devry acct349 week 1 homework

Review Questions and Exercises

Completion Statements Fill in the blank(s) to complete each statement.

1. The variable overhead flexible-budget variance subdivides into which two variances?

2. To compute the budgeted variable overhead cost rate for a manufacturing company, divide budgeted variable overhead costs by the budgeted quantity of the ___

3. To compute the budgeted fixed overhead cost rate for a manufacturing company, divide budgeted fixed overhead costs by the _) of the cost-allocation base.

4. The __ variance is the difference between budgeted FOH and the FOH allocated on the basis of actual output produced.

5. Manufacturing companies treat fixed manufacturing overheadas ifit were a variable cost for which purpose of cost accounting?

6. Fixed overhead is underallocated if the general ledger balance of the Fixed Manufacturing Overhead Control account is __ than the balance of the Fixed Manufacturing Overhead Allocated account.

7. The amount of underallocated or overallocated total overhead is the same as the amount of the ___ variance.

8. Interpreting a cost variance for an activity area requires an understanding of the _ __ used in ABC systems.

True-False

__ 1. Budgeted overhead cost rates can be expressed as an amount per unit of output or per unit of input.

__ 2. There is no fundamental difference between the budgeted variable-overhead cost rate per unit of input and the budgeted price of individual direct materials.

__ 3. The variable-overhead spending variance is unfavorable if the actual variable overhead cost rate per unit of input (the cost-allocation base) is greater than the budgeted variable overhead cost rate per unit of input.

__ 4. The variable overhead efficiency variance is computed similarly to the direct-labor efficiency variance, and the meaning and interpretation of these variances are basically the same.

___ 5. If variable overhead is underallocated, this means the flexible-budget variance for variable overhead is unfavorable.

__F__ 6. The total amount of budgeted fixed manufacturing overhead is affected by the production-denominator level chosen.

7. The fixed manufacturing overhead cost per unit is inversely related to the production-denominator level.

__ 8. The production-volume variance is zero if actual output produced is equal to the production-denominator level.

__ 9. The production-volume variance is generally a good measure of the operating income forgone by having unused capacity.

___ 10. In 2-variance analysis of overhead costs, there is only one spending variance.

___ 11. Computing variances for fixed setup costs under an ABC system parallels the computation of variances for fixed overhead costs under a non-ABC system.

Multiple Choice

Select the best answer to each question. Space is provided for computations after the quantitative questions.

_B__ 1. (CPA) Information on Fire Company’s overhead costs is as follows:

Actual variable overhead	$73,000
Actual fixed overhead	$17,000
Budgeted hours allowed for actual output produced	32,000
Budgeted variable overhead cost rate per machine-hour	$2.50
Budgeted fixed overhead cost rate per machine-hour	$0.50

The total overhead variance is:

b. $6,000 favorable.

_A__ 2. (CPA adapted) Geyer Company uses standard costing. For the month of April 2009, total overhead is budgeted at $80,000 based on using 20,000 machine- hours. At standard, each finished unit of output requires 2 machine-hours. The following data are available for April 2011:

Actual units of output
produced	9,500
Machine-hours used	19,500
Total overhead incurred	$79,500

What total amount of variable and fixed overhead should Geyer credit to the Manufacturing Overhead Allocated account for April 2011?

a. $76,000

_C___ 3. The following information is for Pappillon Corporation’s variable manufacturing overhead costs last month: favorable flexible-budget variance of $3,000, unfavorable efficiency variance of $2,500.

The spending variance is:

c. $5,500 favorable.

_D___ 4. (CPA) Fawcett Company prepared the following information on its manufacturing operations for 2010:

	Static Budget	Maximum Capacity
Percent of capacity	80%	100%
Machine-hours	3,200	4,000
Variable overhead	$64,000	$80,000
Fixed overhead	$160,000	$160,000

Fawcett operated at 90% of maximum capacity during 2010. Actual manufacturing overhead for 2010 is $252,000. Fawcett uses the 2-variance analysis of manufacturing overhead. The total overhead flexible-budget variance for the year is:

d. $20,000 unfavorable.

