Corporation has provided the following data for a recent period:
| |Budgeted production |2,200 |units |
| |Actual production |2,500 |units |
| |Standard machine-hours per unit |3.1 |machine-hours |
| |Budgeted machine-hours (3.1 × 2,200) |6,820 |machine-hours |
| |Standard machine-hours allowed for the actual output (3.1 × |7,750 |machine-hours |
| |2,500) | | |
| |Actual machine-hours |8,030 |machine-hours |
| |Budgeted variable overhead cost per machine-hour: |
| |Lubricants |$2.00 |per machine-hour |
| |Supplies |$2.60 |per machine-hour |
| | | | |
| |Actual total variable overhead costs: |
| |Lubricants |$15,858 | |
| |Supplies |$20,392 | |
100. The variable overhead spending variance for lubricants is:
A) $202 F
B) $358 U
C) $202 U
D) $560 U
Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Easy
Solution:
Budgeted machine-hours: 6,820
Actual machine-hours: 8,030
Standard machine-hours allowed: 7,750
| | |Cost Formula (per |Actual Costs |Budget Based on |Spending Variance |
| | |MH) |Incurred 8,030 MHs |8,030 MHs | |
| |Variable overhead costs (Lubricants) |$2.00 |$15,858 |$16,060 |$202 F |
101. The variable overhead spending variance for supplies is:
A) $486 F
B) $242 F
C) $242 U
D) $728 U
Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Easy
Solution:
Budgeted machine-hours: 6,820
Actual machine-hours: 8,030
Standard machine-hours allowed: 7,750
| | |Cost Formula (per |Actual Costs |Budget Based on |Spending Variance |
| | |MH) |Incurred 8,030 MHs |8,030 MHs | |
| |Variable overhead costs (Supplies) |$2.60 |$20,392 |$20,878 |$486 F |
Use the following to answer questions 102-103:
The following data have been provided by Liggett Corporation:
| |Budgeted production |7,400 |units |
| |Standard machine-hours per unit |6.6 |machine-hours |
| |Standard lubricants |$3.50 |per machine-hour |
| |Standard supplies |$2.00 |per machine-hour |
| | | | |
| |Actual production |7,600 |units |
| |Actual machine-hours (total) |49,840 |machine-hours |
| |Actual lubricants (total) |$179,821 | |
| |Actual supplies (total) |$98,933 | |
102. The variable overhead spending variance for lubricants is:
A) $1,120 F
B) $5,381 F
C) $4,261 U
D) $5,381 U
Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Easy
Solution:
Actual machine-hours: 49,840
| | |Cost Formula (per |Actual Costs |Budget Based on |Spending Variance |
| | |MH) |Incurred 49,840 MHs|49,840 MHs | |
| |Variable overhead costs (Lubricants) |$3.50 |$179,821 |$174,440 |$5,381 U |
103. The variable overhead spending variance for supplies is:
A) $640 F
B) $1,387 F
C) $1,387 U
D) $747 F
Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Easy
Solution:
Actual machine-hours: 49,840
| | |Cost Formula (per |Actual Costs |Budget Based on |Spending Variance |
| | |MH) |Incurred 49,840 MHs|49,840 MHs | |
| |Variable overhead costs (Supplies) |$2.00 |$98,933 |$99,680 |$747 F |
Use the following to answer questions 104-105:
Byers Corporation, which produces cellular transmission towers, has provided the following data:
| |Budgeted production |2,500 |towers |
| |Actual production |2,800 |towers |
| |Standard machine-hours per tower |6.8 |machine-hours |
| |Budgeted machine-hours (6.8 × 2,500) |17,000 |machine-hours |
| |Standard machine-hours allowed for the actual output (6.8 × |19,040 |machine-hours |
| |2,800) | | |
| |Actual machine-hours |18,380 |machine-hours |
| |Budgeted variable overhead cost per machine-hour: |
| |Indirect labor |$7.40 |per machine-hour |
| |Power |$1.40 |per machine-hour |
| | | | |
| |Actual total variable overhead costs: |
| |Indirect labor |$139,660 | |
| |Power |$26,212 | |
104. The variable overhead efficiency variance for indirect labor is:
A) $4,884 U
B) $4,884 F
C) $1,236 F
D) $1,236 U
Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Easy
Solution:
Budgeted machine-hours: 17,000
Actual machine-hours: 18,380
Standard machine-hours allowed: 19,040
| | |Cost Formula (per |Budget Based on |Budget Based on |Efficiency Variance |
| | |MH) |18,380 MHs |19,040 MHs | |
| |Variable overhead costs (Indirect labor) |$7.40 |$136,012 |$140,896 |$4,884 F |
105. The variable overhead efficiency variance for power is:
A) $444 F
B) $444 U
C) $480 U
D) $924 F
Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Easy
Solution:
Budgeted machine-hours: 17,000
Actual machine-hours: 18,380
Standard machine-hours allowed: 19,040
| | |Cost Formula (per |Budget Based on |Budget Based on |Efficiency Variance |
| | |MH) |18,380 MHs |19,040 MHs | |
| |Variable overhead costs (Power) |$1.40 |$25,732 |$26,656 |$924 F |
Use the following to answer questions 106-107:
Czlapinski Corporation, which produces highway lighting poles, has provided the following data:
| |Budgeted production |1,000 |poles |
| |Standard machine-hours per pole |6.4 |machine-hours |
| |Budgeted indirect labor |$2.90 |per machine-hour |
| |Budgeted supplies |$1.50 |per machine-hour |
| | | | |
| |Actual production |1,300 |poles |
| |Actual machine-hours |7,920 |machine-hours |
| |Actual indirect labor (total) |$23,210 | |
| |Actual supplies (total) |$13,297 | |
