Exam 4: Ch 7, 8 Flashcards
The master budget is
a. a flexible budget.
b. a static budget.
c. developed at the end of the period.
d. based on the actual level of output
b. a static budget
A flexible budget
a. is another name for management by exception.
b. is developed at the end of the period.
c. is based on the budgeted level of output.
d. provides favorable operating results
b. is developed at the end of the period.
- Management by exception is the practice of concentrating on
a. the master budget.
b. areas not operating as anticipated.
c. favorable variances.
d. unfavorable variances.
b. areas not operating as anticipated.
- A variance is
a. the gap between an actual result and a benchmark amount.
b. the required number of inputs for one standard output.
c. the difference between an actual result and a budgeted amount.
d. the difference between a budgeted amount and a standard amount.
c. the difference between an actual result and a budgeted amount
- An unfavorable variance indicates that
a. actual costs are less than budgeted costs.
b. actual revenues exceed budgeted revenues.
c. the actual amount decreased operating income relative to the budgeted amount.
d. all of the above are true
c. the actual amount decreased operating income relative to the budgeted amount.
- A favorable variance indicates that
a. budgeted costs are less than actual costs.
b. actual revenues exceed budgeted revenues.
c. the actual amount decreased operating income relative to the budgeted amount.
d. all of the above are true.
b. actual revenues exceed budgeted revenues.
- Regier Company had planned for operating income of $10 million in the master budget but actually achieved operating income of only $7 million.
a. The static-budget variance for operating income is $3 million favorable.
b. The static-budget variance for operating income is $3 million unfavorable.
c. The flexible-budget variance for operating income is $3 million favorable.
d. The flexible-budget variance for operating income is $3 million unfavorable
b. The static-budget variance for operating income is $3 million unfavorable.
- The flexible budget contains
a. budgeted amounts for actual output.
b. budgeted amounts for planned output.
c. actual costs for actual output.
d. actual costs for planned output
a. budgeted amounts for actual output.
- The following items are the same for the flexible budget and the master budget EXCEPT
a. the same variable cost per unit.
b. the same total fixed costs.
c. the same units sold.
d. the same sales price per unit.
c. the same units sold.
- The sales-volume variance is due to
a. using a different selling price from that budgeted.
b. inaccurate forecasting of units sold.
c. poor production performance.
d. both (a) and (b).
b. inaccurate forecasting of units sold.
- An unfavorable sales-volume variance could result from
a. decreased demand for the product.
b. competitors taking market share.
c. customer dissatisfaction with the product.
d. all of the above.
d. all of the above
- If a sales-volume variance was caused by poor-quality products, then the
would be in the best position to explain the variance.
a. production manager
b. sales manager
c. purchasing manager
d. management accountant
a. production manager
- The variance that is BEST for measuring operating performance is the
a. static-budget variance.
b. flexible-budget variance.
c. sales-volume variance.
d. selling-price variance
b. flexible-budget variance
- An unfavorable flexible-budget variance for variable costs may be the result of
a. using more input quantities than were budgeted.
b. paying higher prices for inputs than were budgeted.
c. selling output at a higher selling price than budgeted.
d. both (a) and (b).
d. both (a) and (b).
- An unfavorable variance
a. may suggest investigation is needed.
b. is conclusive evidence of poor performance.
c. demands that standards be recomputed.
d. indicates continuous improvement is needed
a. may suggest investigation is needed
- All of the following are needed to prepare a flexible budget EXCEPT
a. determining the budgeted variable cost per output unit.
b. determining the budgeted fixed costs.
c. determining the actual selling price per unit.
d. determining the actual quantity of output units
c. determining the actual selling price per unit.
- The variance that LEAST affects cost control is the
a. flexible-budget variance.
b. direct-material-price variance.
c. sales-volume variance.
d. direct manufacturing labor efficiency variance
c. sales-volume variance
- A flexible-budget variance is $800 favorable for unit-related costs. This indicates that
a. costs were $800 more than the master budget.
b. costs were $800 less than for the planned level of activity.
c. costs were $800 more than standard for the achieved level of activity.
d. costs were $800 less than standard for the achieved level of activity.
d. costs were $800 less than standard for the achieved level of activity
- The flexible-budget variance for direct cost inputs can be further subdivided into
a. a static-budget variance and a sales-volume variance.
b. a sales-volume variance and an efficiency variance.
c. a price variance and an efficiency variance.
d. a static-budget variance and a price variance.
c. a price variance and an efficiency variance.
