Final

Question 1

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

Answer 1

C) choosing the appropriate level of investment

Question 2

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

Answer 2

B) add value for the customer using the products or services

Question 3

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.

Answer 3

D) The level of variable overhead costs incurred in a period is mainly determined by day-to-day operating decisions.

Question 4

4) Fixed overhead costs include ________.
A) the cost of sales commissions
B) property taxes paid on plant facilities
C) energy costs
D) indirect materials

Answer 4

B) property taxes paid on plant facilities

Question 5

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

Answer 5

D) choosing the appropriate level of capacity

Question 6

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

Answer 6

C) redesigning products to use fewer resources

Question 7

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

Answer 7

D) at the start of a budget period

Question 8

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

Answer 8

C) choosing the appropriate level of capacity

Question 9

9) An effective plan for variable overhead costs will eliminate activities that do not add value.

Answer 9

Answer: TRUE

Question 10

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 10

Answer: TRUE

Question 11

11) The planning of fixed overhead costs differs from the planning of variable overhead costs in terms of timing.

Answer 11

Answer: TRUE

Question 12

12) The planning of fixed overhead costs does not differ from the planning of variable overhead costs.

Answer 12

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.

Question 13

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

Answer 13

D) Budgeted input allowed per output unit × Budgeted variable overhead cost rate per input unit

Question 14

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

Answer 14

B) uses standard costs to determine the cost of products

Question 15

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

Answer 15

C) selecting the cost-allocation base to use in allocating machine-handling costs

Question 16

4) Which of the following is the mathematical expression for the budgeted fixed overhead cost per unit of cost allocation base?

Answer 16

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

Question 17

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

Answer 17

C) fixed costs

Question 18

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

Answer 18

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

Question 19

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

Answer 19

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

Question 20

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

Answer 20

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

Question 21

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 21

Answer: TRUE

Question 22

10) Fixed costs automatically increase or decrease with the level of activity within a relevant range of activity

Answer 22

Answer: FALSE

Question 23

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 23

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.

Question 24

12) Computing standard costs at the start of the budget period results in a complex record keeping system.

Answer 24

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

Question 25

13) List the four steps to develop budgeted variable overhead cost-allocation.

Answer 25

Answer: Step 1: Choose the period to be used for the budget.
Step 2: Select the cost-allocation bases to use in allocating the variable overhead costs to the output produced.
Step 3: Identify the variable overhead costs associated with each cost-allocation base.
Step 4: Compute the rate per unit of each cost-allocation base used to allocate the variable overhead costs to the output produced.

Question 26

1) The variable overhead spending variance measures the difference between ________, multiplied by the actual quantity of variable overhead cost-allocation base used.
A) the actual variable overhead cost per unit and the budgeted variable overhead cost per unit
B) the standard variable overhead cost rate and the budgeted variable overhead cost rate
C) the actual variable overhead cost per unit and the budgeted fixed overhead cost per unit
D) the actual quantity per unit and the budgeted quantity per unit

Answer 26

A) the actual variable overhead cost per unit and the budgeted variable overhead cost per unit

Question 27

2) A $5,000 unfavorable flexible-budget variance indicates that ________.
A) the flexible-budget amount exceeded actual variable manufacturing overhead by $5,000
B) the 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) the standard variable manufacturing overhead exceeded the flexible-budget amount by $5,000

Answer 27

B) the actual variable manufacturing overhead exceeded the flexible-budget amount by $5,000

Question 28

12) 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

Answer 28

C) spending variance and the efficiency variance

Question 29

13) Teddy Company uses a standard cost system. In May, $234,000 of variable manufacturing overhead costs were incurred and the flexible-budget amount for the month was $240,000. Which of the following variable manufacturing overhead entries would have been recorded for May?
A) Accounts Payable Control and other accounts 240,000
Work-in-Process Control 240,000
B) Work-in-Process Control 240,000
Variable Manufacturing Overhead Allocated 240,000
C) Work-in-Process Control 234,000
Accounts Payable Control and other accounts 234,000
D) Accounts Payable Control and other accounts 234,000
Variable Manufacturing Overhead Control 234,000