106. The variable overhead efficiency variance for indirect labor is:
A) $918 F
B) $1,160 F
C) $918 U
D) $1,160 U
Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Easy
Solution:
Actual machine-hours: 7,920
Standard machine-hours: 8,320*
| | |Cost Formula (per |Budget Based on |Budget Based on |Efficiency Variance |
| | |MH) |7,920 MHs |8,320 MHs | |
| |Variable overhead costs (Indirect labor) |$2.90 |$22,968 |$24,128 |$1,160 F |
*1,300 poles × 6.4 machine-hours per pole = 8,320 machine-hours
107. The variable overhead efficiency variance for supplies is:
A) $817 F
B) $1,417 U
C) $600 F
D) $817 U
Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Easy
Solution:
Actual machine-hours: 7,920
Standard machine-hours: 8,320*
| | |Cost Formula (per |Budget Based on |Budget Based on |Efficiency Variance |
| | |MH) |7,920 MHs |8,320 MHs | |
| |Variable overhead costs (Supplies) |$1.50 |$11,880 |$12,480 |$600 F |
*1,300 poles × 6.4 machine-hours per pole = 8,320 standard machine-hours
Use the following to answer questions 108-109:
Quickle Corporation, which produces commercial windows, has provided the following data:
| |Budgeted production |1,000 |windows |
| |Actual production |1,200 |windows |
| |Standard machine-hours per window |7.0 |machine-hours |
| |Budgeted machine-hours (7.0 × 1,000) |7,000 |machine-hours |
| |Standard machine-hours allowed for the actual output (7.0 × |8,400 |machine-hours |
| |1,200) | | |
| |Actual machine-hours |7,750 |machine-hours |
| |Budgeted variable overhead cost per machine-hour: |
| |Supplies |$8.40 |per machine-hour |
| | | | |
| |Actual total variable overhead costs: |
| |Supplies |$68,595 | |
108. The variable overhead spending variance for supplies is:
A) $3,495 F
B) $1,965 U
C) $3,495 U
D) $1,965 F
Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Easy
Solution:
Budgeted machine-hours: 7,000
Actual machine-hours: 7,750
Standard machine-hours allowed: 8,400
| | |Cost Formula (per |Actual Costs |Budget Based on |Spending Variance |
| | |MH) |Incurred 7,750 MHs |7,750 MHs | |
| |Variable overhead costs (Supplies) |$8.40 |$68,595 |$65,100 |$3,495 U |
109. The variable overhead efficiency variance for supplies is:
A) $5,460 U
B) $1,965 F
C) $5,460 F
D) $1,965 U
Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Easy
Solution:
Budgeted machine-hours: 7,000
Actual machine-hours: 7,750
Standard machine-hours allowed: 8,400
| | |Cost Formula (per |Budget Based on |Budget Based on |Efficiency Variance |
| | |MH) |7,750 MHs |8,400 MHs | |
| |Variable overhead costs (Supplies) |$8.40 |$65,100 |$70,560 |$5,460 F |
Use the following to answer questions 110-111:
Geschke Corporation, which produces commercial safes, has provided the following data:
| |Budgeted production |8,500 |safes |
| |Standard machine-hours per safe |9.1 |machine-hours |
| |Standard supplies cost |$1.70 |per machine-hour |
| |Actual production |8,700 |safes |
| |Actual machine-hours |79,100 |machine-hours |
| |Actual supplies cost |$123,642 | |
110. The variable overhead spending variance for supplies is:
A) $10,828 F
B) $10,947 U
C) $10,828 U
D) $10,947 F
Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Easy
Solution:
Actual machine-hours: 79,100
Standard machine-hours: 79,170*
| | |Cost Formula (per |Actual Costs |Budget Based on |Spending Variance |
| | |MH) |Incurred 79,100 MHs|79,100 MHs | |
| |Variable overhead costs (Supplies) |$1.70 |$123,642 |$134,470 |$10,828 F |
*8,700 safes × 9.1 machine-hours = 79,170 standard machine-hours
111. The variable overhead efficiency variance for supplies is:
A) $10,947 F
B) $119 U
C) $10,947 U
D) $119 F
Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Easy
Solution:
Actual machine-hours: 79,100
Standard machine-hours: 79,170*
| | |Cost Formula (per |Budget Based on |Budget Based on |Efficiency Variance |
| | |MH) |79,100 MHs |79,170 MHs | |
| |Variable overhead costs (Supplies) |$1.70 |$134,470 |$134,589 |$119 F |
*8,700 safes × 9.1 machine-hours = 79,170 standard machine-hours
Use the following to answer questions 112-113:
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:
| |Actual total overhead cost |$260,000 | |
| |Budgeted fixed overhead cost |$180,000 | |
| |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
Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Medium
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
Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Medium
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:
| |Denominator level of activity |8,500 |DLHs |
| |Overhead costs at the denominator activity level: | | |
| |Variable overhead cost |$19,550 | |
| |Fixed overhead cost |$93,075 | |
The following data pertain to operations for the most recent period:
| |Actual hours |8,600 |DLHs |
| |Standard hours allowed for the actual output |8,575 |DLHs |
| |Actual total variable overhead cost |$18,490 | |
| |Actual total fixed overhead cost |$91,225 | |
114. What is the predetermined overhead rate to the nearest cent?
A) $12.91
B) $13.10
C) $12.76
D) $13.25
Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Medium
Solution:
