True/False Questions 1.

A key feature of a flexible budget is that actual results can be compared to budgeted costs at the same level of activity. Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy 2. Direct labor-hours would generally be a better measure of activity for a flexible budget than direct labor cost. Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy 3. In a flexible budget, when the activity declines, the variable costs per unit also declines. Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Medium 4. Fixed costs should not be included in a flexible budget because they do not change when the level of activity changes. Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Medium 5. To assess how well a production manager has controlled costs, actual costs should be compared to what the costs should have been for the planned level of production. Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Medium 6. The overhead spending variance is not affected by excessive usage or waste of overhead materials. Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Easy 7. The variable overhead efficiency variance provides a measure of how efficiently the activity base which underlies the flexible budget is being utilized in production. Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Medium

8. A company has a standard cost system in which fixed and variable manufacturing overhead costs are applied to products on the basis of direct labor-hours. The company's choice of the denominator level of activity affects the fixed overhead volume variance. Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5; 6 Level: Medium 9. The higher the denominator activity level used to compute the predetermined overhead rate, the higher the predetermined overhead rate. Ans: False AACSB: Analytic AICPA FN: Reporting LO: 5 AICPA BB: Critical Thinking Level: Easy

10. In a standard costing system, if the actual fixed manufacturing overhead cost exceeds the budgeted fixed manufacturing overhead cost for the period, then fixed manufacturing overhead cost would be underapplied for the period. Ans: False AACSB: Analytic AICPA FN: Reporting LO: 5 AICPA BB: Critical Thinking Level: Hard

11. When fixed manufacturing overhead cost is applied to work in process, it is treated as if it were a variable cost. Ans: True AACSB: Analytic AICPA FN: Reporting LO: 5 AICPA BB: Critical Thinking Level: Medium

12. A company has a standard cost system in which fixed and variable manufacturing overhead costs are applied to products on the basis of direct labor-hours. The company's choice of the denominator level of activity has no effect on the variable portion of the predetermined overhead rate. Ans: True AACSB: Analytic AICPA FN: Reporting LO: 5 AICPA BB: Critical Thinking Level: Medium

13. There can be a volume variance for either variable manufacturing overhead or fixed manufacturing overhead. Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Medium

14. If the denominator level of activity is less than the standard hours allowed for the output of the period, then the volume variance is unfavorable, indicating an overutilization of available facilities. Ans: False AACSB: Analytic AICPA FN: Reporting LO: 6 AICPA BB: Critical Thinking Level: Medium

15. A company has a standard cost system in which fixed and variable manufacturing overhead costs are applied to products on the basis of direct labor-hours. A fixed overhead volume variance will necessarily occur in a month in which actual direct labor-hours differ from standard hours allowed. Ans: False AACSB: Analytic AICPA FN: Reporting LO: 6 Multiple Choice Questions 16. The purpose of a flexible budget is to: A) allow management some latitude in meeting goals. B) eliminate fluctuations in production reports by ignoring variable costs. C) compare actual and budgeted results at virtually any level of activity. D) reduce the time to prepare the annual budget. Ans: C AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy Source: CPA; adapted 17. When using a flexible budget, a decrease in activity within the relevant range: A) decreases variable cost per unit. B) decreases total costs. C) increases total fixed costs. D) increases variable cost per unit. Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy Source: CPA; adapted AICPA BB: Critical Thinking Level: Hard

18. The activity base that is used for a flexible budget for an overhead cost should be: A) direct labor-hours. B) units of output. C) expressed in dollars, if possible. D) the cause of the overhead cost. Ans: D AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy 19. A budget that is based on the actual activity of a period is known as a: A) continuous budget. B) flexible budget. C) static budget. D) master budget. Ans: B AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy 20. The fixed manufacturing overhead budget variance equals: A) Actual fixed manufacturing overhead cost--Applied fixed manufacturing overhead cost. B) Actual fixed manufacturing overhead cost--Budgeted fixed manufacturing overhead cost. C) Budgeted fixed manufacturing overhead cost--Applied fixed manufacturing overhead cost. D) Actual fixed manufacturing overhead cost-- (Actual hours x Standard fixed overhead rate). Ans: B AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Medium 21. Which of the following variances is least significant from a standpoint of cost control? A) materials price variance. B) labor efficiency variance. C) fixed overhead volume variance. D) variable overhead spending variance. Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Medium

22. The manufacturing overhead variance that is a measure of capacity utilization is: A) the overhead spending variance. B) the overhead efficiency variance. C) the overhead budget variance. D) the overhead volume variance. Ans: D AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Medium 23. If the denominator activity is less than the standard hours allowed for the actual output, one would expect that: A) the variable overhead efficiency variance would be unfavorable. B) the fixed overhead volume variance would be favorable. C) the fixed overhead budget variance would be unfavorable. D) the variable overhead efficiency variance would be favorable. Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Medium 24. The volume variance is nonzero whenever: A) standard hours allowed for the output of a period differ from the denominator level of activity. B) actual hours differ from the denominator level of activity. C) standard hours allowed for the output of a period differ from the actual hours during the period. D) actual fixed overhead costs incurred during a period differ from budgeted fixed overhead costs as contained in the flexible budget. Ans: A AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Medium 25. A volume variance is computed for: A) both variable and fixed overhead. B) variable overhead only. C) fixed overhead only. D) direct labor costs as well as overhead costs. Ans: C AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Easy

26. Which of the following standard cost variances would usually be least controllable by a production supervisor? A) Fixed overhead volume variance. B) Variable overhead efficiency variance. C) Direct labor efficiency variance. D) Materials usage (quantity) variance. Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Hard Source: CPA; adapted 27. The following costs appear in Malgorzata Company's flexible budget at an activity level of 15,000 machine-hours: Indirect materials............... Factory rent........................ Total Cost $7,800 $18,000

