Question 1

Bread Company has developed the following standards for one of its products.  The company records materials price variances at the time of purchase.
-
The variable manufacturing overhead efficiency variance is
A) $1,000 favorable.
B) $1,000 unfavorable.
C) $2,000 favorable.
D) $3,000 unfavorable.

Accepted Answer

The answer of Bread Company has developed the following standards...

Question 2

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 hours worked and the standard hours allowed for the actual outputs achieved. A poor quality material may require more labor time to meet production standards, which would increase the actual hours worked and cause an unfavorable efficiency variance. The other choices have no direct impact on variable overhead efficiency variance.

Question 3

Which is NOT an acceptable method of disposing of variances?
A) closing them to cost of goods sold
B) closing them to raw materials, work-in-process, and finished goods
C) closing them to work-in-process, finished goods, and cost of goods sold
D) all are acceptable methods

Accepted Answer

Closing variances to raw materials is not an acceptable method since it does not reflect the actual cost of producing the finished goods. The correct methods are A and C, which involve closing variances to cost of goods sold, work-in-process, and finished goods. D is also correct as it includes all acceptable methods.

Question 4

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 managing the production process and ensuring that resources are used efficiently. Therefore, if there is a variable overhead efficiency variance, it is likely that the production supervisor did not effectively manage the use of resources. The accountant is responsible for recording financial transactions and preparing financial statements, and would not have direct responsibility for managing variable overhead efficiency. The personnel director is responsible for human resources activities such as recruitment and training, and would not have direct responsibility for managing variable overhead efficiency. The supplier provides materials or services, but would not be directly responsible for variable overhead efficiency in the production process.

Question 5

Bread Company has developed the following standards for one of its products.  The company records materials price variances at the time of purchase.
-
The direct labor efficiency variance is
A) $8,000 favorable.
B) $8,000 unfavorable.
C) $20,000 unfavorable.
D) $20,000 favorable.

Accepted Answer

The direct labor efficiency variance is calculated as (Actual hours - Standard hours) x Standard rate. If the actual hours are less than the standard hours, the variance is favorable.

Question 6

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

The volume variance measures the difference between the actual number of units produced/sold and the budgeted number of units. A favorable volume variance would be if the company produced/sold more units than expected. Therefore, if the company produces fewer units than expected, there will be an unfavorable volume variance.

Question 7

Crawford 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 2006, Crawford produced 110,000 units of product, incurred $630,000 of fixed overhead costs, and recorded 212,000 actual hours of direct labor. What is Crawford's fixed overhead spending variance for 2011?
A) $60,000 (F)
B) $24,000 (F)
C) $36,000 (U)
D) $30,000 (U)

Accepted Answer

The fixed overhead spending variance is calculated as the actual fixed overhead costs minus the budgeted fixed overhead costs. The budgeted fixed overhead costs are $600,000, and the actual fixed overhead costs are $630,000. Therefore, the variance is $630,000 - $600,000 = $30,000 unfavorable (U).

Question 8

Bread Company has developed the following standards for one of its products.  The company records materials price variances at the time of purchase.
-
The direct labor rate variance is
A) $8,000 unfavorable.
B) $8,000 favorable.
C) $12,000 unfavorable.
D) $12,000 favorable.

Accepted Answer

The answer of Bread Company has developed the following standards...

Question 9

Harry Company's standard variable overhead rate is $6 per direct labor hour, and each unit requires 2 standard direct labor hours.During March, Harry recorded 6,000 actual direct labor hours, $37,000 actual variable overhead costs, and 2,900 units of product manufactured. What is the total variable overhead variance for March for Harry?
A) $1,200 (U)
B) $600 (U)
C) $1,000 (U)
D) $2,200 (U)

Accepted Answer

The answer of Harry Company's standard variable overhead rate is...

Question 10

Griffen 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 Griffen?
A) $2,000 (U)
B) $8,000 (U)
C) $4,000 (U)
D) $20,000 (U)

Accepted Answer

The answer of Griffen Corporation uses a standard costing system.Information...

Question 11

If variable manufacturing overhead is applied based on direct labor hours and there is an unfavorable direct labor efficiency variance
A) the direct materials usage variance will be unfavorable.
B) the direct labor rate variance will be favorable.
C) the variable manufacturing overhead efficiency variance will be unfavorable.
D) the variable manufacturing overhead spending variance will be unfavorable.

Accepted Answer

If there is an unfavorable direct labor efficiency variance, it means that more direct labor hours were used than expected to produce the goods. Since variable manufacturing overhead is applied based on direct labor hours, the variable manufacturing overhead efficiency variance will also be unfavorable, as more overhead costs were incurred than expected due to the excess usage of direct labor hours. The other options are not necessarily affected by the direct labor efficiency variance.

Question 12

Crawford 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 2006, Crawford 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 Crawford based its fixed overhead rate?
A) 110,000 direct labor hours
B) 105,000 direct labor hours
C) 100,000 direct labor hours
D) 50,000 direct labor hours

Accepted Answer

The standard fixed overhead rate is calculated by dividing budgeted fixed costs by the standard activity level. Therefore, the standard activity level can be calculated by dividing the budgeted fixed costs by the standard fixed overhead rate:
$600,000 ÷ $6 per direct labor hour = 100,000 direct labor hours
So the standard activity level on which Crawford based its fixed overhead rate is 100,000 direct labor hours, and the closest option to this is choice C. Therefore, the answer is C.