Predetermined overhead rate = ($19,550 + $93,075) ÷ 8,500 DLHs
= $112,625 ÷ 8,500 DLHs = $13.25 per DLH
115. How much overhead was applied to products during the period to the nearest dollar?
A) $109,715
B) $112,625
C) $113,619
D) $113,950
Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Medium
Solution:
Predetermined overhead rate = ($19,550 + $93,075) ÷ 8,500 DLHs
= $112,625 ÷ 8,500 DLHs = $13.25 per DLH
Applied overhead = Standard hours allowed for actual output × Predetermined overhead rate = 8,575 DLHs × $13.25 per DLH = $113,619
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
Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Medium
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
Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Medium
Solution:
Fixed portion of predetermined overhead rate =
Budgeted fixed overhead cost ÷ Denominator activity level
$93,075 ÷ 8,500 DLHs = $10.95 per DLH
Volume variance = Fixed portion of predetermined overhead rate × (Denominator hours − Standard hours allowed)
= $10.95 per DLH × (8,500 DLHs − 8,575 DLHs)
= $10.95 per DLH × 75 DLHs = $821 F
Use the following to answer questions 118-121:
A manufacturer of playground equipment has a standard costing system based on standard machine-hours (MHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below:
| |Denominator level of activity |8,800 |MHs |
| |Fixed overhead cost |$71,720 | |
The following data pertain to operations for the most recent period:
| |Actual hours |8,500 |MHs |
| |Standard hours allowed for the actual output |8,556 |MHs |
| |Actual total fixed overhead cost |$71,470 | |
118. What is the predetermined fixed overhead rate to the nearest cent?
A) $8.41
B) $8.12
C) $8.15
D) $8.44
Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Medium
Solution:
Predetermined fixed overhead rate = $71,720 ÷ 8,800 MHs = $8.15 per MH
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
Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Medium
Solution:
Predetermined fixed overhead rate = $71,720 ÷ 8,800 MHs = $8.15 per MH
Applied fixed overhead = 8,556 MHs × $8.15 per MH = $69,731
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
Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Medium
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
Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Medium
Solution:
Volume variance = Fixed portion of predetermined overhead rate × (Denominator hours − Standard hours allowed)
= ($71,720 ÷ 8,800 MHs) × (8,800 MHs − 8,556 MHs)
= $8.15 per MH × 244 MHs = $1,989 U
Use the following to answer questions 122-123:
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.
122. What was Rodriquez's fixed overhead budget variance?
A) $16,200 unfavorable
B) $59,400 favorable
C) $109,800 favorable
D) $126,000 unfavorable
Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Medium
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
Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Hard
Solution:
Predetermined overhead rate = ($108,000 + $378,000) ÷ 15,000 MHs
= $486,000 ÷ 15,000 MHs = $32.40 per MH
Applied overhead = 20,000 MHs × $32.40 per MH = $648,000
Actual overhead = $135,000 + $394,200 = $529,200
$648,000 − $529,200 = $118,800 overapplied
Use the following to answer questions 124-125:
A manufacturer of industrial equipment 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:
| |Denominator level of activity |2,200 |DLHs |
| |Overhead costs at the denominator activity level: | | |
| |Variable overhead cost |$12,760 | |
| |Fixed overhead cost |$29,810 | |
The following data pertain to operations for the most recent period:
| |Actual hours |2,100 |DLHs |
| |Standard hours allowed for the actual output |2,108 |DLHs |
| |Actual total variable overhead cost |$12,390 | |
| |Actual total fixed overhead cost |$29,360 | |
124. What is the predetermined overhead rate to the nearest cent?
A) $18.98
B) $20.27
C) $19.88
D) $19.35
Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Medium
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
Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Medium
Solution:
Predetermined overhead rate =
($12,760 + $29,810) ÷ 2,200 DLHs = $19.35 per DLH
Applied overhead = Standard hours for actual output × Predetermined overhead rate = 2,108 DLHs × $19.35 per DLH = $40,790
Use the following to answer questions 126-128:
Muscato Corporation's flexible budget for two levels of activity appears below:
| | |Cost Formula (per |Activity (in machine-hours) |
| | |machine-hour) | |
| | | |7,500 |7,600 |
| |Variable overhead costs: | | | |
| |Supplies |$ 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 |
| |Total overhead cost | |$1,584,600 |$1,586,500 |
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
Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Easy
Solution:
Variable element = $142,500 ÷ 7,500 MHs = $19.00 per MH
127. If the denominator level of activity is 7,500 machine-hours, the fixed element in the predetermined overhead rate would be:
A) $192.28
B) $211.28
C) $19.00
D) $1,900.00
Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Easy
Solution:
Fixed element = $1,442,100 ÷ 7,500 MHs = $192.28 per MH
128. If the denominator level of activity is 7,600 machine-hours, the predetermined overhead rate would be:
A) $1,900.00
B) $19.00
C) $189.75
D) $208.75
Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Easy
Solution:
Predetermined overhead rate = $1,586,500 ÷ 7,600 MHs = $208.75 per MH
Use the following to answer questions 129-131:
Keeran Corporation's flexible budget for two levels of activity appears below:
| | |Cost Formula |Activity |
| | |(per |(in machine-hours) |
| | |machine-hour) | |
| | | |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
Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Easy
Solution:
Variable element = $31,720 ÷ 6,100 MHs = $5.20 per MH
130. If the denominator level of activity is 6,100 machine-hours, the fixed element in the predetermined overhead rate would be:
A) $520.00
B) $39.68
C) $5.20
D) $44.88
Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Easy
Solution:
Fixed element = $242,048 ÷ 6,100 MHs = $39.68 per MH
131. If the denominator level of activity is 6,200 machine-hours, the predetermined overhead rate would be:
A) $520.00
B) $5.20
C) $44.24
D) $39.04
Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Easy
Solution:
Predetermined overhead rate = $274,288 ÷ 6,200 MHs = $44.24 per MH
Use the following to answer questions 132-133:
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:
| |Actual machine-hours |640 |hours |
| |Standard machine-hours allowed for the actual output |650 |hours |
| |Denominator activity |700 |hours |
| |Actual fixed overhead costs |$2,000 | |
| |Budgeted fixed overhead costs |$2,100 | |
| |Predetermined overhead rate ($1 variable + $3 fixed) |$4 |per hour |
132. The fixed overhead budget variance would be:
A) $100 F
B) $300 F
C) $300 U
D) $200 F
Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Easy
Solution:
Budget variance = Actual fixed overhead cost − Budgeted fixed overhead cost
= $2,000 − $2,100 = $100 F
133. The volume variance would be:
A) $180 F
B) $240 F
C) $150 U
D) $200 U
Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Medium
Solution:
Volume variance = Fixed portion of predetermined overhead rate × (Denominator hours − Standard hours allowed) = $3 per hour × (700 hours − 650 hours) = $3 per hours × 50 hours = $150 U
Use the following to answer questions 134-135:
Asper Corporation has provided the following data for February.
| |Denominator level of activity |7,700 |machine-hours |
| |Budgeted fixed overhead costs |$266,420 | |
| |Fixed portion of the predetermined overhead rate |$34.60 |per machine-hour |
| |Actual level of activity |7,900 |machine-hours |
| |Standard machine-hours allowed for the actual output |8,200 |machine-hours |
| |Actual fixed overhead costs |$259,960 | |
134. The budget variance for February is:
A) $6,460 F
B) $6,920 U
C) $6,460 U
D) $6,920 F
Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Easy
Solution:
Budget variance = Actual fixed overhead cost − Budgeted fixed overhead cost
= $259,960 − $266,420 = $6,460 F
135. The volume variance for February is:
A) $17,300 U
B) $17,300 F
C) $6,920 F
D) $6,920 U
Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Easy
Solution:
Volume variance = Fixed portion of predetermined overhead rate × (Denominator hours − Standard hours allowed)
= $34.60 per MH × (7,700 MHs − 8,200 MHs)
= $34.60 per MH × 500 MHs = $17,300 F
Use the following to answer questions 136-137:
The following data for May has been provided by Mccawley Corporation.
| |Denominator level of activity |2,600 |machine-hours |
| |Budgeted fixed overhead costs |$53,820 | |
| |Actual level of activity |2,700 |machine-hours |
| |Standard machine-hours allowed for the actual output |2,800 |machine-hours |
| |Actual fixed overhead costs |$56,290 | |
136. The budget variance for May is:
A) $2,070 U
B) $2,470 F
C) $2,070 F
D) $2,470 U
Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Easy
Solution:
Budget variance = Actual fixed overhead cost − Budgeted fixed overhead cost
= $56,290 − $53,820 = $2,470 U
137. The volume variance for May is:
A) $2,070 U
B) $4,140 U
C) $4,140 F
D) $2,070 F
Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Easy
Solution:
Volume variance = Fixed portion of predetermined overhead rate × (Denominator hours − Standard hours allowed)
= ($53,820 ÷ 2,600 MHs) × (2,600 MHs − 2,800 MHs) =
= $20.70 per MH × 200 MHs = $4,140 F
138. The following overhead data are for a department in a large company.
| | |Actual |Static budget |
| |Activity level (in units) |290 |280 |
| | | | |
| |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:
| |Cost formula |Actual costs |Flexible budget |Variance |
| |per unit |incurred |based on actual | |
| | | |activity | |
| | | | | |
|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 |
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement; Reporting LO: 1; 2 Level: Easy
139. You have been recently hired by Ritter Enterprises as an assistant manager. As your first task, you have been asked to set up a flexible budgeting system for manufacturing overhead. The major purpose of this system will be to prepare performance reports.
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.
2. The activity base should not be expressed in dollars or other currency. Activity bases stated in dollars are subject to price-level changes that may have little to do with overhead costs. For example, an increase in the wage rate of direct labor would cause a direct labor cost activity base to change even though a proportionate change may not take place in the overhead costs themselves.
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.
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement; Reporting LO: 1 Level: Easy
140. Elvin Hospital bases its budgets on patient-visits. The hospital's static budget for May appears below:
| |Budgeted number of patient-visits |5,100 |
| |Budgeted variable overhead costs: | |
| |Supplies (@ $2.70 per patient-visit) |$13,770 |
| |Laundry (@ $3.00 per patient-visit) | 15,300 |
| |Total variable overhead cost | 29,070 |
| |Budgeted fixed overhead costs: | |
| |Wages and salaries |16,830 |
| |Occupancy costs | 16,830 |
| |Total fixed overhead cost | 33,660 |
| |Total budgeted overhead cost |$62,730 |
Required:
Prepare a flexible budget for an activity level of 5,300 patient-visits per month.