What would be the flexible budget amounts at an activity level of 12,000 machinehours if indirect materials is a variable cost and factory rent is a fixed cost? A) B) C) D) Indirect Materials Factory Rent $7,800 $14,400 $7,800 $18,000 $6,240 $14,400 $6,240 $18,000

Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy Solution: Budgeted number of machine hours: 15,000 Cost Formula (per machine-hour) Variable costs: Indirect materials.......... Fixed costs: Factory rent................... $0.52* Activity (in machine-hours): 12,000 $6,240 $18,000

*$7,800 ÷ 15,000 MHs = $0.52 per MH

28. Mongelli Family Inn is a bed and breakfast establishment in a converted 100-year-old mansion. The Inn's guests appreciate its gourmet breakfasts and individually decorated rooms. The Inn's overhead budget for the most recent month appears below: Activity level................................. 90 guests Variable overhead costs: Supplies...................................... Laundry....................................... Fixed overhead costs: Utilities....................................... Salaries and wages...................... Depreciation............................... Total overhead cost........................ $ 234 315 220 4,290 2,680 $7,739

The Inn's variable overhead costs are driven by the number of guests. What would be the total budgeted overhead cost for a month if the activity level is 99 guests? Assume that the activity levels of 90 guests and 99 guests are within the same relevant range. A) $7,793.90 B) $61,541.00 C) $8,512.90 D) $7,739.00 Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy

Solution: Budgeted number of guests: 90 Cost Formula (per guest) Overhead Costs Variable overhead costs: Supplies ($234 ÷ 90 guests)................... Laundry ($315 ÷ 90 guests).................... Total variable overhead cost...................... Fixed overhead costs: Utilities................................................... Salaries and wages.................................. Depreciation........................................... Total fixed overhead cost.......................... Total budgeted overhead cost.................... $2.60 3.50 $6.10 Activity (in guests): 99 $ 257.40 346.50 603.90 220.00 4,290.00 2,680.00 7,190.00 $7,793.90

29. Kerekes Manufacturing Corporation has prepared the following overhead budget for next month. Activity level................................. Variable overhead costs: Supplies...................................... Indirect labor.............................. Fixed overhead costs: Supervision................................. Utilities....................................... Depreciation............................... Total overhead cost........................ 2,500 machine-hours $12,250 22,000 15,500 5,500 6,500 $61,750

The company's variable overhead costs are driven by machine-hours. What would be the total budgeted overhead cost for next month if the activity level is 2,400 machine-hours rather than 2,500 machine-hours? Assume that the activity levels of 2,500 machine-hours and 2,400 machine-hours are within the same relevant range. A) $59,830.00 B) $59,280.00 C) $60,380.00 D) $61,750.00 Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy

Solution: Budgeted variable overhead costs $12,250 $22,000 Machinehours 2,500 2,500 Per machinehour $4.90 $8.80

Supplies................................. Indirect labor..........................

Budgeted number of machine-hours: 2,500 Activity Cost Formula (in MHs): (per MH) 2,400 Overhead Costs Variable overhead costs: Supplies.................................................. Indirect labor.......................................... Total variable overhead cost...................... Fixed overhead costs: Supervision............................................. Utilities................................................... Depreciation........................................... Total fixed overhead cost.......................... Total overhead cost.................................... $ 4.90 8.80 $13.70 $11,760 21,120 13,880 15,500 5,500 6,500 27,500 $60,380

30. Sharifi Hospital bases its budgets on patient-visits. The hospital's static budget for October appears below: Budgeted number of patient-visits............. Budgeted variable overhead costs: Supplies (@$4.70 per patient-visit)........ Laundry (@$7.80 per patient-visit)........ Total variable overhead cost...................... Budgeted fixed overhead costs: Wages and salaries................................. Occupancy costs..................................... Total fixed overhead cost.......................... Total budgeted overhead cost.................... 8,500 $ 39,950 66,300 106,250 50,150 84,150 134,300 $240,55 0

The total overhead cost at an activity level of 9,200 patient-visits per month should be: A) $260,360 B) $250,070 C) $249,300 D) $240,550 Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy Solution: Budgeted number of patient-visits: 8,500 Cost Formula (per patientvisit) Overhead Costs Variable overhead costs: Supplies.................................................. Laundry................................................... Total variable overhead cost...................... Fixed overhead costs: Wages and salaries................................. Occupancy costs..................................... Total fixed overhead cost.......................... Total overhead cost.................................... $ 4.70 7.80 $12.50 Activity (in patient visits): 9,200 $ 43,240 71,760 115,000 50,150 84,150 134,300 $249,300

31. Ostler Hotel bases its budgets on guest-days. The hotel's static budget for April appears below: Budgeted number of guest-days................ Budgeted variable overhead costs: Supplies (@$7.00 per guest-day)........... Laundry (@$3.80 per guest-day)............ Total variable overhead cost...................... Budgeted fixed overhead costs: Wages and salaries................................. Occupancy costs..................................... Total fixed overhead cost.......................... Total budgeted overhead cost.................... 8,700 $ 60,900 33,060 93,960 80,910 38,280 119,190 $213,15 0

The total overhead cost at an activity level of 9,700 guest-days per month should be: A) $213,150 B) $237,650 C) $223,950 D) $224,920 Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy Solution: Budgeted number of guest-days: 8,700 Cost Formula (per guestday) Overhead Costs Variable overhead costs: Supplies.................................................. Laundry................................................... Total variable overhead cost...................... Fixed overhead costs: Wages and salaries................................. Occupancy costs..................................... Total fixed overhead cost.......................... Total overhead cost.................................... $ 7.00 3.80 $10.80 Activity (in guestdays): 9,700 $ 67,900 36,860 104,760 80,910 38,280 119,190 $223,950

