Chapter 8-4

Question 1

the difference between actual fixed overhead costs and the fixed overhead costs in the flexible budget

Answer 1

fixed overhead flexible budget variance

Question 2

this is the same as the fixed overhead flexible budget variance because there is no efficicency variance for fixed overhead costs

Answer 2

fixed overhead spending variance

Question 3

potential causes include higher equipment leasing costs, higher depreciation on plant and equipment, or higher administrative costs, such as a higher than budgeted salary for the plant manager

Answer 3

reasons for unfavorable spending variance

Question 4

arises only for fixed costs and is the differnece between budgeted fixed overhead and the fixed overhead allocated based on actual output

Answer 4

production volume variance

Question 5

these are costs associated with acquiring capacity and do not decrease if the capacity needed is less than acquired. they can be fixed due to contractual reasons or because capacity must be acquired in fixed increments

Answer 5

lump sum fixed costs

Question 6

example of fixed increments: if webb acquires a sewing machine that produces 1000 jackets, they can only add capacity in increments of 1000 jackets as in

Answer 6

10,000, 11,000, 12,000 jackets

Question 7

the 46,000 unfavorable variance in production volume variance indicates what

Answer 7

overcapacity

Question 8

indiates overallocation of fixed overhead costs, meaning the costs allocated to actual output exceed the budgeted fixed overhead costs

Answer 8

favorable production volume variance