Ans:
| |Cost Formula (per |Flexible Budget Based on|
| |patient-visit) |5,300 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 |
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement; Reporting LO: 1 Level: Easy
141. Wytch Corporation bases its budgets on machine-hours. The company's static budget for February appears below:
| |Budgeted number of machine-hours |6,000 |
| |Budgeted variable overhead costs: | |
| |Supplies (@ $6.90 per machine-hour) |$ 41,400 |
| |Power (@ $3.70 per machine-hour) | 22,200 |
| |Total variable overhead cost | 63,600 |
| |Budgeted fixed overhead costs: | |
| |Salaries |51,600 |
| |Equipment depreciation | 26,400 |
| |Total fixed overhead cost | 78,000 |
| |Total budgeted overhead cost |$141,600 |
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 on 6,400 |
| |(per machine-hour) |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 |
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement; Reporting LO: 1 Level: Easy
142. Lobato Hospital bases its budgets on patient-visits. The hospital's static budget for September appears below:
| |Budgeted number of patient-visits |9,900 |
| |Budgeted variable overhead costs: | |
| |Supplies (@ $2.20 per patient-visit) |$21,780 |
| |Laundry (@ $1.10 per patient-visit) | 10,890 |
| |Total variable overhead cost | 32,670 |
| |Budgeted fixed overhead costs: | |
| |Salaries |28,710 |
| |Occupancy costs | 10,890 |
| |Total fixed overhead cost | 39,600 |
| |Total budgeted overhead cost |$72,270 |
Actual results for the month were:
| |Actual number of patient-visits |10,000 |
| |Supplies |$22,040 |
| |Laundry |$10,640 |
| |Salaries |$28,480 |
| |Occupancy costs |$11,360 |
Required:
Prepare a flexible budget performance report in good form.
Ans:
| |Cost Formula |Actual Costs |Flexible Budget |Variances |
| |(per |Incurred for |Based on 10,000 | |
| |patient-visit) |10,000 |Patient-Visits | |
| | |Patient-Visits | | |
|Variable overhead costs: | | | | |
|Supplies |$2.20 |$22,040 |$22,000 |$40 U |
|Laundry |1.10 |10,640 |11,000 |360 F |
|Total variable overhead cost |$3.30 |32,680 |33,000 |320 F |
|Fixed overhead costs: | | | | |
|Salaries | |28,480 |28,710 |230 F |
|Occupancy costs | |11,360 |10,890 |470 U |
|Total fixed overhead cost | |39,840 |39,600 |240 U |
|Total overhead cost | |$72,520 |$72,600 |$80 F |
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement; Reporting LO: 2 Level: Easy
143. Weakly Corporation bases its budgets on machine-hours. The company's static budget for September appears below:
| |Budgeted number of machine-hours |6,000 |
| |Budgeted variable overhead costs: | |
| |Power (@ $9.30 per machine-hour) |$ 55,800 |
| |Supplies (@ $5.20 per machine-hour) | 31,200 |
| |Total variable overhead cost | 87,000 |
| |Budgeted fixed overhead costs: | |
| |Salaries |68,400 |
| |Equipment depreciation | 46,200 |
| |Total fixed overhead cost | 114,600 |
| |Total budgeted overhead cost |$201,600 |
Actual results for the month were:
| |Actual number of machine-hours |6,400 |
| |Power |$59,870 |
| |Supplies |$34,960 |
| |Salaries |$65,100 |
| |Equipment depreciation |$44,610 |
Required:
Prepare a flexible budget performance report in good form.
Ans:
| |Cost Formula |Actual Costs |Flexible Budget |Variances |
| |(per |Incurred for |Based on 6,400 | |
| |machine-hour) |6,400 |Machine-Hours | |
| | |Machine-Hours | | |
|Variable overhead costs: | | | | |
|Power |$9.30 |$59,870 |$59,520 |$350 U |
|Supplies |5.20 |34,960 |33,280 |1,680 U |
|Total variable overhead cost |$14.50 |94,830 |92,800 |2,030 U |
|Fixed overhead costs: | | | | |
|Salaries | |65,100 |68,400 |3,300 F |
|Equipment depreciation | |44,610 |46,200 |1,590 F |
|Total fixed overhead cost | |109,710 |114,600 |4,890 F |
|Total overhead cost | |$204,540 |$207,400 |$2,860 F |
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement; Reporting LO: 2 Level: Easy
144. Cashaw Corporation, which produces only a single product, bases its budgets on units produced. The company's static budget for September appears below:
| |Budgeted number of units produced |4,200 |
| |Budgeted variable overhead costs: | |
| |Power (@ $6.50 per unit) |$27,300 |
| |Supplies (@ $1.10 per unit) | 4,620 |
| |Total variable overhead cost | 31,920 |
| |Budgeted fixed overhead costs: | |
| |Salaries |34,020 |
| |Occupancy costs | 4,620 |
| |Total fixed overhead cost | 38,640 |
| |Total budgeted overhead cost |$70,560 |
Actual results for the month were:
| |Actual number of units produced |4,500 |
| |Power |$31,840 |
| |Supplies |$4,730 |
| |Salaries |$32,480 |
| |Occupancy costs |$4,800 |
Required:
Prepare a flexible budget performance report in good form.
Ans:
| |Cost Formula |Actual Costs |Flexible Budget |Variances |
| |(per unit) |Incurred for |Based on 4,500 | |
| | |4,500 Units |Units | |
|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 |
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement; Reporting LO: 2 Level: Easy
145. Flick Company uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of standard direct labor-hours. The company's total budgeted variable and fixed manufacturing overhead costs at the denominator level of activity are $20,000 for variable overhead and $30,000 for fixed overhead. The predetermined overhead rate, including both fixed and variable components, is $2.50 per direct labor-hour. The standards call for two direct labor-hours per unit of output produced. Last year, the company produced 11,500 units of product and worked 22,000 direct labor-hours. Actual costs were $22,500 for variable overhead and $31,000 for fixed overhead.
Required:
a. What is the denominator level of activity?
b. What were the standard hours allowed for the output last year?
c. What was the variable overhead spending variance?
d. What was the variable overhead efficiency variance?
e. What was the fixed overhead budget variance?
f. What was the fixed overhead volume variance?