32. Riggs Enterprise's flexible budget cost formula for indirect materials, a variable cost, is $0.45 per unit of output. If the company's performance report for last month shows a $90 favorable variance for indirect materials and if 8,700 units of output were produced last month, then the actual costs incurred for indirect materials for the month must have been: A) $4,005 B) $3,915 C) $3,825 D) $3,735 Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Medium Solution: Variable overhead spending variance = AH × (AR − SR) = 90 F 8,700 × (AR − 0.45) = -90 (8,700 × AR) − 3,915 = -90 (8,700 × AR) = 3,825 AR = 3,825 ÷ 8,700 = $0.4396 Actual indirect labor costs = 8,700 × $0.4396 = $3,825

33. Chmielewski Medical Clinic measures its activity in terms of patient-visits. Last month, the budgeted level of activity was 1,560 patient-visits and the actual level of activity was 1,530 patient-visits. The clinic's director budgets for variable overhead costs of $1.10 per patient-visit and fixed overhead costs of $19,900 per month. The actual variable overhead cost last month was $1,400 and the actual fixed overhead cost was $21,720. In the clinic's flexible budget performance report for last month, what would have been the variance for the total overhead cost? A) $33 F B) $1,504 U C) $1,537 U D) $283 F Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Medium Solution: Budgeted number of patient-visits: 1,560 Actual number of patient-visits: 1,530 Cost Formula (per patientvisit) $1.10 Actual Costs Incurred for 1,530 patientvisits $1,400 $21,720 Budget Based on 1,530 patientvisits $1,683 $19,900

Variable overhead costs....... Fixed overhead costs...........

Variance $ 283 F 1,820 U $1,537 U

34. Rodriques Tile Installation Corporation measures its activity in terms of square feet of tile installed. Last month, the budgeted level of activity was 1,630 square feet and the actual level of activity was 1,720 square feet. The company's owner budgets for supply costs, a variable overhead cost, at $3.40 per square foot. The actual supply cost last month was $6,750. In the company's flexible budget performance report for last month, what would have been the variance for supply costs? A) $353 U B) $306 U C) $902 U D) $1,208 U Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy Solution: Budgeted number of square feet: 1,720 Actual number of square feet: 1,630 Cost Formula (per square foot) Variable overhead costs (Supply costs).............. $3.40 Actual Costs Incurred for 1,720 square feet $6,750 Budget Based on 1,720 square feet Variance $5,848 $902 U

35. Rodabaugh Natural Dying Corporation measures its activity in terms of skeins of yarn dyed. Last month, the budgeted level of activity was 15,900 skeins and the actual level of activity was 16,100 skeins. The company's owner budgets for dye costs, a variable overhead cost, at $0.87 per skein. The actual dye cost last month was $14,800. In the company's flexible budget performance report for last month, what would have been the variance for dye costs? A) $967 U B) $174 U C) $184 U D) $793 U Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy Solution: Budgeted number of skeins: 15,900 Actual number of skeins: 16,100 Cost Formula (per skein) Variable overhead costs (Dye costs).................................. $0.87 Actual Costs Incurred for 16,100 skeins $14,800 Budget Based on 16,100 skeins $14,007

Variance $793 U

36. Andress Footwear Corporation's flexible budget cost formula for supplies, a variable overhead cost, is $2.17 per unit of output. The company's flexible budget performance report for last month showed a $4,531 unfavorable variance for supplies. During that month, 19,700 units were produced. Budgeted activity for the month had been 19,400 units. The actual costs incurred for indirect materials must have been closest to: A) $2.17 B) $2.63 C) $2.67 D) $2.40 Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Hard Solution: Budgeted number of units produced: 19,400 Actual number of units produced: 19,700 Actual Costs Incurred for 19,700 units produce d X

Cost Formula (per unit produced) Variable overhead costs (Supplies)......................... $2.17

Budget Based on 19,700 units produced $42,749

Variance $4,531 U

Actual costs − Budgeted costs = Supplies variance X − $42,749 = $4,531 X = $47,280 Per unit cost = Total actual costs ÷ Number of units produced Per unit cost = $47,280 ÷ 19,700 = $2.40

37. Ocker Corporation's flexible budget performance report for last month shows that actual indirect materials cost, a variable overhead cost, was $28,420 and that the variance for indirect materials cost was $3,828 unfavorable. During that month, the company worked 11,600 machine-hours. Budgeted activity for the month had been 11,300 machine-hours. The cost formula per machine-hour for indirect materials cost must have been closest to: A) $2.85 B) $2.18 C) $2.78 D) $2.12 Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Hard Solution: Budgeted number of machine-hours: 11,300 Actual number of machine-hours: 11,600 Actual Costs Incurred for 11,600 machinehours $28,420

Cost Formula (per MH) Variable overhead costs (Indirect materials)........... Y

Budget Based on 11,600 machinehours X

Variance $3,828 U

Actual costs − Budgeted costs = Indirect materials variance $28,420 − X = $3,828 X = $24,592 Y = Per machine-hour cost = Per machine-hour cost = Actual cost ÷ Machine-hours = Per machine-hour cost = $24,592 ÷ 11,600 = $2.12

38. Viger Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company has provided the following data for the most recent month: Budgeted level of activity................................................. Actual level of activity..................................................... Cost formula for variable manufacturing overhead cost. . Budgeted fixed manufacturing overhead cost.................. Actual total variable manufacturing overhead................. Actual total fixed manufacturing overhead...................... 9,700 MHs 9,900 MHs $6.30 per MH $49,00 0 $60,39 0 $47,00 0

