Final Flashcards
1) Compared to variable overhead costs planning, fixed overhead costs planning have an additional strategic issue of ________.
A) eliminating activities that do not add value
B) increasing the linearity between total costs and volume of production
C) choosing the appropriate level of investment
D) identifying essential value-adding activities
C) choosing the appropriate level of investment
2) Effective planning of variable overhead costs means that a company performs those variable overhead costs that primarily ________.
A) increase the planned variable overhead budgets
B) add value for the customer using the products or services
C) increase the linearity between total costs and volume of production
D) identify the product advertising requirements
B) add value for the customer using the products or services
3) Which of the following statements is true of variable overhead costs?
A) All the decisions determining the level of variable overhead costs are made at the start of a budget period.
B) Planning of variable overhead costs includes choosing the appropriate level of capacity.
C) Activities which add value are of least relevance while planning variable overhead costs.
D) The level of variable overhead costs incurred in a period is mainly determined by day-to-day operating decisions.
D) The level of variable overhead costs incurred in a period is mainly determined by day-to-day operating decisions.
4) 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
5) Effective planning of fixed overhead costs includes ________.
A) planning day-to-day operational decisions
B) eliminating value-added costs
C) determining which products are to be produced
D) choosing the appropriate level of capacity
D) choosing the appropriate level of capacity
6) Effective planning of variable overhead costs includes ________.
A) choosing the appropriate level of investment
B) eliminating value-added costs
C) redesigning products to use fewer resources
D) reorganizing management structure
C) redesigning products to use fewer resources
7) Most of the decisions determining the level of fixed overhead costs to be incurred will be made \_\_\_\_\_\_\_\_. A) by the end of a budget period B) by the middle of a budget period C) on a day-to-day ongoing basis D) at the start of a budget period
D) at the start of a budget period
8) The major challenge when planning fixed overhead is ________.
A) calculating total costs
B) calculating the cost-allocation rate
C) choosing the appropriate level of capacity
D) choosing the appropriate planning period
C) choosing the appropriate level of capacity
9) An effective plan for variable overhead costs will eliminate activities that do not add value.
Answer: TRUE
10) At the start of the budget period, management will have made most decisions regarding the level of fixed overhead costs to be incurred.
Answer: TRUE
11) The planning of fixed overhead costs differs from the planning of variable overhead costs in terms of timing.
Answer: TRUE
12) The planning of fixed overhead costs does not differ from the planning of variable overhead costs.
Answer: FALSE
Explanation: The planning of fixed overhead costs differs from the planning of variable overhead costs in one important respect, timing. The level of fixed costs to be incurred will have been mostly decided upon at the start of the budget period, but the day-to-day ongoing operations decisions will be the main determinant in the level of variable overhead costs to be incurred in the period.
1) Which of the following mathematical expression is used to calculate budgeted variable overhead cost rate per output unit?
A) Budgeted output allowed per input unit × Budgeted variable overhead cost rate per input unit
B) Budgeted input allowed per output unit ÷ Budgeted variable overhead cost rate per input unit
C) Budgeted output allowed per input unit ÷ Budgeted variable overhead cost rate per input unit
D) Budgeted input allowed per output unit × Budgeted variable overhead cost rate per input unit
D) Budgeted input allowed per output unit × Budgeted variable overhead cost rate per input unit
2) While calculating the costs of products and services, a standard costing system ________.
A) allocates overhead costs on the basis of the actual overhead-cost rates
B) uses standard costs to determine the cost of products
C) does not keep track of overhead cost
D) traces direct costs to output by multiplying the standard prices or rates by the actual quantities
B) uses standard costs to determine the cost of products
3) Which of the following is a step in developing budgeted variable overhead rates?
A) identifying the fixed costs associated with direct manufacturing labor
B) estimating the budgeted denominator level based on expected utilization of available capacity
C) selecting the cost-allocation base to use in allocating machine-handling costs
D) choosing the appropriate level of capacity or investment
C) selecting the cost-allocation base to use in allocating machine-handling costs
4) Which of the following is the mathematical expression for the budgeted fixed overhead cost per unit of cost allocation base?