Budgeted VOH cost rate = $64,000/3,200 = $20 per machine-hour (or $80,000/4,000 = $20 per machine-hour) TOH flexible-budget variance = $252,000 ? [$160,000 + (4,000*0.90)($20)] = $252,000 ? ($160,000 + $72,000) = $252,000 ? $232,000 = $20,000, or $20,000 U

_E___ 5. (CMA adapted) Edney Company uses standard costing. The standard cost of its product is as follows:

Direct materials	$14.50
Direct manufacturing labor	16.00
Manufacturing overhead 2 machine-hours @ $11	22.00
Total standard cost	$52.50

The manufacturing overhead cost rate is based on a denominator level of 600,000 machine-hours. Edney planned to produce 25,000 units each month during 2010. The budgeted manufacturing overhead for 2010 is as follows:

Variable	$3,600,000
Fixed	3,000,000
Total	$6,600,000

During November 2010, Edney Company produced 26,000 units. Edney used 53,500 machine-hours in November. Actual manufacturing overhead for the month is $315,000 variable and $260,000 fixed. The total manufacturing overhead allocated during November is $572,000. The variable overhead spending variance for November is:

e. $6,000 favorable.

__B__ 6. Using the information in question 5, the variable overhead efficiency variance for November is:

b. $9,000 unfavorable.

__B__ 7. Using the information in question 5, the fixed overhead flexible-budget (spending) variance for November is:

b. $10,000 unfavorable.

__A__ 8. Using the information in question 5, the production-volume variance for November is:

a. $10,000 favorable.

__D__ 9. Considering questions 5 through 8, Edney Company is using which type of overhead variance analysis?

d. 4-variance analysis

Review Exercises

1. Regal Company provides the following information on its manufacturing operations for April:

Production in output units	400
Budgeted variable overhead cost rate per output unit	$3
Actual machine-hours used	700
Actual variable overhead costs	$1,350
Budgeted machine-hours allowed per output unit	1.50

a. Compute the budgeted variable overhead cost rate per machine-hour.

b. Compute the budgeted machine-hours allowed for actual output produced.

c. Using the columnar format below, compute the variable overhead spending and efficiency variances.

Use F for favorable variances and U for unfavorable variances.

Actual Costs Incurred	Actual Input Quantity × Budgeted Rate	Flexible Budget: Budgeted Input Quantity Allowed for Actual Output × Budgeted Rate
? VOH spending variance ? VOH efficiency variance ?

d. Prepare the journal entries to record variable overhead incurred, variable overhead allocated, and the

variable overhead spending and efficiency variances.

2. The following information pertains to the manufacturing operations of Payton Corporation:

Budgeted fixed overhead	$1,800
Actual fixed overhead costs	$1,750
Denominator level in machine-hours	300
Budgeted machine-hours allowed for actual output produced	280

a. Compute the budgeted fixed overhead cost rate per machine-hour.

b. Using the columnar format below, compute the fixed overhead spending and production-volume variances. Use F for favorable variances and U for unfavorable variances.

Actual Costs Incurred	Same Budgeted Lump- Sum Regardless of Output Level	Allocated: Budgeted Input Quantity Allowed for Actual Output × Budgeted Rate
$1,750 $1,800 280 x $6 = $1,680 $50 F $120 U
? FOH spending variance ? Production-volume variance ?

3. (CPA) The following information relates to the manufacturing operations of Herman Company for

March:

Actual total overhead costs	$178,500
Flexible-budget formula based on machine-hours (MH)	$110,000 + $0.50 per MH
Budgeted total overhead cost rate per MH	$1.50 per MH
Total overhead spending variance	$8,000 unfavorable
Production-volume variance	$5,000 favorable

Herman uses the 3-variance analysis of overhead costs.

a. Compute the actual machine-hours used.

b. Compute the budgeted machine-hours allowed for actual output produced.