What was the variable overhead spending variance for the month? A) $2,000 favorable B) $720 favorable C) $1,260 unfavorable D) $1,980 favorable Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Medium Solution: Actual rate = Actual total variable manufacturing overhead ÷ Actual machine-hours Actual rate = $60,390 ÷ 9,900 = $6.10 Variable overhead spending variance = AH × (AR − SR) 9,900 × ($6.10 − $6.30) = 9,900 × (-$0.20) = $1,980 F

39. Teall Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company has provided the following data for the most recent month: Budgeted level of activity.................................................. Actual level of activity...................................................... Cost formula for variable manufacturing overhead cost... Budgeted fixed manufacturing overhead cost................... Actual total variable manufacturing overhead................... Actual total fixed manufacturing overhead....................... What was the fixed overhead budget variance for the month? A) $4,000 unfavorable B) $4,000 favorable C) $570 favorable D) $570 unfavorable Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Medium Solution: Budget variance = Actual fixed overhead cost − Budgeted fixed overhead cost = $54,000 − $50,000 = $4,000 U 8,500 MHs 8,600 MHs $5.70 per MH $50,00 0 $51,60 0 $54,00 0

40. Alapai Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company has provided the following data for the most recent month: Budgeted level of activity................................................. Actual level of activity..................................................... Cost formula for variable manufacturing overhead cost. . Budgeted fixed manufacturing overhead cost.................. Actual total variable manufacturing overhead................. Actual total fixed manufacturing overhead...................... 7,000 MHs 7,200 MHs $9.40 per MH $40,00 0 $66,96 0 $37,00 0

What was the total of the variable overhead spending and fixed overhead budget variances for the month? A) $3,720 favorable B) $2,280 unfavorable C) $1,840 favorable D) $1,880 unfavorable Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Medium Solution: Actual rate = Actual total variable manufacturing overhead ÷ Actual machine-hours = $66,960 ÷ 7,200 = $9.30 Variable overhead spending variance = AH × (AR − SR) = 7,200 × ($9.30 − $9.40) = 7,200 × (−$0.10) = $720 F Fixed overhead budget variance = Actual fixed overhead costs − Budgeted fixed overhead cost = $37,000 − $40,000 = $3,000 F Total overhead variance = $720 F + $3,000 F = $3,720 F

41. Bartoletti Fabrication Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company's cost formula for variable manufacturing overhead is $4.60 per MH. The company had budgeted its fixed manufacturing overhead cost at $65,000 for the month. During the month, the actual total variable manufacturing overhead was $22,080 and the actual total fixed manufacturing overhead was $63,000. The actual level of activity for the period was 4,600 MHs. What was the total of the variable overhead spending and fixed overhead budget variances for the month? A) $1,080 unfavorable B) $1,080 favorable C) $920 unfavorable D) $920 favorable Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Easy Solution: Actual rate = Actual variable manufacturing overhead ÷ Actual machine-hours = $22,080 ÷ 4,600 = $4.80 Variable overhead spending variance = AH × (AR − SR) = 4,600 × ($4.80 − $4.60) = 4,600 × $0.20 = $920 U Fixed overhead budget variance = Actual fixed overhead costs − Budgeted fixed overhead cost = $63,000 − $65,000 = $2,000 F Total overhead variance = $920 U + $2,000 F = $1,080 F

42. Amirault Manufacturing Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company's cost formula for variable manufacturing overhead is $4.00 per MH. During the month, the actual total variable manufacturing overhead was $18,040 and the actual level of activity for the period was 4,100 MHs. What was the variable overhead spending variance for the month? A) $410 favorable B) $1,640 unfavorable C) $1,640 favorable D) $410 unfavorable Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Easy Solution: Actual rate = Actual variable manufacturing overhead ÷ Actual machine-hours = $18,040 ÷ 4,100 = $4.40 Variable overhead spending variance = AH × (AR − SR) = 4,100 × ($4.40 − $4.00) = 4,100 × $0.40 = $1,640 U 43. Goolden Electronics Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company had budgeted its fixed manufacturing overhead cost at $58,000 for the month and its level of activity at 2,500 MHs. The actual total fixed manufacturing overhead was $61,200 for the month and the actual level of activity was 2,600 MHs. What was the fixed overhead budget variance for the month to the nearest dollar? A) $880 unfavorable B) $880 favorable C) $3,200 favorable D) $3,200 unfavorable Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Medium Solution: Fixed overhead budget variance = Actual fixed overhead cost − Budgeted fixed overhead cost = $61,200 − $58,000 = $3,200 U

44. Wadding Corporation applies manufacturing overhead to products on the basis of standard machine-hours. For the most recent month, the company based its budget on 3,600 machine-hours. Budgeted and actual overhead costs for the month appear below: Original Budget Based on 3,600 Machine Actual -Hours Costs Variable overhead costs: $11,83 Supplies....................................... $11,160 0 Indirect labor............................... 26,280 27,970 Fixed overhead costs: Supervision................................. 19,700 19,340 Utilities........................................ 5,900 5,770 Factory depreciation................... 6,900 7,210 $72,12 Total overhead cost........................ $69,940 0 The company actually worked 3,900 machine-hours during the month. The standard hours allowed for the actual output were 3,890 machine-hours for the month. What was the overall variable overhead efficiency variance for the month? A) $760 favorable B) $104 unfavorable C) $180 favorable D) $656 favorable Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Hard

Solution: Variable overhead costs $11,160 $26,280 Machinehours 3,600 3,600 Per machinehour $3.10 $7.30

Supplies.............................. Indirect labor......................