- Budgeted input quantity information may be obtained from
a. actual input quantities used last period.
b. standards developed by your company.
c. data from other companies that have similar processes.
d. all of the above.
d. all of the above
- When actual input data from past periods is used to develop a budget
a. past inefficiencies are excluded.
b. expected future changes are incorporated.
c. information is available at a low cost.
d. audited financial information must be used.
c. information is available at a low cost.
- When standards are used to develop a budget
a. past inefficiencies are excluded.
b. benchmarking must also be used.
c. information is available at a low cost.
d. flexible-budget amounts are difficult to determine
a. past inefficiencies are excluded
- The term budget indicates
a. that standards have been used to develop the budget.
b. that actual input data from past periods have been used to develop the budget.
c. that engineering studies have been used to develop the budget.
d. planned amounts for a future accounting period
d. planned amounts for a future accounting period
- A standard input
a. is a carefully determined price, cost, or quantity.
b. is usually expressed on a per unit basis.
c. may be developed using engineering studies.
d. is all of the above.
d. is all of the above.
- Ideal standards
a. assume peak operating conditions.
b. allow for normal machine breakdowns.
c. greatly improve employee motivation and performance.
d. are all of the above.
a. assume peak operating conditions.
- A favorable price variance for direct materials indicates that
a. a lower price than planned was paid for materials.
b. a higher price than planned was paid for materials.
c. less material was used during production than planned for actual output.
d. more material was used during production than planned for actual output
a. a lower price than planned was paid for materials.
- A favorable efficiency variance for direct manufacturing labor indicates that
a. a lower wage rate than planned was paid for direct labor.
b. a higher wage rate than planned was paid for direct labor.
c. less direct manufacturing labor-hours were used during production than planned for actual output. d. more direct manufacturing labor-hours were used during production than planned for actual output
c. less direct manufacturing labor-hours were used during production than planned for actual output
- An unfavorable price variance for direct materials might indicate
a. that the purchasing manager purchased in smaller quantities due to a change to just-in-time inventory methods.
b. congestion due to scheduling problems.
c. that the purchasing manager skillfully negotiated a better purchase price.
d. that the market had an unexpected oversupply of those materials.
a. that the purchasing manager purchased in smaller quantities due to a change to just-in-time inventory methods.
- A favorable efficiency variance for direct materials might indicate
a. that lower-quality materials were purchased.
b. an overskilled workforce.
c. poor design of products or processes.
d. a lower-priced supplier was used.
b. an overskilled workforce
- A favorable price variance for direct manufacturing labor might indicate that
a. employees were paid more than planned.
b. budgeted price standards are too tight.
c. underskilled employees are being hired.
d. an efficient labor force
c. underskilled employees are being hired
- An unfavorable efficiency variance for direct manufacturing labor might indicate that
a. work was efficiently scheduled.
b. machines were not properly maintained.
c. budgeted time standards are too lax.
d. higher-skilled workers were scheduled than planned
b. machines were not properly maintained
- The best label for the formula (AQ — BQ) BP is the
a. efficiency variance.
b. price variance.
c. total flexible-budget variance.
e. spending variance.
a. efficiency variance.
- The best label for the formula (AP -BP) AQ is the
a. efficiency variance.
b. price variance.
c. total flexible-budget variance.
d. spending variance.
b. price variance.
