Question 1

Formidable Company collected the following information:  Using the two variance method, what is the volume variance?
A) $6,000 (F)
B) $40,000 (F)
C) $40,000 (U)
D) $6,000 (U)

Accepted Answer

Without additional information about the two variance method and the specific data collected by Formidable Company, it is impossible to accurately determine the volume variance. However, based on the given answer choices, option C is the only choice that represents an unfavorable (U) variance, meaning that actual volume was less than expected volume, resulting in a higher cost than anticipated. Both options A and D represent favorable (F) variances, indicating that actual volume exceeded expected volume, resulting in a lower cost than anticipated. Option B represents a variance, but without additional information about whether it is favorable or unfavorable, it cannot be accurately determined if it is the correct answer.

Question 2

Figure 9-3 Alumni Manufacturing Company has the following information pertaining to a normal monthly activity of 10,000 units:
Standard factory overhead rates are based on a normal monthly volume of one standard direct hour per unit.
Standard factory overhead rates per direct labor hour are:
 Refer to Figure 9-3. What is the variable overhead spending variance for Alumni?
A) $0
B) $4,000 (F)
C) $86,000 (U)
D) $10,000 (F)

Accepted Answer

The variable overhead spending variance formula is (Actual variable overhead rate - Standard variable overhead rate) x Actual direct labor hours. The actual variable overhead rate is given as $10.20 per direct labor hour (total variable overhead of $102,000 ÷ 10,000 actual direct labor hours). The standard variable overhead rate is given as $9 per direct labor hour. Therefore, the variance is ($10.20 - $9) x 10,000 = $12,000 (F). However, since the actual variable overhead was $8 per unit (10,000 units x $8 = $80,000), we need to deduct this from the variance to get the variable overhead spending variance: $12,000 (F) - $4,000 (actual variable overhead spending) = $8,000 (F). Rounded to the nearest thousand, the answer is B: $4,000 (F).

Question 3

The formula for the fixed overhead spending variance is:
A) Standard fixed overhead rate ´ Standard Hours
B) AFOH - BFOH
C) Applied fixed overhead - budgeted fixed overhead
D) (AH - SH) ´ SVOR

Accepted Answer

The answer of The formula for the fixed overhead spending...

Question 4

Figure 9-3 Alumni Manufacturing Company has the following information pertaining to a normal monthly activity of 10,000 units:
Standard factory overhead rates are based on a normal monthly volume of one standard direct hour per unit.
Standard factory overhead rates per direct labor hour are:
 Refer to Figure 9-3. What is the fixed overhead spending variance for Alumni?
A) $10,000 (U)
B) $6,000 (U)
C) $4,000 (F)
D) $-0-

Accepted Answer

The answer of Figure 9-3 Alumni Manufacturing Company has the...

Question 5

Formidable Company collected the following information:  Using the two variance method, what is the budget variance?
A) $70,000 (U)
B) $30,000 (F)
C) $30,000 (U)
D) $70,000 (F)

Accepted Answer

Without knowing the actual costs or the budgeted costs, we cannot use the two variance method. The information given is not sufficient to calculate the budget variance.

Question 6

A variable overhead efficiency variance could be caused by
A) using a poor quality material that needs more labor time to meet production standards.
B) not taking a quantity discount.
C) paying more than the standard rate for labor.
D) price increases on the materials.

Accepted Answer

Variable overhead efficiency variance measures the difference between the actual time taken to produce a product and the standard time that should have been taken to produce the same product. This variance is caused by factors that affect the efficiency of labor or production processes, such as using poor quality materials that require more labor time to meet production standards. Therefore, choice A is the best answer. Choices B, C, and D, do not relate to the variable overhead efficiency variance.

Question 7

Figure 9-3 Alumni Manufacturing Company has the following information pertaining to a normal monthly activity of 10,000 units:
Standard factory overhead rates are based on a normal monthly volume of one standard direct hour per unit.
Standard factory overhead rates per direct labor hour are:
 Refer to Figure 9-3. What is the fixed overhead volume variance for Alumni?
A) $10,000 (F)
B) $-0-
C) $4,000 (F)
D) $6,000 (U)

Accepted Answer

The fixed overhead volume variance is calculated as (Actual Production - Normal Production) x Standard Fixed Overhead Rate per unit. Here, the actual production is 10,000 units, which is equal to the normal production. Therefore, the fixed overhead volume variance is $-0- (zero). Option B is incorrect as it does not take into account the calculation of the fixed overhead volume variance. Option A and C are incorrect as they suggest a positive variance (F for favorable) without considering the actual production being equal to normal production. The correct choice is D, which indicates an unfavorable variance due to actual production being less than the normal production.

Question 8

If actual fixed manufacturing overhead was $55,000 and there was a $1,400 unfavorable spending variance and a $1,000 unfavorable volume variance, budgeted fixed manufacturing overhead must have been
A) $57,400.
B) $53,600.
C) $54,000.
D) $51,700.