Budgeted machine-hours: 3,600 Actual machine-hours: 3,900 Standard machine-hours allowed: 3,890 (1) Budget Based on 3,900 MHs (AH × SR) $12,090 * * 28,470 * $40,560

Cost Formula (per MH) Overhead Costs Variable overhead costs: Supplies..................... Indirect labor............. $ 3.10 7.30 $10.40

(2) Budget Based on 3,890 MHs (SH × SR) $12,059 $28,397

(1) − (2) Efficiency Variance $ 31 U 73 U $104 U

*3,900 machine-hours × $3.10 per machine-hour = $12,090 **3,900 machine-hours × $7.30 per machine-hour = $28,470

45. Mongar Corporation applies manufacturing overhead to products on the basis of standard machine-hours. Budgeted and actual overhead costs for the most recent month appear below: Original Budget Actual Costs Variable overhead costs: Supplies....................................... Indirect labor............................... Total variable overhead cost.......... $ 7,980 29,820 $37,800 $ 8,230 29,610 $37,840

The original budget was based on 4,200 machine-hours. The company actually worked 4,350 machine-hours during the month and the standard hours allowed for the actual output were 4,190 machine-hours. What was the overall variable overhead efficiency variance for the month? A) $130 unfavorable B) $950 favorable C) $1,310 favorable D) $1,440 unfavorable Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Medium

Solution: Supplies.................. Indirect labor.......... Variable overhead costs $7,980 $29,820 Machinehours 4,200 4,200 Per machinehour $1.90 $7.10

Budgeted machine-hours: 4,200 Actual machine-hours: 4,350 Standard machine-hours allowed: 4,190 (1) Budget Based on 4,350 MHs (AH × SR) $8,265 * $30,885 **

Cost Formula (per MH) Variable overhead costs: Supplies..................... Indirect labor............. $1.90 $7.10

(2) Budget Based on 4,190 MHs (SH × SR) $7,961 $29,749

(1) − (2) Efficiency Variance $ 304 U 1,136 U $1,440 U

*4,350 machine-hours × $1.90 per machine-hour = $8,265 **4,350 machine-hours × $7.10 per machine-hour = $30,885

46. Pleiss Corporation applies manufacturing overhead to products on the basis of standard machine-hours. The company's cost formula for variable overhead cost is $2.40 per machine-hour. The actual variable overhead cost for the month was $5,240. The original budget for the month was based on 2,100 machine-hours. The company actually worked 2,270 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 2,280 machine-hours. What was the variable overhead efficiency variance for the month? A) $24 favorable B) $232 favorable C) $208 favorable D) $432 unfavorable Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Easy Solution: Budgeted machine-hours: 2,100 Actual machine-hours: 2,270 Standard machine-hours allowed: 2,280 Cost Formula (per MH) $2.40 (1) Budget Based on 2,270 MHs (AH × SR) $5,448 (2) Budget Based on 2,280 MHs (SH × SR) $5,472 (1) − (2) Efficiency Variance $24 F

Variable overhead costs

47. Pyrdum Corporation produces metal telephone poles. In the most recent month, the company budgeted production of 3,500 poles. Actual production was 3,800 poles. According to standards, each pole requires 4.6 machine-hours. The actual machinehours for the month were 17,800 machine-hours. The budgeted indirect labor is $5.40 per machine-hour. The actual indirect labor cost for the month was $96,712. The variable overhead efficiency variance for indirect labor is: A) $2,320 U B) $1,728 F C) $2,320 F D) $1,728 U Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Easy Solution: Standard hours = Actual production in units × Standard machine-hours per unit = 3,800 × 4.6 = 17,480 Variable overhead efficiency variance = SR × (AH − SH) = $5.40 × (17,800 − 17,480) = $5.40 × 320 = $1,728 U 48. Hermansen Corporation produces large commercial doors for warehouses and other facilities. In the most recent month, the company budgeted production of 5,100 doors. Actual production was 5,400 doors. According to standards, each door requires 3.8 machine-hours. The actual machine-hours for the month were 20,880 machine-hours. The budgeted supplies cost is $7.90 per machine-hour. The actual supplies cost for the month was $152,063. The variable overhead efficiency variance for supplies cost is: A) $10,045 F B) $10,045 U C) $2,844 F D) $2,844 U Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Easy Solution: Standard hours = Actual production in units × Standard machine-hours per unit = 5,400 × 3.8 = 20,520 Variable overhead efficiency variance = SR × (AH − SH) = $7.90 × (20,880 − 20,520) = $7.90 × 360 = $2,844 U

49. The following data have been provided by Moretta Corporation, a company that produces forklift trucks: Budgeted production.................................. Standard machine-hours per truck............. Budgeted supplies cost............................... Actual production....................................... Actual machine-hours................................ Actual supplies cost (total)......................... 3,400 2.9 $1.50 3,800 10,930 $17,49 6 trucks machine-hours per machine-hour trucks machine-hours

The variable overhead efficiency variance for supplies cost is: A) $135 U B) $135 F C) $966 U D) $966 F Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Easy Solution: Standard hours = Actual production in units × Standard machine-hours per unit = 3,800 × 2.9 = 11,020 Variable overhead efficiency variance = SR × (AH − SH) = $1.50 × (10,930 − 11,020) = $1.50 × (-$90) = $135 F

50. Ronda Manufacturing Company uses a standard cost system with machine-hours as the activity base for overhead. Last year, Ronda incurred $840,000 of fixed manufacturing overhead and generated a $42,000 favorable fixed overhead budget variance. The following data relate to last year's operations: Denominator activity level in machine-hours................. Standard machine-hours allowed for actual output........ Actual number of machine-hours incurred..................... 21,00 0 20,00 0 22,05 0