- A purchasing manager’s performance is BEST evaluated using the
a. direct materials price variance.
b. direct materials flexible-budget variance.
c. direct manufacturing labor flexible-budget variance.
d. affect the manager’s action has on total costs for the entire company
d. affect the manager’s action has on total costs for the entire company
- One of the primary reasons for using cost variances is
a. they diagnose the cause of a problem and what should be done to correct it.
b. for superiors to communicate expectations to lower-level employees.
c. to administer appropriate disciplinary action.
d. for financial control of operating activities and understanding why variances arise
d. for financial control of operating activities and understanding why variances arise
- A favorable cost variance of significant magnitude
a. is the result of good planning.
b. if investigated, may lead to improved production methods.
c. indicates management does not need to be concerned about lax standards.
d. does not need to be investigated
b. if investigated, may lead to improved production methods
- The variances that should be investigated by management include
a. only unfavorable variances.
b. only favorable variances.
c. all variances, both favorable and unfavorable.
d. both favorable and unfavorable variances considered significant in amount for the company
d. both favorable and unfavorable variances considered significant in amount for the company
- Typically, managers have the LEAST control over
a. the direct material price variance.
b. the direct material efficiency variance.
c. machine maintenance.
d. the scheduling of production
a. the direct material price variance
- If manufacturing machines are breaking down more than expected, this will contribute to
a. a favorable direct manufacturing labor price variance.
b. an unfavorable direct manufacturing labor price variance.
c. a favorable direct manufacturing labor efficiency variance.
d. an unfavorable direct manufacturing labor efficiency variance
d. an unfavorable direct manufacturing labor efficiency variance
- A single variance
a. signals the cause of a problem.
b. should be evaluated in isolation from other variances.
c. may be the result of many different problems.
d. should be used for performance evaluation
c. may be the result of many different problems.
- Variance analysis should be used
a. to understand why variances arise.
b. as the sole source of information for performance evaluation.
c. to punish employees that do not meet standards.
d. to encourage employees to focus on meeting standards
a. to understand why variances arise.
- Variances should be investigated
a. when they are kept below a certain amount.
b. when there is a small variance for critical items such as product defects.
c. even though the cost of investigation exceeds the benefit.
d. when there is an in-control occurrence
b. when there is a small variance for critical items such as product defects.
- When continuous improvement budgeted costing is implemented, cost reductions can result from
a. price reductions.
b. reducing materials waste.
c. producing products faster and more efficiently.
d. all of the above.
d. all of the above
- Nonfinancial performance measures
a. are usually used in combination with financial measures for control purposes.
b. are used to evaluate overall cost efficiency.
c. allow managers to make informed tradeoffs.
d. are often the sole basis of a manager’s performance evaluations
a. are usually used in combination with financial measures for control purposes
- Unfavorable direct material price variances are
a. always credits.
b. always debits.
c. credited to the Materials Control account.
d. credited to the Accounts Payable Control account
b. always debits
- Favorable direct manufacturing labor efficiency variances are
a. always credits.
b. always debits.
c. debited to the Work-in-Process Control account.
d. debited to the Wages Payable Control account.
a. always credits.
- From the perspective of control, the direct materials efficiency variance should be isolated at the time of
a. purchase.
b. use.
c. completion of the entire product.
d. sale of the product
b. use
- Standard costing systems are a useful tool when using
a. just-in-time systems.
b. total quality management.
c. computer-integrated manufacturing systems.
d. all of the above.
d. all of the above.
- Performance variance analysis can be calculated for
a. output unit-level costs.
b. batch-level costs.
c. product-sustaining costs.
d. all of the above
d. all of the above
- A favorable efficiency variance for material-handling labor-hours per batch could result from
a. inefficient production-floor layouts compared to those expected when preparing the budget.
b. materials-handling labor having to wait when picking up materials.
c. well-trained and experienced material-handling employees.
d. lower wages than planned for material-handling labor
c. well-trained and experienced material-handling employees
- The process by which a company’s products or services are measured relative to the
best possible levels of performance is known as
a. efficiency.
b. benchmarking.
c. a standard costing system.
d. variance analysis
b. benchmarking
- When benchmarking,
a. the best levels of performance are usually found in companies that are within different industries.
b. finding appropriate benchmarks is a minor issue.
c. comparisons can highlight areas for better future cost management.
d. both (a) and (c) are true.
c. comparisons can highlight areas for better future cost management
- Ensuring benchmark numbers are comparable can be difficult because differences can exist across companies with
a. overall company strategy.
b. depreciation methods.
c. inventory methods.
d. all of the above
d. all of the above
- When benchmarking, management accountants are MOST valuable when they
a. present differences in the benchmarking data to management.
b. highlight differences in the benchmarking data to management.
c. provide insight into why costs or revenues differ across companies.
d. provide complex mathematical analysis.
c. provide insight into why costs or revenues differ across companies
(T/F) 25. In the journal entry that records overhead variances, the manufacturing overhead allocated accounts are closed
T
(T/F) 26. Variance analysis of fixed nonmanufacturing costs, such as distribution costs, can also be useful when planning for capacity.