Ans:
|a. |Total overhead at the denominator level of activity |$50,000 |
| |÷ Predetermined overhead rate |$2.50/DLH |
| |= Denominator level of activity |20,000 DLHs |
|b. |Actual output |11,500 units |
| |× Standard DLH per unit |2 DLH per unit |
| |= Standard DLHs allowed |23,000 DLHs |
c. Computation of variable overhead spending variance:
Spending variance = (AH × AR) − (AH × SR)
= ($22,500) − (22,000 × $1.00*) = $500 U
*$20,000 ÷ 20,000 DLHs = $1.00
d. Computation of variable overhead efficiency variance:
Spending variance = (AH × SR) − (SH × SR)
= (22,000 × $1.00) − (23,000* × $1.00) = $1,000 F
* 2 DLHs per unit × 11,500 units = 23,000 DLHs
e. Computation of the fixed overhead budget variance:
Budget variance = Actual fixed overhead − Budgeted Fixed overhead
= $31,000 − $30,000 = $1,000 U
f. Computation of the fixed overhead volume variance:
Volume variance = Fixed portion of predetermined overhead rate ×
(Denominator hours − Standard hours allowed)
= $1.50* (20,000 − 23,000) = $4,500 F
*$30,000 ÷ 20,000 DLH = $1.50 per DLH
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3; 4; 5; 6 Level: Medium
146. Wattis Manufacturing has established the following master flexible budget:
| |Sales in units |100,000 |150,000 |200,000 |
| |Sales |$1,500,000 |$2,250,000 |$3,000,000 |
| |Variable expenses: | | | |
| |Raw materials |220,000 |330,000 |440,000 |
| |Direct labor |240,000 |360,000 |480,000 |
| |Variable manufacturing overhead |180,000 |270,000 |360,000 |
| |Variable selling and administrative | 100,000 | 150,000 | 200,000 |
| |Total variable expenses | 740,000 | 1,110,000 | 1,480,000 |
| |Contribution margin | 760,000 | 1,140,000 | 1,520,000 |
| |Fixed expenses: | | | |
| |Fixed manufacturing overhead |337,500 |337,500 |337,500 |
| |Fixed selling and administrative | 250,000 | 250,000 | 250,000 |
| |Total fixed expenses | 587,500 | 587,500 | 587,500 |
| |Net operating income |$ 172,500 |$ 552,500 |$ 932,500 |
Manufacturing overhead is applied on the basis of standard machine-hours. At standard, each unit of product requires one machine-hour to complete.
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:
| |Actual variable manufacturing overhead cost |$211,680 |
| |Actual fixed manufacturing overhead cost |$343,000 |
| |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:
a. Predetermined variable overhead rate = $270,000 ÷ 150,000 machine-hours
= $1.80 per machine-hour
Predetermined fixed overhead rate = $337,500 ÷ 150,000 machine-hours
= $2.25 per machine-hour
b. Variable overhead variances:
Spending variance = AH (AR − SR) = 126,000 ($1.68* − $1.80) = $15,120 F
*AR = $211,680 ÷ 126,000 actual machine-hours = $1.68
Efficiency variance = SR (AH − SH) = $1.80 (126,000 − 120,000*) = $10,800 U
*SH = 120,000 units × 1 hour per unit = 120,000 hours
Fixed overhead variances:
Budget variance = Actual fixed overhead − Budgeted fixed overhead
= $343,000 − $337,500 = $5,500 U
Volume variance = Fixed rate (Denominator hours − Standard hours)
= $2.25 (150,000 − 120,000*) = $67,500 U
*Standard hours = 120,000 units × 1 hour per unit = 120,000 hours
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3; 4; 5; 6 Level: Hard
147. Sorrick Corporation, which makes sophisticated industrial valves, has provided the following data from its standard costing system and for its actual operations in March:
| |Budgeted production |5,300 |valves |
| |Actual production |5,400 |valves |
| |Standard machine-hours per valve |7.5 |machine-hours |
| |Budgeted machine-hours (7.5 × 5,300) |39,750 |machine-hours |
| |Standard machine-hours allowed for the actual output (7.5 × 5,400) |40,500 |machine-hours |
| |Actual machine-hours |41,160 |machine-hours |
| |Budgeted variable overhead cost per machine-hour: |
| |Indirect labor |$9.30 |per machine-hour |
| |Power |$2.40 |per machine-hour |
| | | | |
| |Actual total variable overhead costs: |
| |Indirect labor |$363,400 | |
| |Power |$94,821 | |
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:
| |Cost Formula (per |Actual Costs Incurred |Flexible Budget Based |Spending Variance |
| |machine-hour) |41,160 Machine-Hours |on 41,160 Machine-Hours| |
|Indirect labor |$9.30 |$363,400 |$382,788 |$19,388 F |
|Power |$2.40 |$94,821 |$98,784 |$3,963 F |
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Easy
148. The following data for November have been provided by Hunn Corporation, a producer of precision drills for oil exploration:
| |Budgeted production |3,700 |drills |
| |Standard machine-hours per drill |9.0 |machine-hours |
| |Standard indirect labor |$8.80 |per machine-hour |
| |Standard power |$2.40 |per machine-hour |
| | | | |
| |Actual production |3,900 |drills |
| |Actual machine-hours |35,350 |machine-hours |
| |Actual indirect labor |$313,923 | |
| |Actual power |$83,310 | |
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:
| |Cost Formula (per |Actual Costs |Flexible Budget |Spending Variance |
| |machine-hour) |Incurred 35,350 |Based on 35,350 | |
| | |Machine-Hours |Machine-Hours | |
|Indirect labor |$8.80 |$313,923 |$311,080 |$2,843 U |
|Power |$2.40 |$83,310 |$84,840 |$1,530 F |
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Easy
149. Hammond Corporation has provided the following data for October:
| |Budgeted production |2,100 |units |
| |Actual production |2,400 |units |
| |Standard machine-hours per unit |6.0 |machine-hours |
| |Budgeted machine-hours (6.0 × 2,100) |12,600 |machine-hours |
| |Standard machine-hours allowed for the actual output (6.0 × |14,400 |machine-hours |
| |2,400) | | |
| |Actual machine-hours |14,220 |machine-hours |
| |Budgeted variable overhead cost per machine-hour: |
| |Lubricants |$1.00 |per machine-hour |