What amount of total fixed manufacturing overhead cost did Ronda apply to production last year? A) $837,900 B) $840,000 C) $926,100 D) $972,405 Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5; 6 Level: Hard Solution: Predetermined overhead rate = $882,000 ÷ 21,000 denominator machine-hours = $42 per machine-hour Fixed overhead applied to production = 20,000 standard hours × $42 per machine-hour = $840,000

51. Blue Company's standards call for 2,500 direct labor-hours to produce 1,000 units. During May only 900 units were produced and the company worked 2,400 direct labor-hours. The standard hours allowed for May production would be: A) 2,500 hours B) 2,400 hours C) 2,250 hours D) 1,800 hours Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Easy Solution: Standard direct labor-hours per unit = 2,500 direct labor-hours ÷ 1,000 units = 2.5 direct labor-hours per unit Standard hours allowed = 2.5 direct labor hours per unit × 900 units = 2,250 hours 52. Diehl Company uses a standard cost system in which it applies manufacturing overhead to units of product on the basis of standard direct labor-hours. The company's total applied factory overhead was $315,000 last year when the company used 32,000 direct labor-hours as the denominator activity. If the variable factory overhead rate was $8 per direct labor-hour, and if 30,000 standard labor-hours were allowed for the output of the year, then the total budgeted fixed factory overhead for the year must have been: A) $60,000 B) $80,000 C) $90,000 D) $100,000 Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Hard Solution: Predetermined overhead rate = $315,000 ÷ 30,000 DLHs = $10.50 per DLH Fixed portion of predetermined overhead rate = Total predetermined overhead rate − Variable overhead rate = $10.50 per DLH − $8.00 per DLH = $2.50 per DLH Budgeted fixed overhead = 32,000 DLHs × $2.50 per DLH = $80,000

53. The Marlow Company uses a standard cost system and applies manufacturing overhead to products on the basis of standard direct labor-hours. The denominator activity is set at 40,000 direct labor-hours per year. Budgeted fixed manufacturing overhead cost is $40,000 per year, and 0.5 direct labor-hours are required to manufacture one unit. The standard cost card would indicate fixed manufacturing overhead cost per unit to be: A) $1.00 B) $2.00 C) $1.50 D) $0.50 Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Medium Solution: Actual units produced = Total direct labor-hours ÷ Standard direct labor-hours per unit = 40,000 ÷ 0.5 = 80,000 units Fixed manufacturing overhead cost per unit = $40,000 ÷ 80,000 units = $0.50 per unit 54. Bakos Corporation's abbreviated flexible budget for two levels of activity appears below: Cost Formula (per machineActivity hour) (in machine-hours) 2,800 2,900 Total variable overhead cost....... $8.80 $ 24,640 $ 25,520 Total fixed overhead cost........... 100,688 100,688 $126,20 Total overhead cost..................... $125,328 8 If the denominator level of activity is 2,800 machine-hours, the variable element in the predetermined overhead rate would be: A) $44.76 B) $35.96 C) $43.52 D) $8.80 Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Easy Solution: Variable element = Total variable overhead cost ÷ Actual machine-hours = $24,640 ÷ 2,800 machine-hours = $8.80 per machine-hour

55. Recht Corporation's summary flexible budget for two levels of activity appears below: Cost Formula (per machinehour) Total variable overhead cost....... Total fixed overhead cost........... Total overhead cost..................... $9.30 Activity (in machine-hours) 1,200 1,300 $ 11,160 $ 12,090 17,940 17,940 $29,100 $30,030

If the denominator level of activity is 1,200 machine-hours, the fixed element in the predetermined overhead rate would be: A) $14.95 B) $930.00 C) $24.25 D) $9.30 Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Easy Solution: Fixed element = Total fixed overhead ÷ Actual machine-hours = $17,940 ÷ 1,200 machine-hours = $14.95 per machine-hour

56. Billa Corporation's abbreviated flexible budget for two levels of activity appears below: Cost Formula (per machineActivity hour) (in machine-hours) 4,600 4,700 Total variable overhead cost....... $11.70 $ 53,820 $ 54,990 Total fixed overhead cost........... 341,596 341,596 $396,58 Total overhead cost..................... $395,416 6 If the denominator level of activity is 4,700 machine-hours, the predetermined overhead rate would be: A) $11.70 B) $72.68 C) $84.38 D) $1,170.00 Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Easy Solution: Predetermined overhead rate = Total overhead cost ÷ Actual machine-hours = $396,586 ÷ 4,700 machine-hours = $84.38 per machine-hour

57. At the beginning of last year, Monze Corporation budgeted $600,000 of fixed manufacturing overhead and chose a denominator level of activity of 100,000 direct labor-hours. At the end of the year, Monze's fixed overhead budget variance was $8,000 unfavorable. Its fixed overhead volume variance was $21,000 favorable. Actual direct labor-hours for the year were 96,000. What was Monze's actual fixed overhead for last year? A) $563,000 B) $579,000 C) $608,000 D) $592,000 Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Hard Solution: Fixed overhead budget variance = Actual fixed overhead cost − Budgeted fixed overhead cost = Actual fixed overhead cost − $600,000 = $8,000 U Actual fixed overhead = $8,000 + $600,000 = $608,000