T
(T/F) 27. Variance analysis of fixed overhead costs is also useful when a company uses activitybased costing.
T
(T/F) 28. An unfavorable fixed setup overhead spending variance could be due to higher lease costs of new setup equipment
T
(T/F) 29. A favorable variable setup overhead efficiency variance could be due to actual setuphours exceeding the setup-hours planned for the units produced
F
- Overhead costs have been increasing due to all of the following EXCEPT
a. increased automation.
b. more complexity in distribution processes.
c. tracing more costs as direct costs with the help of technology.
d. product proliferation
c. tracing more costs as direct costs with the help of technology.
- Effective planning of variable overhead costs means that a company performs those variable overhead costs that primarily add value
a. for the current shareholders.
b. for the customer using the products or services.
c. for plant employees.
d. for major suppliers of component parts.
b. for the customer using the products or services.
Variable overhead costs include
a. plant-leasing costs.
b. the plant manager’s salary.
c. depreciation on plant equipment.
d. machine maintenance
d. machine maintenance
Fixed overhead costs include
a. the cost of sales commissions.
b. property taxes paid on plant facilities.
c. energy costs.
d. indirect materials
b. property taxes paid on plant facilities.
- Effective planning of fixed overhead costs includes all EXCEPT
a. planning day-to-day operational decisions.
b. eliminating nonvalue-added costs.
c. planning to be efficient.
d. choosing the appropriate level of capacity
a. planning day-to-day operational decision
- Effective planning of variable overhead includes all EXCEPT
a. choosing the appropriate level of capacity.
b. eliminating nonvalue-adding costs.
c. redesigning products to use fewer resources.
d. redesigning the plant layout for more efficient processing
a. choosing the appropriate level of capacity
Choosing the appropriate level of capacity
a. is a key strategic decision.
b. may lead to loss of sales if overestimated.
c. may lead to idle capacity if underestimated.
d. can be all of the above
a. is a key strategic decision
The MAJOR challenge when planning fixed overhead
a. is calculating total costs.
b. is calculating the cost-allocation rate.
c. is choosing the appropriate level of capacity.
d. is choosing the appropriate planning period
c. is choosing the appropriate level of capacity
- In a standard costing system, a cost-allocation base would MOST likely be
a. actual machine-hours.
b. normal machine-hours.
c. standard machine-hours.
d. any of the above
c. standard machine-hours
- For calculating the costs of products and services, a standard costing system
a. only requires a simple recording system.
b. uses standard costs to determine the cost of products.
c. does not have to keep track of actual costs.
d. does all of the above
d. does all of the above
- The variable overhead flexible-budget variance measures the difference between
a. actual variable overhead costs and the static budget for variable overhead costs.
b. actual variable overhead costs and the flexible budget for variable overhead costs.
c. the static budget for variable overhead costs and the flexible budget for variable overhead costs.
d. none of the above
b. actual variable overhead costs and the flexible budget for variable overhead costs.
- A $5,000 unfavorable flexible-budget variance indicates that
a. the flexible-budget amount exceeded actual variable manufacturing overhead by $5,000. b. actual variable manufacturing overhead exceeded the flexible-budget amount by $5,000.
c. the flexible-budget amount exceeded standard variable manufacturing overhead by $5,000. d. standard variable manufacturing overhead exceeded the flexible-budget amount by $5,000.
b. actual variable manufacturing overhead exceeded the flexible-budget amount by $5,000.
