Question 1

Which of the following is used in the computation of the fixed overhead budget variance? 
A) Choice A
B) Choice B
C) Choice C
D) Choice D
E) Choice E

Accepted Answer

The answer of Which of the following is used in...

Question 2

Which of the following elements is (are) needed in a straightforward calculation of the variable-overhead spending variance?
A) Variable overhead incurred during the period.
B) Budgeted variable overhead based on actual hours worked.
C) Standard variable overhead applied to production.
D) Both variable overhead incurred during the period and budgeted variable overhead based on actual hours worked.
E) Both variable overhead incurred during the period and standard variable overhead applied to production.

Accepted Answer

The straightforward calculation of variable-overhead spending variance requires both variable overhead incurred during the period and budgeted variable overhead based on actual hours worked. This calculation is computed as (variable overhead incurred - budgeted variable overhead based on actual hours worked). Standard variable overhead applied to production is used to calculate the variable-overhead efficiency variance, not the variable-overhead spending variance.

Question 3

Which of the following is not an overhead variance?
A) Variable-overhead spending variance.
B) Variable-overhead efficiency variance.
C) Fixed-overhead efficiency variance.
D) Fixed-overhead budget variance.
E) Fixed-overhead volume variance.

Accepted Answer

Variable overhead spending variance, variable overhead efficiency variance, fixed overhead budget variance, and fixed overhead volume variance are all examples of overhead variances. The fixed overhead efficiency variance is not an overhead variance.

Question 4

A flexible budget is appropriate for a: 
A) Choice A
B) Choice B
C) Choice C
D) Choice D
E) Choice E

Accepted Answer

The answer of A flexible budget is appropriate for a:...

Question 5

Which of the following statements is/are correct concerning the application of overhead in a standard costing system driven by process hours?
A) A predetermined overhead rate is allowed only for fixed overhead.
B) Overhead application is based on standard process hours allowed.
C) Overhead application is based on actual process hours incurred.
D) Only prime costs are considered to be product costs in a standard costing system.
E) Only variable overhead costs are applied to production.

Accepted Answer

In a standard costing system driven by process hours, overhead application is based on standard process hours allowed in order to allocate overhead costs to production. Predetermined overhead rates can be used for both fixed and variable overhead costs. Both prime costs (direct materials and direct labor) and overhead costs are considered to be product costs in a standard costing system.

Question 6

Smithville uses labor hours to apply variable overhead to production. If the company's workers were very inefficient during the period, which of the following statements would be true about the variable-overhead efficiency variance?
A) The variance would be favorable.
B) The variance would be unfavorable.
C) The nature of the variance (favorable or unfavorable) would be unknown based on the facts presented.
D) The variance would be the same amount as the labor efficiency variance.
E) None of the other answers are correct.

Accepted Answer

If the workers were very inefficient during the period, it means that they took more time to complete the same amount of work than expected. This would result in more labor hours being used than budgeted, which would increase variable overhead costs. As a result, the variable-overhead efficiency variance would be unfavorable.

Question 7

A flexible budget for 15,000 hours revealed variable manufacturing overhead of $90,000 and fixed manufacturing overhead of $120,000. The budget for 20,000 hours would reveal total overhead costs of:
A) $240,000.
B) $270,000.
C) $290,000.
D) $350,000.
E) $210,000.

Accepted Answer

The answer of A flexible budget for 15,000 hours revealed...

Question 8

A flexible budget for 15,000 hours revealed variable manufacturing overhead of $90,000 and fixed manufacturing overhead of $120,000. The budget for 25,000 hours would reveal total overhead costs of:
A) $210,000.
B) $270,000.
C) $290,000.
D) $350,000.
E) None of the other answers are correct.

Accepted Answer

The answer of A flexible budget for 15,000 hours revealed...

Question 9

Which of the following is used in the computation of the variable-overhead spending variance? 
A) Choice A
B) Choice B
C) Choice C
D) Choice D
E) Choice E

Accepted Answer

The answer of Which of the following is used in...

Question 10

A flexible budget is appropriate for a(n): 
A) Choice A
B) Choice B
C) Choice C
D) Choice D
E) Choice E

Accepted Answer

The answer of A flexible budget is appropriate for a(n):...

Question 11

The activity measure selected for use in a variable- and fixed-overhead flexible budget:
A) should be stated in sales dollars.
B) should be approved by the company's president.
C) should vary in a similar behavior pattern to the way that variable overhead varies.
D) should remain fixed.
E) should produce the most attractive results for the individual who will use the budget in managerial applications.

Accepted Answer

The activity measure selected for use in a variable- and fixed-overhead flexible budget should vary in a similar behavior pattern to the way that variable overhead varies. This ensures that the budget will reflect changes in production volume and the corresponding changes in variable and fixed overhead costs.

Question 12

Which of the following should have the strongest cause and effect relationship with overhead costs?
A) Cost followers.
B) Non-value-added costs.
C) Cost drivers.
D) Value-added costs.
E) Units of output.

Accepted Answer

Cost drivers have the strongest cause and effect relationship with overhead costs. Cost drivers are the factors that cause overhead costs to increase or decrease, such as machine hours, labor hours, or number of setups. By identifying the cost drivers, a company can better control and allocate its overhead costs. The other options may influence overhead costs to some extent, but not directly or as significantly as cost drivers.