58. Mclellan Corporation applies manufacturing overhead to products on the basis of standard machine-hours. Budgeted and actual overhead costs for the month appear below: Original Budget Actual Costs Variable overhead costs: Supplies....................................... Indirect labor............................... Fixed overhead costs: Supervision................................. Utilities........................................ Factory depreciation................... Total overhead cost........................ $ 9,760 42,090 14,500 5,200 7,400 $78,950 $10,200 43,720 14,350 4,740 7,510 $80,520

The company based its original budget on 6,100 machine-hours. The company actually worked 6,480 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 6,370 machine-hours. What was the overall fixed overhead budget variance for the month? A) $500 favorable B) $500 unfavorable C) $1,570 favorable D) $1,570 unfavorable Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Medium Solution: Budget variance = Actual fixed overhead cost − Budgeted fixed overhead cost = ($14,350 + $4,740 + $7,510) − ($14,500 + $5,200 + $7,400) = $26,600 − $27,100 = $500 F

59. Songster Corporation applies manufacturing overhead to products on the basis of standard machine-hours. Budgeted and actual overhead costs for the most recent month appear below: Original Budget Actual Costs Fixed overhead costs: Supervision..................... Utilities........................... Factory depreciation....... Total overhead cost............ $14,100 5,300 7,200 $26,600 $13,650 5,060 7,470 $26,180

The company based its original budget on 3,500 machine-hours. The company actually worked 3,700 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 3,820 machine-hours. What was the overall fixed overhead budget variance for the month? A) $2,432 favorable B) $2,432 unfavorable C) $420 favorable D) $420 unfavorable Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Medium Solution: Budget variance = Actual fixed overhead cost − Budgeted fixed overhead cost = $26,180 − $26,600 = $420 F

60. Maertz Corporation applies manufacturing overhead to products on the basis of standard machine-hours. The budgeted fixed overhead cost for the most recent month was $10,890 and the actual fixed overhead cost for the month was $10,540. The company based its original budget on 3,300 machine-hours. The standard hours allowed for the actual output of the month totaled 3,240 machine-hours. What was the overall fixed overhead budget variance for the month? A) $198 unfavorable B) $350 unfavorable C) $198 favorable D) $350 favorable Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Easy Solution: Budget variance = Actual fixed overhead cost − Budgeted fixed overhead cost = $10,540 − $10,890 = $350 F 61. Lossing Corporation applies manufacturing overhead to products on the basis of standard machine-hours. Budgeted and actual overhead costs for the most recent month appear below: Original Budget Actual Costs Variable overhead costs: Supplies....................................... $11,220 $10,670 Indirect labor............................... 8,670 8,030 Fixed overhead costs: Supervision................................. 5,610 5,940 Utilities........................................ 8,160 7,990 Factory depreciation................... 39,780 39,950 Total overhead cost........................ $73,440 $72,580 The company based its original budget on 5,100 machine-hours. The company actually worked 4,800 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 4,980 machine-hours. What was the overall fixed overhead volume variance for the month? A) $3,150 unfavorable B) $3,150 favorable C) $1,260 unfavorable D) $1,260 favorable Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Hard

Solution: Fixed portion of predetermined overhead rate = Total budgeted fixed overhead ÷ Budgeted machine-hours = ($5,610 + $8,160 + $39,780) ÷ 5,100 MHs = $53,550 ÷ 5,100 MHs = $10.50 per MH Volume variance = $10.50 per MH × (5,100 MHs − 4,980 MHs) = $10.50 per MH × 120 MHs = $1,260 U 62. Hoag Corporation applies manufacturing overhead to products on the basis of standard machine-hours. Budgeted and actual fixed overhead costs for the most recent month appear below: Original Budget Actual Costs Fixed overhead costs: Supervision................................. Utilities........................................ Factory depreciation................... Total fixed overhead cost............... $ 9,880 4,160 21,320 $35,360 $ 9,970 4,440 21,190 $35,600

The company based its original budget on 2,600 machine-hours. The company actually worked 2,280 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 2,080 machine-hours. What was the overall fixed overhead volume variance for the month? A) $4,352 favorable B) $4,352 unfavorable C) $7,072 unfavorable D) $7,072 favorable Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Medium Solution: Predetermined overhead rate = Total overhead ÷ Budgeted hours = $35,360 ÷ 2,600 MHs = $13.60 per MH Volume variance = $13.60 per MH × (2,600 MHs − 2,080 MHs) = $13.60 per MH × 520 MHs = $7,072 U

63. Merone Corporation applies manufacturing overhead to products on the basis of standard machine-hours. The company bases its predetermined overhead rate on 2,300 machine-hours. The company's total budgeted fixed manufacturing overhead is $5,060. In the most recent month, the total actual fixed manufacturing overhead was $4,660. The company actually worked 2,200 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 2,320 machinehours. What was the overall fixed overhead volume variance for the month? A) $220 unfavorable B) $400 favorable C) $44 favorable D) $220 favorable Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Easy Solution: Predetermined overhead rate = Total overhead ÷ Budgeted hours = $5,060 ÷ 2,300 MHs = $2.20 per MH Volume variance = $2.20 per MH × (2,300 MHs − 2,320 MHs) = $2.20 per MH × 20 MHs = $44 F 64. Rodarta Corporation applies manufacturing overhead to products on the basis of standard machine-hours. The company's predetermined overhead rate for fixed manufacturing overhead is $1.20 per machine-hour and the denominator level of activity is 6,600 machine-hours. In the most recent month, the total actual fixed manufacturing overhead was $8,340 and the company actually worked 6,400 machinehours during the month. The standard hours allowed for the actual output of the month totaled 6,480 machine-hours. What was the overall fixed overhead volume variance for the month? A) $240 favorable B) $144 unfavorable C) $240 unfavorable D) $96 favorable Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Easy Solution: Volume variance = $1.20 per MH × (6,600 MHs − 6,480 MHs) = $1.20 per MH × 120 MHs = $144 U