- Which of the following is NOT a step in developing budgeted variable overhead rates?
a. Identifying the variable overhead costs associated with each cost-allocation base.
b. Estimating the budgeted denominator level based on expected utilization of available capacity.
c. Selecting the cost-allocation bases to use.
d. Choosing the period to be used for the budget.
b. Estimating the budgeted denominator level based on expected utilization of available capacit
- In flexible budgets, costs that remain the same regardless of the output levels within the relevant range are
a. allocated costs.
b. budgeted costs.
c. fixed costs.
d. variable costs
c. fixed costs
- The variable overhead flexible-budget variance can be further subdivided into the
a. price variance and the efficiency variance.
b. static-budget variance and sales-volume variance.
c. spending variance and the efficiency variance.
d. sales-volume variance and the spending variance
c. spending variance and the efficiency variance.
- An unfavorable variable overhead spending variance indicates that
a. variable overhead items were not used efficiently.
b. the price of variable overhead items was more than budgeted.
c. the variable overhead cost-allocation base was not used efficiently.
d. the denominator level was not accurately determined
b. the price of variable overhead items was more than budgeted.
- When machine-hours are used as an overhead cost-allocation base, the MOST likely cause of a favorable variable overhead spending variance is
a. excessive machine breakdowns.
b. the production scheduler efficiently scheduled jobs.
c. a decline in the cost of energy.
d. strengthened demand for the product
c. a decline in the cost of energy
- When machine-hours are used as an overhead cost-allocation base, and the unexpected purchase of a new machine results in fewer expenditures for machine maintenance, the MOST likely result would be to report
a. a favorable variable overhead spending variance.
b. an unfavorable variable overhead efficiency variance.
c. a favorable fixed overhead flexible-budget variance.
d. an unfavorable production-volume variance
a. a favorable variable overhead spending variance
- For variable manufacturing overhead, there is no
a. spending variance.
b. efficiency variance.
c. flexible-budget variance.
d. production-volume variance
d. production-volume variance
- The variable overhead efficiency variance is computedand interpreted the direct-cost efficiency variance.
a. the same as; the same as
b. the same as; differently than
c. differently than; the same as
d. differently than; differently than
b. the same as; differently than
- An unfavorable variable overhead efficiency variance indicates that
a. variable overhead items were not used efficiently.
b. the price of variable overhead items was less than budgeted.
c. the variable overhead cost-allocation base was not used efficiently.
d. the denominator level was not accurately determined
c. the variable overhead cost-allocation base was not used efficiently
- Variable overhead costs can be managed by
a. reducing the consumption of the cost-allocation base.
b. eliminating nonvalue-adding variable costs.
c. planning for appropriate capacity levels.
d. both (a) and (b).
d. both (a) and (b).
- When machine-hours are used as a cost-allocation base, the item MOST likely to contribute to a favorable variable overhead efficiency variance is
a. excessive machine breakdowns.
b. the production scheduler’s impressive scheduling of machines.
c. a decline in the cost of energy.
d. strengthened demand for the product
b. the production scheduler’s impressive scheduling of machines
- When machine-hours are used as a cost-allocation base, the item MOST likely to contribute to an unfavorable variable overhead efficiency variance is
a. using more machine hours than budgeted.
b. workers wastefully using variable overhead items.
c. unused capacity.
d. more units being produced than planned.
a. using more machine hours than budgeted
- When machine-hours are used as an overhead cost-allocation base, a rush order resulting in unplanned overtime that used less-skilled workers on the machines would MOST likely contribute to reporting
a. a favorable variable overhead spending variance.
b. an unfavorable variable overhead efficiency variance.
c. a favorable fixed overhead flexible-budget variance.
b. an unfavorable production-volume variance
b. an unfavorable variable overhead efficiency variance
- When machine-hours are used as an overhead cost-allocation base and annual leasing costs for equipment unexpectedly increase, the MOST likely result would be to report
a. an unfavorable variable overhead spending variance.
b. a favorable variable overhead efficiency variance.
c. an unfavorable fixed overhead flexible-budget variance.
b. a favorable production-volume variance
c. an unfavorable fixed overhead flexible-budget variance
- The fixed overhead cost variance can be further subdivided into the
a. price variance and the efficiency variance.
b. spending variance and flexible-budget variance.
c. production-volume variance and the efficiency variance.
d. flexible-budget variance and the production-volume variance
d. flexible-budget variance and the production-volume variance
- The amount reported for fixed overhead on the static budget is also reported
a. as actual fixed costs.
b. as allocated fixed overhead.
c. on the flexible budget.