Answer 29

B) Work-in-Process Control 240,000

Variable Manufacturing Overhead Allocated 240,000

Question 30

14) The flexible budget enables to highlight the differences ________.
A) between actual costs and actual quantities versus budgeted costs and budgeted quantities for the actual output level
B) between budgeted costs and budgeted quantities versus actual costs and budgeted quantities for the budgeted output level
C) between budgeted costs and actual quantities versus budgeted costs and budgeted quantities for the actual output level
D) between actual costs and actual quantities versus budgeted costs and budgeted quantities for the budgeted output level

Answer 30

B) between budgeted costs and budgeted quantities versus actual costs and budgeted quantities for the budgeted output level

Question 31

15) 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

Answer 31

C) a decline in the cost of energy

Question 32

16) The variable overhead efficiency variance measures the difference between the ________, multiplied by the budgeted variable overhead cost per unit of the cost-allocation base.
A) budgeted quantity of the cost-allocation base used and the budgeted quantity of the cost-allocation base that should have been used to produce the actual output
B) actual quantity of the cost-allocation base used and the budgeted quantity of the cost-allocation base that should have been used to produce the actual output
C) actual cost incurred and the budgeted quantity of the cost-allocation base that should have been used to produce the actual output
D) budgeted cost and the actual cost used to produce the actual output

Answer 32

B) actual quantity of the cost-allocation base used and the budgeted quantity of the cost-allocation base that should have been used to produce the actual output

Question 33

17) When variable overhead efficiency variance is favorable, it can be safely assumed that the ________.
A) actual rate per unit of the cost-allocation base is higher than the budgeted rate
B) actual quantity of the cost-allocation base used is higher than the budgeted quantity
C) actual rate per unit of the cost-allocation base is lower than the budgeted rate
D) actual quantity of the cost-allocation base used is lower than the budgeted quantity

Answer 33

D) actual quantity of the cost-allocation base used is lower than the budgeted quantity

Question 34

35) The variable overhead efficiency variance is computed \_\_\_\_\_\_\_\_ and 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

Answer 34

B) the same as; differently than

Question 35

36) Mendel Company makes the following journal entry:
Variable Manufacturing Overhead Allocated 200,000
Variable Manufacturing Overhead Efficiency Variance 5,000
Variable Manufacturing Overhead Control 175,000
Variable Manufacturing Overhead Spending Variance 30,000

Which of the following statements is true of the given journal entry?
A) A variable manufacturing overhead cost of $175,000 is written-off.
B) An unfavorable spending variance of $30,000 is recorded.
C) A favorable efficiency variance of $5,000 is recorded.
D) A favorable flexible-budget variance of $25,000 is recorded.

Answer 35

D) A favorable flexible-budget variance of $25,000 is recorded.

Question 36

37) An unfavorable variable overhead efficiency variance indicates that ________.
A) the actual rate of variable overhead was more than budgeted rate
B) the price of variable overhead items was less than budgeted
C) the variable overhead cost-allocation base was not used efficiently
D) the variable overhead cost-allocation base was used efficiently

Answer 36

C) the variable overhead cost-allocation base was not used efficiently

Question 37

38) Osium Company made the following journal entry:

Variable Manufacturing Overhead Allocated 200,000
Variable Manufacturing Overhead Efficiency Variance 60,000
Variable Manufacturing Overhead Control 250,000
Variable Manufacturing Overhead Spending Variance 10,000

Which of the following statements is true of the given journal entry?
A) Osium overallocated variable manufacturing overhead.
B) A $10,000 unfavorable spending variance was recorded.
C) Work-in-Process is currently overstated.
D) A $60,000 unfavorable efficiency variance was recorded.

