Chapter 8: Flexible Budgets, Overhead Cost Variances, and Management Control

Question 1

How does standard costing trace direct costs to output?

Answer 1

Standard rate

x

Standard quantities of input allowed for actual outputs produced

Question 2

How does standard costing allocate overhead cost?

Answer 2

Standard Overhead-Cost Rates

x

Standard quantities of the allocation bases allowed for the actual outputs produced

Question 3

How do you calculate the budgeted variable overhead cost rates?

What is its significance?

Answer 3

1. Select the cost-allocation bases
2. Id the variable overhead costs for each cost-allocation base
3. Compute the rate per unit

It tells manager how much variable cost per budgeted input allowed in a single unit of output.

Question 4

What is the budgeted variable overhead cost rate per output unit?

What is its significance?

Answer 4

Budgeted input allowed per output unit

x

Budgeted variable overhead cost rate per input unit

This tells managers how much variable overhead cost is assigned to each unit of output.

Question 5

What is variable overhead flexible-budget variance?

Answer 5

The difference between actual variable overhead costs incurred and flexible-budget variable overhead amounts.

Actual Costs Incurred

(Actual Input Quantity x Actual Rate)

-

Flexible-budget amount

(Quantity Allowed for Actual Output x Budgeted Rate)

Question 6

What is the variable overhead spending variance?

Answer 6

Actual variable overhead cost per unit of cost-allocation base

-

Budgeted variable overhead cost per unit of cost-allocation base

x

Actual quantity of variable overhead cost-allocation base used for actual output

Question 7

What is the variable overhead efficiency variance?

Answer 7

Actual quanity of variable overhead cost-allocation base used for actual output

-

Budgeted quantity of variable overhead cost-allocation based allowed for actual output

x

Budgeted variable overhead cost per unit of cost-allocation base

Question 8

How do you calculate budgeted fixed overhead cost rates?

Answer 8

1. Select the cost-allocation bases
2. Id the f_ixed overhead costs_ of each cost-allocation base
3. Compute the rate per unit of each cost-allocation base

Question 9

What is the fixed overhead flexible budget variance?

Answer 9

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

Actual Costs Incurred

-

Flexible-budget amount

Question 10

What is the production-volume variance?

Answer 10

The difference between budgeted fixed overhead and fixed overhead allocated on the basis of actual output.

Budgeted Fixed Overhead

-

Fixed Overhead allocated using budgeted input allowed for actual output units produced

Question 11

What is budgeted fixed overhead cost per unit of cost-allocation base?

What is its significance?

Answer 11

Budgeted total costs in fixed overhead cost pool

divided by

Budgeted total quantity of cost-allocation base

It tells managers how much fixed cost is allocated for the cost allocation base (cost driver) allowed per output unit.

Question 12

Whati is the budgeted fixed overhead cost per output unit?

What is its significance?

Answer 12

Budgeted quantity of cost-allocation base allowed per output unit

x

Budgeted fixed overhead cost per unit of cost-cost allocation base

It tells managers how much fixed cost is allocated to each unit of output.

Question 13

How is fixed overhead allocated calculated?

Answer 13

of output units produced during the budget period

x

Budgeted cost per output unit