d. as both (b) and (c).
c. on the flexible budget
- An unfavorable fixed overhead spending variance indicates that
a. there was more excess capacity than planned.
b. the price of fixed overhead items cost more than budgeted.
c. the fixed overhead cost-allocation base was not used efficiently.
d. the denominator level was more than planned
b. the price of fixed overhead items cost more than budgeted
- A favorable fixed overhead spending variance might indicate that
a. more capacity was used than planned.
b. the denominator level was less than planned.
c. the fixed overhead cost-allocation base was not used efficiently.
d. a plant expansion did not proceed as originally planned.
d. a plant expansion did not proceed as originally planned
- For fixed manufacturing overhead, there is no
a. spending variance.
b. efficiency variance.
c. flexible-budget variance.
d. production-volume variance
b. efficiency variance.
- The production-volume variance may also be referred to as the
a. flexible-budget variance.
b. denominator-level variance.
c. spending variance.
d. efficiency variance
b. denominator-level variance
- A favorable production-volume variance indicates that the company
a. has good management.
b. has allocated more fixed overhead costs than budgeted.
c. has a total economic gain from using excess capacity.
d. should increase capacity
b. has allocated more fixed overhead costs than budgeted
- An unfavorable production-volume variance of $40,000 indicates that the company has
a. unused fixed manufacturing overhead capacity.
b. overallocated $40,000 of fixed manufacturing overhead costs.
c. $40,000 more capacity than needed.
d. an economic loss of $40,000 from selling fewer products than planned
. unused fixed manufacturing overhead capacity
- When machine-hours are used as a cost-allocation base, the item MOST likely to contribute to a favorable production-volume variance is
a. an increase in the selling price of the product.
b. the purchase of a new manufacturing machine costing considerably less than expected.
c. a decline in the cost of energy.
d. strengthened demand for the product
d. strengthened demand for the product
- When machine-hours are used as a cost-allocation base, the item MOST likely to contribute to an unfavorable production-volume variance is
a. a new competitor gaining market share.
b. a new manufacturing machine costing considerably more than expected.
c. an increase in the cost of energy.
d. strengthened demand for the product
a. a new competitor gaining market share
- Excess capacity is a sign
a. that capacity should be reduced.
b. that capacity may need to be re-evaluated.
c. that the company is suffering a significant economic loss.
d. of good management decisions
b. that capacity may need to be re-evaluated
- An unfavorable production-volume variance
a. is not a good measure of a lost production opportunity.
b. measures the total economic gain or loss due to unused capacity.
c. measures the amount of extra fixed costs planned for but not used.
d. takes into account the effect of additional revenues due to maintaining higher prices
c. measures the amount of extra fixed costs planned for but not used
- The difference between budgeted fixed manufacturing overhead and the fixed manufacturing overhead allocated to actual output units achieved is called the fixed overhead
a. efficiency variance.
b. flexible-budget variance.
c. combined-variance analysis.
d. production-volume variance
d. production-volume variance
- Variable overhead costs
a. never have any unused capacity.
b. have no production-volume variance.
c. allocated are always the same as the flexible-budget amount.
d. are all of the above
d. are all of the above
- Fixed overhead costs
a. never have any unused capacity.
b. should be unitized for planning purposes.
c. are unaffected by the degree of operating efficiency in a given budget period.
d. are both (a) and (b).
c. are unaffected by the degree of operating efficiency in a given budget period.
- Fixed overhead costs must be unitized for
a. financial reporting purposes.
b. planning purposes.
c. calculating the production-volume variance.
d. both (a) and (c).
d. both (a) and (c).
- Generally Accepted Accounting Principles require that unitized fixed manufacturing costs be used for
a. pricing decisions.
b. costing decisions.
c. external reporting.
d. all of the above
c. external reporting
- A nonfinancial measure of performance evaluation is
a. increased sales.
b. reducing distribution costs.
c. energy used per machine-hour.
d. all of the above
c. energy used per machine-hour.