B) Budgeted fixed overhead cost per unit of cost allocation base = Budgeted total costs in fixed overhead cost pool ÷ Budgeted total quantity of cost allocation base
5) 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
6) Alka Corporation manufactures industrial-sized gas furnaces and uses budgeted machine-hours to allocate variable manufacturing overhead. The following information pertains to the company’s manufacturing overhead data:
Budgeted output units 29,000 units
Budgeted machine-hours 10,150 hours
Budgeted variable manufacturing overhead costs for 10,150 hours $324,800
Actual output units produced 31,000 units
Actual machine-hours used 14,400 hours
Actual variable manufacturing overhead costs $333,250
What is the budgeted variable overhead cost rate per output unit? A) $11.70 B) $11.75 C) $11.20 D) $11.00
C) $11.20
Answer: C
Explanation: C) Machine hour per unit = 10,150 ÷ 29,000 = 0.35
Budgeted cost per machine hour = $324,800 ÷ 10,150 = $32
Budgeted cost per unit = $32 × 0.35 = $11.20
7) Christine Corporation manufactures baseball uniforms and uses budgeted machine-hours to allocate variable manufacturing overhead. The following information pertains to the company’s manufacturing overhead data:
Budgeted output units 10,000 units
Budgeted machine-hours 15,000 hours
Budgeted variable manufacturing overhead costs for 15,000 hours $180,000
Actual output units produced 9,000 units
Actual machine-hours used 14,000 hours
Actual variable manufacturing overhead costs $171,000
What is the budgeted variable overhead cost rate per output unit? A) $12.00 B) $12.21 C) $18.00 D) $19.00
C) $18.00
Explanation: C) Budgeted rate = $180,000/15,000 = $12.00 per machine hour
Budgeted machine hours per unit = 15,000/10,000 = 1.5 hours per unit
Cost rate per output unit = $12.00 x 1.5 = $18.00
8) Green Energy Inc. produces fertilizer and distributes the product by using his tanker trucks. Green Energy uses budgeted fleet hours to allocate variable manufacturing overhead. The following information relates to the company’s manufacturing overhead data:
Budgeted output units 730 truckloads
Budgeted fleet hours 511 hours
Budgeted pounds of fertilizer 24,000,000 pounds
Budgeted variable manufacturing overhead costs for 730 loads $89,425
Actual output units produced and delivered 720 truckloads
Actual fleet hours 436 hours
Actual pounds of fertilizer produced and delivered 25,200,000 pounds
Actual variable manufacturing overhead costs $87,120
What is the budgeted variable overhead cost rate per output unit? A) $120.00 B) $122.50 C) $123.69 D) $121.00
B) $122.50
Explanation: B) Budgeted fleet hours per unit = 511 ÷ 730= 0.7
Budgeted cost per fleet hour = $89,425 ÷ 511 = $175
Budgeted cost per unit = $175 × 0.7 = $122.5
9) Standard costing is a costing system that allocates overhead costs on the basis of the standard overhead-cost rates times the standard quantities of the allocation bases allowed for the actual outputs produced.
Answer: TRUE
10) Fixed costs automatically increase or decrease with the level of activity within a relevant range of activity
Answer: FALSE
11) Standard costing is a cost system that allocates overhead costs on the basis of overhead cost rates based on actual overhead costs times the standard quantities of the allocation bases allowed for the actual outputs produced.
Answer: FALSE
Explanation: Standard costing is a costing system that traces direct costs to output produced by multiplying the standard prices or rates by the standard quantities of inputs allowed for actual outputs produced.
12) Computing standard costs at the start of the budget period results in a complex record keeping system.
Answer: FALSE
Explanation: Computing standard costs at the start of the budget period simplifies record keeping because no records are needed of the actual overhead costs or of the actual quantities of the cost-allocation bases used.
Diff: 2