| |Supplies |$1.60 |per machine-hour |
| | | | |
| |Actual total variable overhead costs: |
| |Lubricants |$13,974 | |
| |Supplies |$23,558 | |
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:
| |Cost Formula (per |Actual Costs Incurred |Flexible Budget Based on |Spending Variance |
| |machine-hour) |14,220 Machine-Hours |14,220 Machine-Hours | |
|Lubricants |$1.00 |$13,974 |$14,220 |$246 F |
|Supplies |$1.60 |$23,558 |$22,752 |$806 U |
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Easy
150. The following data have been provided by Lopus Corporation:
| |Budgeted production |2,600 |units |
| |Standard machine-hours per unit |2.7 |machine-hours |
| |Standard lubricants |$4.20 |per machine-hour |
| |Standard supplies |$2.90 |per machine-hour |
| | | | |
| |Actual production |2,900 |units |
| |Actual machine-hours |8,080 |machine-hours |
| |Actual lubricants (total) |$35,151 | |
| |Actual supplies (total) |$23,038 | |
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 (per |Actual Costs Incurred |Flexible Budget Based on |Spending Variance|
| |machine-hour) |8,080 Machine-Hours |8,080 Machine-Hours | |
|Lubricants |$4.20 |$35,151 |$33,936 |$1,215 U |
|Supplies |$2.90 |$23,038 |$23,432 |$394 F |
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Easy
151. Osika Corporation, which makes helicopter rotors, has provided the following data for November:
| |Budgeted production |3,300 |rotors |
| |Actual production |3,500 |rotors |
| |Standard machine-hours per rotor |8.7 |machine-hours |
| |Budgeted machine-hours (8.7 × 3,300) |28,710 |machine-hours |
| |Standard machine-hours allowed for the actual output (8.7 × |30,450 |machine-hours |
| |3,500) | | |
| |Actual machine-hours |31,010 |machine-hours |
| |Budgeted variable overhead cost per machine-hour: |
| |Indirect labor |$1.00 |per machine-hour |
| |Power |$2.50 |per machine-hour |
| | | | |
| |Actual total variable overhead costs: |
| |Indirect labor |$32,673 | |
| |Power |$70,913 | |
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 |
| |
|Budgeted machine-hours |28,710 |
|Actual machine-hours |31,010 |
|Standard machine-hours allowed |30,450 |
|Variable overhead costs: |Cost Formula |(1) |(2) |(3) |
| |(per |Actual Costs |Flexible Budget |Flexible Budget |
| |machine-hour) |Incurred 31,010 |Based on 31,010 |Based on 30,450 |
| | |Machine-Hours |Machine-Hours |Machine-Hours |
|Indirect labor |$1.00 |$32,673 |$31,010 |$30,450 |
|Power |2.50 |70,913 |77,525 |76,125 |
|Total |$3.50 |$103,586 |$108,535 |$106,575 |
|Variable overhead costs: |Total Variance (1) |Spending Variance |Efficiency Variance |
| |− (3) |(1) − (2) |(2) − (3) |
|Indirect labor |$2,223 U |$1,663 U |$560 U |
|Power |5,212 F |6,612 F |1,400 U |
|Total |$2,989 F |$4,949 F |$1,960 U |
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Easy
152. Koppa Corporation, which makes skylights, has provided the following data for January:
| |Budgeted production |6,100 |skylights |
| |Actual production |6,300 |skylights |
| |Standard machine-hours per skylight |6.6 |machine-hours |
| |Actual machine-hours |42,120 |machine-hours |
| |Budgeted variable overhead cost per machine-hour: |
| |Indirect labor |$5.90 |per machine-hour |
| |Power |$1.00 |per machine-hour |
| | | | |
| |Actual total variable overhead costs: |
| |Indirect labor |$268,306 | |
| |Power |$41,922 | |
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 |
|Budgeted machine-hours (6.6 × 6,100) |40,260 |
|Actual machine-hours |42,120 |
|Standard machine-hours allowed for the actual output (6.6 × 6,300) |41,580 |
|Variable overhead costs: |Cost Formula |(1) |(2) |(3) |
| |(per |Actual Costs |Flexible Budget |Flexible Budget |
| |machine-hour) |Incurred 42,120 |Based on 42,120 |Based on 41,580 |
| | |Machine-Hours |Machine-Hours |Machine-Hours |
|Indirect labor |$5.90 |$268,306 |$248,508 |$245,322 |
|Power |1.00 |41,922 |42,120 |41,580 |
|Total |$6.90 |$310,228 |$290,628 |$286,902 |
|Variable overhead costs: |Total Variance |Spending Variance |Efficiency Variance|
| |(1) − (3) |(1) − (2) | |
| | | |(2) − (3) |
|Indirect labor |$22,984 U |$19,798 U |$3,186 U |
|Power |342 U |198 F |540 U |
|Total |$23,326 U |$19,600 U |$3,726 U |
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Easy
153. Creger Corporation, which makes landing gears, has provided the following data for a recent month:
| |Budgeted production |7,900 |gears |
| |Standard machine-hours per gear |9.3 |machine-hours |
| |Budgeted supplies cost |$6.20 |per machine-hour |
| |Actual production |8,300 |gears |
| |Actual machine-hours |76,930 |machine-hours |
| |Actual supplies cost (total) |$479,438 | |
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:
|Budgeted machine-hours (9.3 × 7,900) |73,470 |
|Actual machine-hours |76,930 |
|Standard machine-hours allowed for the actual output (9.3 × 8,300) |77,190 |
|Variable overhead costs: |Cost Formula |(1) |(2) |(3) |
| |(per |Actual Costs |Flexible Budget |Flexible Budget |
| |machine-hour) |Incurred 76,930 |Based on 76,930 |Based on 77,190 |
| | |Machine-Hours |Machine-Hours |Machine-Hours |
|Supplies cost |$6.20 |$479,438 |$476,966 |$478,578 |
|Variable overhead costs: |Total Variance (1) |Spending Variance |Efficiency Variance|
| |− (3) |(1) − (2) | |
| | | |(2) − (3) |
|Supplies cost |$860 U |$2,472 U |$1,612 F |
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Easy
154. Bondi Corporation makes automotive engines. For the most recent month, budgeted production was 1,500 engines. The budgeted power cost is $3.10 per machine-hour. The company's standards indicate that each engine requires 9.3 machine-hours. Actual production was 1,800 engines. Actual machine-hours were 15,860 machine-hours. Actual power cost totaled $51,593.