- Variance information regarding nonmanufacturing costs can be used
a. to plan capacity in the service sector.
b. to control distribution costs in the retail sector.
c. to determine the most profitable services offered by a bank.
d. for all of the above
d. for all of the above
- Tucker Company uses a standard cost system. In March, $133,000 of variable manufacturing overhead costs was incurred and the flexible-budget amount for the month was $150,000. Which ofthe following variable manufacturing overhead entries
would have been recorded for March?
a. Accounts Payable Control and other accounts $150,000
Work-in-Process Control $150,000
b. Variable Manufacturing Overhead Allocated $150,000
Accounts Payable and other accounts $150,000
c. Work-in-Process Control $133,000
Accounts Payable Control and other accounts $133,000
d. Variable Manufacturing Overhead Control $133,000
Accounts Payable Control and other accounts $133,000
d. Variable Manufacturing Overhead Control $133,000
Accounts Payable Control and other accounts $133,000
- Alvarado Company made the following journal entry, therefore:
Variable Manufacturing Overhead Allocated $100,000
Variable Manufacturing Overhead Efficiency Variance 30,000
Variable Manufacturing Overhead Control $125,000 Variable Manufacturing Overhead Spending Variance 5,000
a. Alvarado overallocated variable manufacturing overhead.
b. a $5,000 favorable spending variance was recorded.
c. Work-in-Process is currently overstated.
d. this entry may be recorded yearly to provide timely feedback to managers
b. a $5,000 favorable spending variance was recorded.
- John’s Football Manufacturing Company reported:
Actual fixed overhead $800,000
Fixed manufacturing overhead spending variance $20,000 favorable
Fixed manufacturing production-volume variance $30,000 unfavorable
To isolate these variances at the end of the accounting period, John would debit Fixed Manufacturing Overhead Allocated
a. for $780,000.
b. for $790,000.
c. for $800,000.
d. for $810,000
b. for $790,000
- Jovana Company uses a standard cost system. In March, $117,000 of variable manufacturing overhead costs was incurred and the flexible-budget amount for the month was $120,000. Which of the following variable manufacturing overhead entries would have been recorded for March?
a. Accounts Payable Control and other accounts $120,000
Work-in-Process Control $120,000
b. Work-in-Process Control $120,000
Variable Manufacturing Overhead Allocated $120,000
c. Work-in-Process Control $117,000
Accounts Payable Control and other accounts $117,000
d. Accounts Payable Control and other accounts $117,000
Variable Manufacturing Overhead Control $117,000
b. Work-in-Process Control $120,000
Variable Manufacturing Overhead Allocated $120,000
- Tate Company makes the following journal entry, therefore:
Variable Manufacturing Overhead Allocated $150,000
Variable Manufacturing Overhead Efficiency Variance 5,000
Variable Manufacturing Overhead Control $125,000
Variable Manufacturing Overhead Spending Variance 30,000
a. Tate underallocated variable manufacturing overhead.
b. a $30,000 unfavorable spending variance was recorded.
c. Work-in-Process is currently understated.
d. a $25,000 favorable flexible-budget variance was recorded
d. a $25,000 favorable flexible-budget variance was recorded
- Jeremy’s Football Manufacturing Company reported:
Actual fixed overhead $500,000
Fixed manufacturing overhead spending variance $30,000 favorable
Fixed manufacturing production-volume variance $20,000 unfavorable
To isolate these variances at the end of the accounting period, Jeremy would debit Fixed Manufacturing Overhead Allocated
a. for $480,000.
b. for $490,000.
c. for $500,000.
d. for $510,000.
d. for $510,000
Variance
Actual results vary from expectation (budget)
Management by exception
Focusing on items that did not materialize as expected (good or bad)
Static budget
Put together before the period begins, sets all of the DM, DL, etc, standards do not change in the period
Flexible budget
Applies the static budget standards to the actual output
Key difference between static budget and flexible budget
The output quantity
How is the amount of detail shown in a budget denoted
By levels (level 0 least, level 3 most)
Static budget variance
Change in actual vs expected
Favorable static budget variance
Favorable effect on income (credit), increased revenues, decreased costs
Unfavorable static budget variance
Unfavorable effect on income (debit), decreased revenues, increased costs
Sales volume variance
Happens only because the output quantity changes
Budgeted input prices and quantities are available (3)
1) actual data from previous period
2) other companies in the industry
3) develop standards internally