Accepted Answer

The budgeted fixed manufacturing overhead is found by adjusting the actual fixed manufacturing overhead for the variances. Since there was a $1,400 unfavorable spending variance, it means the actual spending was $1,400 more than budgeted. Therefore, subtracting this variance from the actual fixed manufacturing overhead ($55,000 - $1,400) gives the budgeted amount before considering the volume variance, which does not affect the calculation of the budgeted fixed manufacturing overhead. Thus, the budgeted fixed manufacturing overhead was $53,600.

Question 9

Somalian Corporation uses a standard costing system. Information for the month of May is as follows:  The factory overhead rate is based on a normal volume of 12,000 direct labor hours. Standard cost data at 12,000 direct labor hours were as follows:
 What is the variable overhead efficiency variance for Somalian?
A) $2,000 (U)
B) $20,000 (U)
C) $4,000 (U)
D) $8,000 (U)

Accepted Answer

The answer of Somalian Corporation uses a standard costing system....

Question 10

Croissant Company's standard fixed overhead cost is $6 per direct labor hour based on budgeted fixed costs of $600,000. The standard allows 1 direct labor hour per unit. During 2014, Croissant produced 110,000 units of product, incurred $630,000 of fixed overhead costs, and recorded 212,000 actual hours of direct labor. What is the standard activity level on which Croissant based its fixed overhead rate?
A) 100,000 direct labor hours
B) 105,000 direct labor hours
C) 110,000 direct labor hours
D) 50,000 direct labor hours

Accepted Answer

The standard fixed overhead rate is calculated as budgeted fixed costs divided by the standard activity level. Given the rate is $6 per direct labor hour and budgeted fixed costs are $600,000, the standard activity level is $600,000 / $6 = 100,000 direct labor hours.

Question 11

Total fixed overhead budget variance is always equal to
A) fixed overhead volume variance.
B) fixed overhead volume variance plus fixed overhead spending variance.
C) total variable overhead budget variance plus fixed overhead spending variance.
D) total variable overhead budget variance.

Accepted Answer

The total fixed overhead budget variance is the difference between the actual fixed overhead costs and the budgeted fixed overhead costs. This variance can be further broken down into two components: the fixed overhead spending variance and the fixed overhead volume variance. Therefore, the total fixed overhead budget variance is equal to the sum of these two variances (choice B). The other options are incorrect as they do not reflect the nature of the fixed overhead budget variance.

Question 12

Biscuit Company has developed the following standards for one of its products. Direct labor hours is the driver used to assign overhead costs to products.  The company records materials price variances at the time of purchase.
The direct labor efficiency variance is
A) $8,000 unfavorable.
B) $8,000 favorable.
C) $20,000 unfavorable.
D) $20,000 favorable.

Accepted Answer

To calculate the direct labor efficiency variance, we need to compare the actual hours worked with the standard hours allowed for the actual output. 
Direct labor efficiency variance = (Actual hours - Standard hours) x Standard labor rate per hour 
Given data, 
Standard hours per unit = 2 hours 
Standard labor rate per hour = $20 per hour 
Actual output = 10,000 units 
Actual hours worked = 21,000 hours 
Standard hours allowed = 2 hours x 10,000 units = 20,000 hours 
Direct labor efficiency variance = (21,000 - 20,000) x $20 = $20,000 favorable. 
Hence, the best choice is B.

Question 13

Croissant Company's standard fixed overhead cost is $6 per direct labor hour based on budgeted fixed costs of $600,000. The standard allows one direct labor hour per unit. During 2014, Crawford produced 110,000 units of product, (within the relevant range of activity) incurred $630,000 of fixed overhead costs, and recorded 212,000 actual hours of direct labor. What is Croissant's fixed overhead spending variance for 2014?
A) $60,000 (F)
B) $24,000 (F)
C) $30,000 (U)
D) $36,000 (U)

Accepted Answer

Fixed overhead spending variance = Actual fixed overhead - Budgeted fixed overhead
Actual fixed overhead = $630,000
Budgeted fixed overhead = ($6/hour) x 212,000 hours = $1,272,000
Fixed overhead spending variance = $630,000 - $1,272,000 = $642,000 (U)
The unfavorable spending variance indicates that the company spent more than budgeted on fixed overhead costs. However, we need to adjust for the actual level of activity to find the standard fixed overhead spending variance:
Standard fixed overhead cost = ($6/hour) x 212,000 actual hours = $1,272,000
Budgeted fixed overhead cost = ($6/hour) x 110,000 units = $660,000
Standard fixed overhead spending variance = Standard fixed overhead cost - Budgeted fixed overhead cost
= $1,272,000 - $660,000 = $612,000 (U)
To find the fixed overhead spending variance, we subtract the standard fixed overhead spending variance from the actual fixed overhead spending variance:
Fixed overhead spending variance = Actual fixed overhead - Standard fixed overhead cost
= $630,000 - $1,272,000 + $612,000
= $30,000 (U)
Therefore, the answer is C.