Question 13

With respect to overhead, what is the difference between normal costing and standard costing?
A) Use of a predetermined overhead rate.
B) Use of standard hours versus actual hours.
C) Use of a standard rate versus an actual rate.
D) The choice of an activity measure.
E) There is no difference.

Accepted Answer

The answer of With respect to overhead, what is the...

Question 14

Which of the following variances would be useful to help control overhead spending? 
A) Choice A
B) Choice B
C) Choice C
D) Choice D
E) Choice E

Accepted Answer

The answer of Which of the following variances would be...

Question 15

The difference between the total actual factory overhead and the total factory overhead applied to production is the:
A) sum of the spending, efficiency, budget, and volume variances.
B) controllable variance.
C) efficiency variance.
D) spending variance.
E) volume variance.

Accepted Answer

The difference between the total actual factory overhead and the total factory overhead applied to production encompasses all variances related to overhead costs, including spending, efficiency, budget, and volume variances. These variances together account for the discrepancies in overhead costs.

Question 16

The budget variance arises from a comparison of:
A) budgeted fixed overhead expenditures with budgeted fixed overhead costs.
B) actual fixed overhead costs with budgeted fixed overhead costs.
C) actual variable overhead expenditures with budgeted variable overhead costs.
D) variable overhead costs with budgeted fixed overhead costs.
E) static-budget amounts with flexible-budget amounts.

Accepted Answer

The answer of The budget variance arises from a comparison...

Question 17

The manufacturing overhead applied to Work-in-Process Inventory by a company that uses standard costing would be computed as:
A) actual hours times a predetermined (standard) overhead rate.
B) standard hours times a predetermined (standard) overhead rate.
C) actual hours times an actual overhead rate.
D) standard hours times an actual overhead rate.
E) $0, because users of standard costing do not apply overhead to work in process.

Accepted Answer

Manufacturing overhead applied to Work-in-Process Inventory by a company that uses standard costing is computed by multiplying the standard hours allowed for the actual production with the predetermined overhead rate. This results in a predetermined amount of overhead being applied to the Work-in-Process Inventory.

Question 18

What will cause the variable-overhead efficiency variance?
A) Efficient or inefficient use of a specific component of variable overhead (e.g., electricity).
B) Full or partial utilization of major equipment resources.
C) Production of units in excess of the number of units sold.
D) Efficient or inefficient use of the cost driver (e.g., machine hours) for variable overhead.
E) Changes in the salary cost of manufacturing supervisors.

Accepted Answer

The variable-overhead efficiency variance is caused by efficient or inefficient use of the cost driver (e.g., machine hours) for variable overhead. This means that if the actual amount of machine hours used differs from the expected or budgeted amount, there will be a variance in variable overhead efficiency. Choices A, B, C, and E can cause other variances but not the variable-overhead efficiency variance.

Question 19

Assume that machine hours is the cost driver for overhead. The difference between the actual variable overhead incurred and the applied variable overhead is the:
A) volume variance.
B) production variance.
C) efficiency variance.
D) sum of the spending and efficiency variances.
E) spending variance.

Accepted Answer

The answer of Assume that machine hours is the cost...

Question 20

Which of the following is not an overhead variance?
A) Variable-overhead spending variance.
B) Variable-overhead volume variance.
C) Variable-overhead efficiency variance.
D) Fixed-overhead budget variance.
E) Fixed-overhead volume variance.

Accepted Answer

The answer of Which of the following is not an...

Quiz 11: Flexible Budgeting and Analysis of Overhead Costs

Which of the following is used in the computation of the fixed overhead budget variance?

Which of the following elements is (are) needed in a straightforward calculation of the variable-overhead spending variance?

Which of the following is not an overhead variance?

A flexible budget is appropriate for a:

Which of the following statements is/are correct concerning the application of overhead in a standard costing system driven by process hours?

Smithville uses labor hours to apply variable overhead to production. If the company's workers were very inefficient during the period, which of the following statements would be true about the variable-overhead efficiency variance?

A flexible budget for 15,000 hours revealed variable manufacturing overhead of $90,000 and fixed manufacturing overhead of $120,000. The budget for 20,000 hours would reveal total overhead costs of:

A flexible budget for 15,000 hours revealed variable manufacturing overhead of $90,000 and fixed manufacturing overhead of $120,000. The budget for 25,000 hours would reveal total overhead costs of:

Which of the following is used in the computation of the variable-overhead spending variance?

A flexible budget is appropriate for a(n) :

The activity measure selected for use in a variable- and fixed-overhead flexible budget:

Which of the following should have the strongest cause and effect relationship with overhead costs?

With respect to overhead, what is the difference between normal costing and standard costing?

Which of the following variances would be useful to help control overhead spending?

The difference between the total actual factory overhead and the total factory overhead applied to production is the:

The budget variance arises from a comparison of:

The manufacturing overhead applied to Work-in-Process Inventory by a company that uses standard costing would be computed as:

What will cause the variable-overhead efficiency variance?

Assume that machine hours is the cost driver for overhead. The difference between the actual variable overhead incurred and the applied variable overhead is the:

Which of the following is not an overhead variance?