Question 13

Griffen 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 Griffen?
A) $2,000 (U)
B) $8,000 (U)
C) $4,000 (U)
D) $20,000 (U)

Accepted Answer

The fixed overhead spending variance is calculated as the difference between the actual fixed overhead costs and the budgeted fixed overhead costs. In this case, the actual fixed overhead costs are $22,000 and the budgeted fixed overhead costs are $20,000. Therefore, the fixed overhead spending variance is $2,000 (U).

Question 14

Harry Company's standard variable overhead rate is $6 per direct labor hour, and each unit requires 2 standard direct labor hours.During March, Harry recorded 6,000 actual direct labor hours, $37,000 actual variable overhead costs, and 2,900 units of product manufactured. What is the variable overhead efficiency variance for March for Harry?
A) $2,200 (U)
B) $2,200 (F)
C) $600 (U)
D) $1,200 (U)

Accepted Answer

The answer of Harry Company's standard variable overhead rate is...

Question 15

If actual fixed manufacturing overhead was $54,000 and there was a $1,300 unfavorable spending variance and a $1,000 unfavorable volume variance, budgeted fixed manufacturing overhead must have been
A) $56,300.
B) $50,300.
C) $53,000.
D) $52,700.

Accepted Answer

The answer of If actual fixed manufacturing overhead was $54,000...

Question 16

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

Total fixed overhead budget variance is the difference between the actual fixed overhead costs and the budgeted fixed overhead costs. It can be further analyzed as fixed overhead volume variance and fixed overhead spending variance. Therefore, the total fixed overhead budget variance is always equal to the sum of the fixed overhead volume variance and fixed overhead spending variance.

Question 17

Gina Production Company uses a standard costing system.The following information pertains to 2011.  The factory overhead rate is based on an activity level of 10,000 units.Standard cost data for 5,000 units is as follows:
 What is the variable overhead efficiency variance for Gina Production Company?
A) $562.50 (F)
B) $3,000.00 (U)
C) $562.50 (U)
D) $1,687.50 (F)

Accepted Answer

The variable overhead rate is calculated as $6,000 / 10,000 units = $0.60 per unit.

Based on the standard cost data, the standard hours allowed for 5,000 units is 12,500 hours (2.5 hours per unit).

The actual hours worked were 12,000 hours. Therefore, the variable overhead efficiency variance is:

(Standard hours allowed - actual hours worked) x variable overhead rate
= (12,500 - 12,000) x $0.60
= $300 (U)

Therefore, option C is correct.

Question 18

An unfavorable variable overhead spending variance may be caused by
A) the use of excessive quantities of variable overhead items.
B) the payment of lower prices for variable overhead items used.
C) the use of excessive quantities of the variable overhead allocation base.
D) both a and b.

Accepted Answer

An unfavorable variable overhead spending variance means that actual variable overhead costs were higher than expected. This could be caused by using excessive quantities of variable overhead items, which would increase the total cost even if the price per unit remained constant. Option B, the payment of lower prices for variable overhead items used, would actually result in a favorable variance. Option C refers to the allocation base, not the actual cost, and would not affect the variable overhead spending variance.

Question 19

Crawford 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 2011, Crawford produced 110,000 units of product, incurred $630,000 of fixed overhead costs, and recorded 212,000 actual hours of direct labor.
- What is Crawford's fixed overhead volume variance for 2006?
A) $60,000 (F)
B) $24,000 (F)
C) $36,000 (U)
D) $60,000 (U)

Accepted Answer

Fixed overhead volume variance = (Standard fixed overhead rate x (Standard allowed hours - Actual hours))= ($6 x (110,000 - 212,000))= $60,000 (F)

Question 20

The standard overhead cost assigned to each unit of product manufactured is called the
A) total manufacturing cost.
B) predetermined overhead cost.
C) applied overhead cost.
D) estimated overhead cost.

Accepted Answer

The standard overhead cost assigned to each unit of product manufactured is called the applied overhead cost. Predetermined overhead cost is an estimated amount of overhead that is determined in advance of the actual overhead costs being incurred. Estimated overhead cost is a projection of what the overhead costs will be for a given period, based on historical data and expectations for the future. Total manufacturing cost includes both direct and indirect materials, direct and indirect labor, and overhead costs.

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

Bread Company has developed the following standards for one of its products. The company records materials price variances at the time of purchase. - The variable manufacturing overhead efficiency variance is

A variable overhead efficiency variance could be caused by

Which is NOT an acceptable method of disposing of variances?

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

Bread Company has developed the following standards for one of its products. The company records materials price variances at the time of purchase. - The direct labor efficiency variance is

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

Bread Company has developed the following standards for one of its products. The company records materials price variances at the time of purchase. - The direct labor rate variance is

If variable manufacturing overhead is applied based on direct labor hours and there is an unfavorable direct labor efficiency variance

If actual fixed manufacturing overhead was $54,000 and there was a $1,300 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

Gina Production Company uses a standard costing system.The following information pertains to 2011. The factory overhead rate is based on an activity level of 10,000 units.Standard cost data for 5,000 units is as follows: What is the variable overhead efficiency variance for Gina Production Company?

An unfavorable variable overhead spending variance may be caused by

The standard overhead cost assigned to each unit of product manufactured is called the