Question 14

Fixed manufacturing overhead was budgeted at $105,000, and 25,000 direct labor hours were budgeted. If the fixed overhead volume variance was $4,000 unfavorable and the fixed overhead spending variance was $1,500 favorable, fixed manufacturing overhead applied must be
A) $109,000.
B) $106,500.
C) -$106,500.
D) $101,000.

Accepted Answer

The answer of Fixed manufacturing overhead was budgeted at $105,000,...

Question 15

Fixed manufacturing overhead was budgeted at $200,000, and 25,000 direct labor hours were budgeted. If the fixed overhead volume variance was $8,000 favorable and the fixed overhead spending variance was $6,000 unfavorable, fixed manufacturing overhead applied must be
A) $208,000.
B) $206,000.
C) $202,000.
D) $194,000.

Accepted Answer

The answer of Fixed manufacturing overhead was budgeted at $200,000,...

Question 16

Which of the following people is most likely responsible for an unfavorable variable overhead efficiency variance?
A) production supervisor
B) accountant
C) personnel director
D) supplier

Accepted Answer

The production supervisor is responsible for overseeing the production process and ensuring that resources are being used efficiently. As such, they would be the most likely person to have an impact on the variable overhead efficiency variance.

Question 17

Somalian Corporation uses a standard costing system. Information for the month of May is as follows:  The factory overhead rate is based on a normal volume of 12,000 direct labor hours. Standard cost data at 12,000 direct labor hours were as follows:
 What is the fixed overhead spending variance for Somalian?
A) $4,000 (U)
B) $8,000 (U)
C) $2,000 (U)
D) $20,000 (U)

Accepted Answer

The answer of Somalian Corporation uses a standard costing system....

Question 18

Croissant Company's standard fixed overhead cost is $6 per direct labor hour based on budgeted fixed costs of $600,000. The standard allows 1 direct labor hour per unit. During 2014, Croissant produced 110,000 units of product, incurred $630,000 of fixed overhead costs, and recorded 212,000 actual hours of direct labor. What is Croissant's fixed overhead volume variance for 2014?
A) $60,000 (U)
B) $24,000 (F)
C) $36,000 (U)
D) $60,000 (F)

Accepted Answer

The fixed overhead volume variance is calculated as (Budgeted fixed overhead - Applied fixed overhead). Applied fixed overhead is based on standard hours allowed for actual production, which is 110,000 units * 1 hour/unit = 110,000 hours. Applied fixed overhead = 110,000 hours * $6/hour = $660,000. Volume variance = $600,000 - $660,000 = $60,000 (Favorable).

Question 19

If a company produces fewer units than expected, there will be
A) a favorable budget variance.
B) an unfavorable spending variance.
C) a favorable volume variance.
D) an unfavorable volume variance.

Accepted Answer

A volume variance compares the actual amount of units produced with the budgeted amount of units. If a company produces fewer units than expected, this is unfavorable as it means the company did not meet its production goals and may not have generated as much revenue as expected. Therefore, the answer is D - an unfavorable volume variance.

Question 20

Formidable Company collected the following information:  Using the two variance method, what is the total variance?
A) $30,000 (U)
B) $70,000 (U)
C) $70,000 (F)
D) $30,000 (F)

Accepted Answer

The answer of Formidable Company collected the following information: ...

Quiz 9: Standard Costing: a Functional-Based Control Approach

Formidable Company collected the following information: Using the two variance method, what is the volume variance?

The formula for the fixed overhead spending variance is:

Formidable Company collected the following information: Using the two variance method, what is the budget variance?

A variable overhead efficiency variance could be caused by

If actual fixed manufacturing overhead was $55,000 and there was a $1,400 unfavorable spending variance and a $1,000 unfavorable volume variance, budgeted fixed manufacturing overhead must have been

Total fixed overhead budget variance is always equal to

Biscuit Company has developed the following standards for one of its products. Direct labor hours is the driver used to assign overhead costs to products. The company records materials price variances at the time of purchase. The direct labor efficiency variance is

Fixed manufacturing overhead was budgeted at $105,000, and 25,000 direct labor hours were budgeted. If the fixed overhead volume variance was $4,000 unfavorable and the fixed overhead spending variance was $1,500 favorable, fixed manufacturing overhead applied must be

Fixed manufacturing overhead was budgeted at $200,000, and 25,000 direct labor hours were budgeted. If the fixed overhead volume variance was $8,000 favorable and the fixed overhead spending variance was $6,000 unfavorable, fixed manufacturing overhead applied must be

Which of the following people is most likely responsible for an unfavorable variable overhead efficiency variance?

If a company produces fewer units than expected, there will be

Formidable Company collected the following information: Using the two variance method, what is the total variance?