Answer 37

D) A $60,000 unfavorable efficiency variance was recorded.

Question 38

39) Which of the following is the correct mathematical expression is used to calculate variable overhead efficiency variance?
A) (Actual rate − Budgeted rate) × Budgeted quantity
B) (Actual quantity × Budgeted rate) - (Budgeted input quantity allowed for actual output × Budgeted rate)
C) (Actual quantity ÷ Budgeted rate) − (Budgeted quantity ÷ Budgeted rate)
D) (Actual quantity ÷ Budgeted rate) × Budgeted quantity allowed for actual output

Answer 38

B) (Actual quantity × Budgeted rate) - (Budgeted input quantity allowed for actual output × Budgeted rate)

Question 39

40) Marshall Company uses a standard cost system. In April, $266,000 of variable manufacturing overhead costs were incurred and the flexible-budget amount for the month was $300,000. Which of the following variable manufacturing overhead entries would have been recorded for March?
A) Accounts Payable Control and other accounts 300,000
Work-in-Process Control 300,000
B) Variable Manufacturing Overhead Allocated 300,000
Accounts Payable and other accounts 300,000
C) Work-in-Process Control 266,000
Accounts Payable Control and other accounts 266,000
D) Variable Manufacturing Overhead Control 266,000
Accounts Payable Control and other accounts 266,000

Answer 39

D) Variable Manufacturing Overhead Control 266,000

Accounts Payable Control and other accounts 266,000

Question 40

41) 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) skillful workforce 
C) additional machinery 
D) strengthened demand for the product

Answer 40

B) skillful workforce

Question 41

42) Which of the following journal entries is used to record actual variable overhead costs incurred?
A) Accounts Payable 
	Variable Overhead Control
B) Variable Overhead Control
	Accounts Receivable 
C) Work-in-Process Control
	Variable Overhead Control 
D) Variable Overhead Control 
	Accounts Payable

Answer 41

D) Variable Overhead Control

Accounts Payable

Question 42

43) When variances are immaterial, which of the following statements is true of the journal entry to write-off the variable overhead variance accounts?
A) Cost of Goods Sold account will always be debited.
B) Unfavorable efficiency variance will be credited.
C) Favorable efficiency variance will be credited.
D) Cost of Goods Sold account will always be credited.

Answer 42

B) Unfavorable efficiency variance will be credited.

Question 43

44) The flexible budget enables to highlight the differences between budgeted costs and budgeted quantities versus actual costs and actual quantities for the budgeted output level.

Answer 43

Answer: TRUE

Question 44

45) Managers can always view a favorable variable overhead spending variance as desirable.

Answer 44

Answer: FALSE

Question 45

46) The variable overhead efficiency variance is the difference between actual quantity of the
cost-allocation base used and budgeted quantity of the cost-allocation base allowed for actual output, multiplied by the budgeted variable overhead cost per unit of the cost-allocation base.

Answer 45

Answer: TRUE

Question 46

47) Tightly budgeted machine time standards can lead to unfavorable variable overhead efficiency variance.

Answer 46

Answer: TRUE

Question 47

48) If budgeted and actual machine hours are equal, spending variance will always be nil.

Answer 47

Answer: FALSE

Question 48

49) Unskilled workforce can lead to unfavorable efficiency variance.

Answer 48

Answer: TRUE

Question 49

50) Causes of a favorable variable overhead efficiency variance might include using lower-skilled workers than expected.

Answer 49

Answer: FALSE
Explanation: Possible causes of a favorable variable overhead efficiency variance might include using higher-skilled workers that are more efficient than expected.

Question 50

51) If the production planners set the budgeted machine hours standards too tight, one could anticipate there would be a favorable variable overhead efficiency variance.

Answer 50

Answer: FALSE
Explanation: If the production planners set the budgeted machine hours standards too tight, one could anticipate there would be an unfavorable variable overhead efficiency variance.

Question 51

1) 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(n) ________.
A) unfavorable variable overhead spending variance
B) favorable variable overhead efficiency variance
C) unfavorable fixed overhead flexible-budget variance
D) favorable production-volume variance

Answer 51

C) unfavorable fixed overhead flexible-budget variance

Question 52

2) The amount reported for fixed overhead on the static budget is also reported \_\_\_\_\_\_\_\_.
A) as actual fixed costs 
B) as allocated fixed overhead costs
C) as flexible budget costs
D) as committed variable costs

Answer 52

C) as flexible budget costs

Question 53

3) 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

Answer 53

B) the price of fixed overhead items cost more than budgeted

Question 54

4) Which of the following is the correct mathematical expression to calculate the fixed overhead spending variance?
A) Static-budget amount — Flexible-budget amount
B) Flexible-budget amount — Actual costs incurred
C) Static-budget amount — Fixed overhead allocated for actual output
D) Flexible-budget amount — Fixed overhead allocated for actual output

Answer 54

B) Flexible-budget amount — Actual costs incurred

Question 55

5) For fixed manufacturing overhead, there is no \_\_\_\_\_\_\_\_.
A) spending variance 
B) efficiency variance 
C) flexible-budget variance 
D) production-volume variance

Answer 55

B) efficiency variance

Question 56

6) Luke’s Football Manufacturing Company reported:
Actual fixed overhead $400,000
Fixed manufacturing overhead spending variance $10,000 favorable
Fixed manufacturing production-volume variance $15,000 unfavorable

To isolate these variances at the end of the accounting period, John would debit Fixed Manufacturing Overhead Allocated for  \_\_\_\_\_\_\_\_.
A) $390,000 
B) $395,000 
C) $400,000 
D) $405,000

Answer 56

B) $395,000

Explanation: B) $400,000 + $10,000 - $15,000 = $395,000

Question 57

16) Which of the following statements is true of fixed overhead variances?
A) The difference between actual costs and static budget costs will give the production volume variance.
B) The difference between actual costs and static budget costs will always be nil.
C) The difference between actual costs and flexible budget costs will give the production volume variance.
D) The difference between flexible budget costs and static budget costs will always be nil.

Answer 57

D) The difference between flexible budget costs and static budget costs will always be nil.

Question 58

17) Which of the following is the correct mathematical expression to calculate the fixed overhead production-volume variance?
A) static-budget amount − flexible-budget amount
B) flexible-budget amount − actual costs incurred
C) actual costs incurred − fixed overhead allocated for actual output
D) budgeted fixed overhead − fixed overhead allocated for actual output

Answer 58

D) budgeted fixed overhead − fixed overhead allocated for actual output

Question 59

18) Which of the following journal entries is used to record fixed overhead costs allocated?
A) Fixed Overhead Allocated
	Work-in-Process Control 
B) Work-in-Process Control
	Fixed Overhead Allocated 
C) Fixed Overhead Control
	Work-in-Process Control 
D) Fixed Overhead Allocated
	Fixed Overhead Control

Answer 59

B) Work-in-Process Control

Fixed Overhead Allocated

Question 60

19) Bismith Company reported:
Actual fixed overhead $500,000
Fixed manufacturing overhead spending variance $30,000 unfavorable
Fixed manufacturing production-volume variance $20,000 unfavorable

To record the write-off of these variances at the end of the accounting period, Bismith would ________.
A) credit Fixed Manufacturing Overhead Allocated for $500,000
B) debit Fixed Manufacturing Overhead Spending Variance for $30,000
C) credit Fixed Manufacturing Production-Volume Variance for $20,000
D) debit Fixed Manufacturing Control for $500,000

Answer 60

B) debit Fixed Manufacturing Overhead Spending Variance for $30,000

Question 61

20) Radon Corporation manufactured 33,000 grooming kits for horses during March. The following fixed overhead data pertain to March:

Actual	Static Budget Production	33,000 units	30,000 units Machine-hours	6,100 hours	6,000 hours Fixed overhead costs for March	$153,000	$144,000

What is the fixed overhead production-volume variance? 
A) $9,000 unfavorable 
B) $14,400 favorable 
C) $14,400 unfavorable 
D) $9,000 favorable

Answer 61

B) $14,400 favorable
Explanation: B) Fixed cost per machine hour = $144,000 ÷ 6,000 = $24
Machine hours per unit = 6,000 ÷ 30,000 = 0.2
Fixed cost per unit = $24 × 0.2 = $4.8
Fixed overhead allocated = 33,000 × $4.8 = $158,400
Fixed overhead production-volume variance = $144,000 − $158,400 = $14,400 F

Question 62

23) Under Generally Accepted Accounting Principles (GAAP), fixed manufacturing overhead costs are allocated as an inventoriable cost to the output units produced.

Answer 62

Answer: TRUE

Question 63

24) Allocated fixed overhead can be expressed in terms of allocation-base units or in terms of the budgeted fixed cost per unit.

Answer 63

Answer: TRUE

Question 64

25) Lump-sum fixed costs of acquiring capacity decrease automatically if the capacity needed turns out to be less than the capacity acquired.

Answer 64

Answer: FALSE
Explanation: Lump-sum fixed costs represent the costs of acquiring capacity. These costs do not decrease
automatically if the capacity needed turns out to be less than the capacity acquired.

Question 65

26) When forecasting fixed costs, managers should concentrate on total lump-sum costs instead of unitized fixed overhead costs.

Answer 65

Answer: TRUE

Question 66

27) A favorable fixed overhead flexible-budget variance indicates that actual fixed costs exceeded the lump-sum amount budgeted.

Answer 66

Answer: FALSE

Question 67

28) Fixed costs for the period are by definition a lump sum of costs that remain unchanged and therefore the fixed overhead spending variance is always zero.

Answer 67

Answer: FALSE
Explanation: Fixed costs for the period are by definition a lump sum of costs, but they can and do change from the amount that was originally budgeted.

Question 68

29) An unfavorable production-volume variance indicates an overallocation of fixed overhead costs.

Answer 68

Answer: FALSE
Explanation: A favorable production-volume variance indicates an overallocation of fixed overhead costs. An unfavorable production-volume variance indicates an underallocation of fixed overhead costs.

Question 69

30) Favorable overhead variances are always recorded with credits in a standard cost system.

Answer 69

Answer: TRUE

Question 70

31) Under activity-based costing, the flexible-budget amount equals the static-budget amount for fixed overhead costs.

Answer 70

Answer: TRUE

Question 71

32) Prorated allocation of production-volume variance results in a higher operating income for current year than if the entire favorable production-volume variance were credited to Cost of Goods Sold.

Answer 71

Answer: FALSE
Explanation: Proration of production-volume variance results in a lower operating income for current year than if the entire favorable production-volume variance were credited to Cost of Goods Sold.

Question 72

33) Prorated allocation of production-volume variance has the effect of approximating the allocation of fixed costs based on actual costs and actual output.

Answer 72

Answer: TRUE

Question 73

1) Which of the following statements is true of variable overhead costs?
A) Variable overhead costs always have unused capacity.
B) Variable overhead costs have no production-volume variance.
C) Variable overhead costs have no spending variance.
D) Variable overhead costs have no efficiency variance.

Answer 73

B) Variable overhead costs have no production-volume variance.

Question 74

2) Fixed overhead costs \_\_\_\_\_\_\_\_.
A) never have any unused capacity 
B) have no spending variance
C) have no efficiency variance
D) have no production-volume variance

Answer 74

C) have no efficiency variance

Question 75

3) When variable overhead spending variance is unfavorable, it can be safely assumed that ________.
A) actual rate per unit of cost-allocation base is higher than budgeted rate
B) actual quantity of cost-allocation base used is higher than budgeted quantity
C) actual rate per unit of cost-allocation base is lower than budgeted rate
D) actual quantity of cost-allocation base used is lower than budgeted quantity

Answer 75

A) actual rate per unit of cost-allocation base is higher than budgeted rate

Question 76

4) When fixed overhead spending variance is unfavorable, it can be safely assumed that ________.
A) flexible budget amount is higher than actual costs incurred
B) fixed overhead allocated for actual output is lower than actual costs incurred
C) flexible budget amount is lower than actual costs incurred
D) fixed overhead allocated for actual output is higher than actual costs incurred

Answer 76

C) flexible budget amount is lower than actual costs incurred

Question 77

5) Which of the following statements is true of fixed overhead cost variances?
A) The difference between actual costs and flexible budget costs will give the production volume variance.
B) The difference between actual costs and static budget costs will give the production volume variance.
C) The difference between flexible budget costs and allocated overhead costs will give the production volume variance.
D) The difference between static budget costs and flexible budget costs will give the production volume variance.

Answer 77

C) The difference between flexible budget costs and allocated overhead costs will give the production volume variance.

Question 78

1) 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

Answer 78

D) flexible-budget variance and the production-volume variance

Question 79

2) 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

Answer 79

B) denominator-level variance

Question 80

3) Which of the following is a component of sales-volume variance?
A) Net-income volume variance
B) Operating-income volume variance
C) Taxable-income volume variance
D) Budgeted revenue variance

Answer 80

B) Operating-income volume variance

Question 81

4) Under standard costing, ________.
A) fixed overhead costs are treated as if they are a variable cost
B) fixed overhead costs are treated as if they are a fixed cost
C) variable overhead costs are treated as if they are a fixed cost
D) fixed overhead costs are treated as if they are a sunk cost

Answer 81

A) fixed overhead costs are treated as if they are a variable cost

Question 82

5) An unfavorable production-volume variance ________.
A) is not a good measure of a lost production opportunity
B) indicates that the company had reduced its per unit fixed overhead cost to improve sales
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

Answer 82

C) measures the amount of extra fixed costs planned for but not used

Question 83

6) 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

Answer 83

B) flexible-budget variance

Question 84

7) The production volume variance arises only for variable overhead costs.

Answer 84

Answer: FALSE
Explanation: The production volume variance arises only for fixed overhead costs.

Question 85

8) The production-volume variance is a component of the sales-volume variance.

Answer 85

Answer: TRUE

Question 86

9) Under standard costing, fixed overhead costs are treated as if they are a variable cost.

Answer 86

Answer: TRUE

Question 87

10) A favorable production-volume variance arises when manufacturing capacity planned for is NOT used.

Answer 87

Answer: FALSE
Explanation: An unfavorable production-volume variance arises when manufacturing capacity planned for is not used.

Question 88

11) An unfavorable production-volume variance always infers that management made a bad planning decision regarding the plant capacity.

Answer 88

Answer: FALSE
Explanation: An unfavorable production-volume variance does not always infer that management made a bad planning decision regarding the plant capacity.

Question 89

1) Standard costing can provide managers with reliable and timely information on variable distribution overhead ________.
A) efficiency variances and production variances
B) production-volume variances and spending variances
C) efficiency variances and spending variances
D) production-volume variances and sales variances

Answer 89

C) efficiency variances and spending variances

Question 90

2) Managers can use variance analysis to make decisions about the mix of products to make.

Answer 90

Answer: TRUE

Question 91

3) Service-sector companies have no use of variance analysis as only few costs can be traced to their outputs in a cost effective way.

Answer 91

Answer: FALSE
Explanation: Even though service-sector companies have only a few costs can be traced to their outputs in a cost-effective way, service-sector companies can use variance analysis to good effect as most of their costs are fixed overhead costs.