Question 1

The fixed manufacturing overhead budget variance is:
A)the difference between budgeted fixed manufacturing overhead cost and actual fixed manufacturing overhead cost.
B)the difference between actual fixed manufacturing overhead cost and applied fixed manufacturing overhead cost.
C)the difference between budgeted fixed manufacturing overhead cost and applied fixed manufacturing overhead cost.
D)the difference between fixed overhead at the planned level of activity and the flexible budget for actual activity.

Accepted Answer

A

Question 2

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 manufacturing overhead budget variance.

Accepted Answer

False

Question 3

A fixed manufacturing overhead volume variance occurs as the result of a difference between the denominator level of activity (in hours)and the standard hours allowed for the actual output of the period.

Accepted Answer

This is the definition of fixed manufacturing overhead volume variance. It is caused by a difference between the denominator level of activity and the standard hours allowed for the actual output of the period.

Question 4

The higher the denominator activity level used to compute the predetermined overhead rate,the lower the predetermined overhead rate.

Accepted Answer

This is because the predetermined overhead rate is calculated by dividing the estimated total overhead costs by the estimated activity level. Therefore, when the denominator (activity level) increases, the predetermined overhead rate decreases as the total overhead costs are spread over a larger level of activity.

Question 5

The fixed manufacturing overhead volume variance is more meaningful than the budget variance for cost control purposes.

Accepted Answer

The answer of The fixed manufacturing overhead volume variance is...

Question 6

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 manufacturing overhead volume variance.

Accepted Answer

The fixed manufacturing overhead volume variance is a result of the difference between the budgeted fixed overhead at the actual labor hours worked and the budgeted fixed overhead at the denominator level of activity. As the denominator level of activity changes, the budgeted fixed overhead at that level also changes, which results in a change in the fixed manufacturing overhead volume variance. Therefore, the company's choice of denominator level of activity affects the fixed manufacturing overhead volume variance.

Question 7

If all four of Argo Corporation's overhead variances are favorable,Argo's overhead will be underapplied.

Accepted Answer

If all four of Argo Corporation's overhead variances are favorable, it means that actual overhead costs incurred are less than the budgeted amount. This results in overapplication of overhead, not underapplication. Underapplication occurs when actual overhead costs are higher than the budgeted amount.

Question 8

A volume variance is computed for:
A)both variable and fixed manufacturing overhead.
B)variable manufacturing overhead only.
C)fixed manufacturing overhead only.
D)direct labor costs as well as overhead costs.

Accepted Answer

The answer of A volume variance is computed for:
A)both variable...

Question 9

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.

Accepted Answer

The variable portion of the predetermined overhead rate is based on variable overhead costs, which are not affected by the choice of denominator level of activity. Only the fixed overhead costs would be affected by the choice of denominator level of activity.

Question 10

Which of the following variances is generally the least significant from the standpoint of cost control?
A)Materials price variance.
B)Labor efficiency variance.
C)Fixed manufacturing overhead volume variance.
D)Variable overhead rate variance.

Accepted Answer

The fixed manufacturing overhead volume variance is generally the least significant from the standpoint of cost control because fixed costs do not change with the level of production. As a result, there is limited control over fixed manufacturing overhead costs, which makes this variance less important when it comes to cost control. On the other hand, materials price variance, labor efficiency variance, and variable overhead rate variance can all have significant impacts on costs and are therefore more important in terms of cost control.

Question 11

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 manufacturing overhead volume variance will NOT necessarily occur in a month in which the fixed manufacturing overhead applied to units of product on the basis of standard hours allowed differs from the budgeted fixed manufacturing overhead.

Accepted Answer

A fixed manufacturing overhead volume variance occurs when the actual production volume differs from the budgeted production volume, regardless of whether the fixed manufacturing overhead applied on a per unit basis differs from the budgeted amount.

Question 12

In a standard costing system where the denominator activity for the predetermined overhead rate is labor-hours,overhead costs are applied to work in process on the basis of the standard labor-hours allowed for the actual output.

Accepted Answer

In a standard costing system with labor-hours as the denominator activity for the predetermined overhead rate, overhead costs are applied to work in process based on the amount of standard labor-hours allowed for the actual output.

Question 13

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 manufacturing overhead volume variance will NOT necessarily occur in a month in which production volume differs from sales volume.

Accepted Answer

The fixed manufacturing overhead volume variance occurs when the actual production volume differs from the budgeted production volume. It does not depend on the sales volume. Therefore, it is possible for production volume to differ from sales volume without any fixed manufacturing overhead volume variance.

Question 14

An unfavorable volume variance means that a firm operated at an activity level that was below the activity level planned for the period.

Accepted Answer

An unfavorable volume variance occurs when the actual activity level is less than the planned activity level, resulting in lower production levels and lower profits.

Question 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 manufacturing overhead volume variance will NOT necessarily occur in a month in which there is a fixed manufacturing overhead budget variance.

Accepted Answer

The fixed manufacturing overhead volume variance is caused by a difference between the actual and budgeted production volume. The fixed manufacturing overhead budget variance, on the other hand, reflects the difference between the actual and budgeted fixed overhead costs. These two variances are independent of each other and can occur separately in a given month. Therefore, it is possible to have a fixed manufacturing overhead budget variance without a fixed manufacturing overhead volume variance, and vice versa.

Question 16

When computing standard cost variances,the difference between actual and standard price multiplied by actual quantity yields a(n):
A)combined price and quantity variance.
B)efficiency variance.
C)price or rate variance.
D)quantity variance.

Accepted Answer

The formula described in the question (actual quantity multiplied by the difference between actual and standard price) is meant to calculate the price variance, or the difference between the actual cost of a unit of input and the expected cost based on the standard cost. It does not take into account the efficiency or quantity of inputs used, so it is not the combined price and quantity variance or the efficiency variance.

Question 17

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 overapplied for the period.

Accepted Answer

If actual fixed manufacturing overhead cost exceeds the budgeted amount, it means that the cost was under budgeted and therefore fixed manufacturing overhead would be underapplied.

Question 18

A favorable volume variance means that the company operated at an activity level greater than that planned for the period.

Accepted Answer

A favorable volume variance means that the actual activity level is higher than the planned level, which is a positive outcome for the company.

Question 19

Traveller Corporation sells one product and uses a standard cost system.Last year the overhead volume variance was zero.Which of the following is correct?
A)Actual variable manufacturing overhead cost was equal to standard variable manufacturing overhead cost.
B)Total applied overhead was equal to total actual overhead.
C)The denominator activity was equal to actual activity.
D)The budgeted fixed costs were equal to the applied fixed costs.

Accepted Answer

The answer of Traveller Corporation sells one product and uses...

Question 20

Sulema,Inc.repairs and refinishes antique furniture.Manufacturing overhead at Sulema is applied to production on the basis of standard direct labor-hours.Which overhead variance(s)at Sulema would be unfavorably affected if the cost of solvents used to strip the old paint from the furniture unexpectedly doubles in price?
A)variable overhead rate variance
B)variable overhead efficiency variance
C)fixed manufacturing overhead budget variance
D)fixed manufacturing overhead volume variance

Accepted Answer

The answer of Sulema,Inc.repairs and refinishes antique furniture.Manufacturing overhead at...

Quiz 15: Predetermined Overhead Rates and Overhead Analysis in a Standard Costing System

The fixed manufacturing overhead budget variance is: