Section (7)

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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. an unfavorable variable overhead spending variance. b. a favorable variable overhead efficiency variance. c. an unfavorable fixed overhead flexible-budget variance. d. a favorable production-volume variance. Answer: c 2. 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: d 3. 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). Answer: c 4. For fixed manufacturing overhead, there is no a. spending variance. b. efficiency variance. c. flexible-budget variance. d. production-volume variance. Answer : b
Jenny's Corporation manufactured 25,000 grooming kits for horses during March. The fixed- overhead cost-allocation rate is $20.00 per machine-hour. The following fixed overhead data pertain to March. Actual Static Budget Production 25,000 units 24,000 units Machine-hours 6,100 hours 6,000 hours Fixed overhead costs for March $123,000 $120,000 5. What is the flexible-budget amount? a. $120,000 b. $122,000 c. $123,000 d. $125,000 Answer : a $120,000, the same lump sum as the static budget 6. What is the amount of fixed overhead allocated to production? a. $120,000 b. $122,000 c. $123,000 d. $125,000 Answer : d [25,000 x (6,000/24,000)] x $ 20 .00 = $125,000 7. What is the fixed overhead spending variance? a. $1,000 unfavorable b. $2,000 favorable c. $3,000 unfavorable d. $5,000 favorable Answer : c $123,000 actual costs - $120,000 budgeted cost = $3,000 unfavorable 8. What is the fixed overhead production-volume variance? a. $1,000 unfavorable b. $2,000 favorable c. $3,000 unfavorable d. $5,000 favorable Answer : d $120,000 - [25,000 x (6,000/24,000) x $20.00] = $5,000 favorable
Matthew's Corporation manufactured 10,000 golf bags during March. The fixed overhead cost-allocation rate is $20.00 per machine-hour. The following fixed overhead data pertain to March. Actual Static Budget Production 10,000 units 12,000 units Machine-hours 5,100 hours 6,000 hours Fixed overhead cost for March $122,000 $120,000 9. What is the flexible-budget amount? a. $100,000 b. $102,000 c. $120,000 d. $122,000 Answer : c $120,000, the same lump sum as the static budget 10. What is the amount of fixed overhead allocated to production? a. $100,000 b. $102,000 c. $120,000 d. $122,000 Answer : a [10,000 x (6,000/12,000)] x $20.00 = $100,000 11. What is the fixed overhead production-volume variance? a. $2,000 unfavorable b. $18,000 favorable c. $20,000 unfavorable d. $22,000 unfavorable Answer : c $120,000 - [10,000 x (6,000/12,000) x $20.00] = $20,000 unfavorable 12. Fixed overhead is a. overallocated by $2,000. b. underallocated by $2,000. c. overallocated by $22,000. d. underallocated by $22,000. Answer : d $122,000 - [10,000 x (6,000/12,000) x $20.00] = $22,000 underallocated
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