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:
|Budgeted machine-hours (9.3 × 1,500) |13,950 |
|Actual machine-hours |15,860 |
|Standard machine-hours allowed for the actual output (9.3 × 1,800) |16,740 |
|Variable overhead costs: |Cost Formula |(1) |(2) |(3) |
| |(per |Actual Costs |Flexible Budget |Flexible Budget |
| |machine-hour) |Incurred 15,860 |Based on 15,860 |Based on 16,740 |
| | |Machine-Hours |Machine-Hours |Machine-Hours |
|Power cost |$3.10 |$51,593 |$49,166 |$51,894 |
|Variable overhead costs: |Total Variance (1) −|Spending Variance |Efficiency Variance|
| |(3) |(1) − (2) |(2) − (3) |
|Power cost |$301 F |$2,427 U |$2,728 F |
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Easy
155. Hykes Corporation's flexible budget for two levels of activity appears below:
| | |Cost Formula (per |Activity |
| | |machine-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:
Determine the predetermined overhead rate if the denominator level of activity is 3,100 machine-hours. Show your work!
Ans:
Predetermined overhead rate
= Overhead from the flexible budget/Denominator level of activity
= $141,670/3,100 machine-hours = $45.70 per machine-hour
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Easy
156. Benoit Corporation has provided its flexible budget for two levels of activity:
| | |Cost Formula (per |Activity |
| | |machine-hour) |(in machine-hours) |
| | | |5,600 |5,700 |
| |Variable overhead costs: | | | |
| |Supplies |$ 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 |
| |Total overhead cost | |$629,328 |$630,648 |
Required:
Determine the predetermined overhead rate for the denominator level of activity of 5,700 machine-hours. Show your work!
Ans:
Predetermined overhead rate
= Overhead from the flexible budget/Denominator level of activity
= $630,648/5,700 machine-hours = $110.64 per machine-hour
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Easy
157. Coppin Corporation has provided the following data for August.
| |Denominator level of activity |5,600 |machine-hours |
| |Budgeted fixed overhead costs |$196,560 | |
| |Fixed portion of the predetermined overhead rate |$35.10 |per machine-hour |
| |Actual level of activity |5,800 |machine-hours |
| |Standard machine-hours allowed for the actual output |6,000 |machine-hours |
| |Actual fixed overhead costs |$193,710 | |
Required:
a. Compute the budget variance for August. Show your work!
b. Compute the volume variance for August. Show your work!
Ans:
a. Budget variance = Actual fixed overhead cost − Budgeted fixed overhead cost
= $193,710 − $196,560 = $2,850 F
b. Volume variance = Fixed portion of the predetermined overhead rate × (Denominator hours − Standard hours allowed)
= $35.10 × (5,600 − 6,000) = $14,040 F
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Easy
158. Holl Corporation has provided the following data for November.
| |Denominator level of activity |4,800 |machine-hours |
| |Budgeted fixed overhead costs |$56,640 | |
| |Standard machine-hours allowed for the actual output |5,100 |machine-hours |
| |Actual fixed overhead costs |$55,860 | |
Required:
a. Compute the budget variance for November. Show your work!
b. Compute the volume variance for November. Show your work!
Ans:
a. Budget variance = Actual fixed overhead cost − Budgeted fixed overhead cost
= $55,860 − $56,640 = $780 F
b. Fixed portion of the predetermined overhead rate
= $56,640/4,800 machine-hours = $11.80 per machine-hour
Volume variance = Fixed portion of the predetermined overhead rate × (Denominator hours − Standard hours allowed)
= $11.80 × (4,800 − 5,100) = $3,540 F
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Easy
159. Wangerin Corporation applies overhead to products based on machine-hours. The denominator level of activity is 6,900 machine-hours. The budgeted fixed overhead costs are $240,810. In April, the actual fixed overhead costs were $245,640 and the standard machine-hours allowed for the actual output were 7,200 machine-hours.
Required:
a. Compute the budget variance for April. Show your work!
b. Compute the volume variance for April. Show your work!
Ans:
a. Budget variance = Actual fixed overhead cost − Budgeted fixed overhead cost
= $245,640 − $240,810 = $4,830 U
b. Fixed portion of the predetermined overhead rate
= $240,810/6,900 machine-hours = $34.90 per machine-hour
Volume variance = Fixed portion of the predetermined overhead rate × (Denominator hours − Standard hours allowed)
= $34.90 × (6,900 − 7,200) = $10,470 F
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Easy
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