Use the following to answer questions 65-67: Capelli Hospital bases its budgets on patient-visits. The hospital's static budget for August appears below: Budgeted number of patient-visits............. Budgeted variable overhead costs: Supplies (@$5.00 per patient-visit)........ Laundry (@$7.30 per patient-visit)........ Total variable overhead cost...................... Budgeted fixed overhead costs: Wages and salaries................................. Occupancy costs..................................... Total fixed overhead cost.......................... Total budgeted overhead cost.................... 8,300 $ 41,500 60,590 102,090 60,590 73,040 133,630 $235,72 0

65. The total variable overhead cost at an activity level of 9,300 patient-visits per month should be: A) $114,390 B) $149,730 C) $102,090 D) $133,630 Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy Solution: Budgeted number of patient-visits: 8,300 Cost Formula (per patientvisit) Variable overhead costs: Supplies.................................................. Laundry................................................... Total variable overhead cost...................... $ 5.00 7.30 $12.30 Activity (in patientvisits): 9,300 $ 46,500 67,890 $114,390

66. The total fixed overhead cost at an activity level of 9,600 patient-visits per month should be: A) $133,630 B) $154,560 C) $235,720 D) $272,640 Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy Solution: Budgeted number of patient-visits: 9,600 Activity (in patientvisits): 9,300 Fixed overhead costs: Wages and salaries................................. Occupancy costs..................................... Total fixed overhead cost.......................... $ 60,590 73,040 $133,630

67. The total overhead cost at an activity level of 9,400 patient-visits per month should be: A) $235,720 B) $249,250 C) $266,960 D) $250,640 Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy Solution: Budgeted number of patient-visits: 8,300 Cost Formula (per patientvisit) Overhead Costs Variable overhead costs: Supplies.................................................. Laundry................................................... Total variable overhead cost...................... Fixed overhead costs: Wages and salaries................................. Occupancy costs..................................... Total fixed overhead cost.......................... Total overhead cost.................................... Use the following to answer questions 68-70: Mandalay Hotel bases its budgets on guest-days. The hotel's static budget for August appears below: Budgeted number of guest-days................. Budgeted variable overhead costs: Supplies (@$9.60 per guest-day)............ Laundry (@$9.40 per guest-day)............ Total variable overhead cost...................... Budgeted fixed overhead costs: Wages and salaries.................................. Occupancy costs..................................... Total fixed overhead cost........................... Total budgeted overhead cost.................... 4,300 $ 41,280 40,420 81,700 57,190 52,030 109,220 $190,92 0 $ 5.00 7.30 $12.30 Activity (in patient visits): 9,400 $ 47,000 68,620 115,620 60,590 73,040 133,630 $249,250

68. The total variable overhead cost at an activity level of 5,000 guest-days per month should be: A) $127,000 B) $109,220 C) $95,000 D) $81,700 Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy Solution: Budgeted number of guest-days: 4,300 Cost Formula (per guestdays) Variable overhead costs: Supplies.................................................. Laundry................................................... Total variable overhead cost...................... $ 9.60 9.40 $19.00 Activity (in guest-days): 5,000 $48,000 47,000 $95,000

69. The total fixed overhead cost at an activity level of 5,500 guest-days per month should be: A) $139,700 B) $190,920 C) $244,200 D) $109,220 Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy Solution: Budgeted number of guest-days: 4,300 Activity (in guest-days): 5,500 Fixed overhead costs: Wages and salaries................................. Occupancy costs..................................... Total fixed overhead cost.......................... $ 57,190 52,030 $109,220

70. The total overhead cost at an activity level of 5,200 guest-days per month should be: A) $208,020 B) $230,880 C) $209,940 D) $190,920 Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy Solution: Budgeted number of guest-days: 4,300 Cost Formula (per guestdays) Overhead Costs Variable overhead costs: Supplies.................................................. Laundry................................................... Total variable overhead cost...................... Fixed overhead costs: Wages and salaries................................. Occupancy costs..................................... Total fixed overhead cost.......................... Total overhead cost.................................... $ 9.60 9.40 $19.00 Activity (in guest-days): 5,200 $ 49,920 48,880 98,800 57,190 52,030 109,220 $208,020

Use the following to answer questions 71-73: Isadore Hospital bases its budgets on patient-visits. The hospital's static budget for July appears below: Budgeted number of patient-visits............. Budgeted variable overhead costs: Supplies (@ $4.60 per patient-visit)....... Laundry (@ $7.20 per patient-visit)....... Total variable overhead cost...................... Budgeted fixed overhead costs: Salaries.................................................... Occupancy costs..................................... Total fixed overhead cost........................... Total budgeted overhead cost.................... Actual results for the month were: Actual number of patient-visits............... Supplies................................................... Laundry................................................... Salaries.................................................... Occupancy costs..................................... 7,700 $ 35,420 55,440 90,860 46,200 67,760 113,960 $204,82 0 7,800 $38,250 $61,240 $46,190 $65,650

71. The variance for supplies costs in the flexible budget performance report for the month is: A) $2,370 U B) $2,370 F C) $2,830 F D) $2,830 U Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy Solution: Budgeted number of patient-visits: 7,700 Actual number of patient-visits: 7,800 Actual Costs Incurred for 7,800 patientvisits $38,250 Budget Based on 7,800 patientvisits $35,880

Cost Formula (per patientvisit) Variable overhead costs (Supplies)....... $4.60

Variance $2,370 U

72. The variance for laundry costs in the flexible budget performance report for the month is: A) $5,080 F B) $5,080 U C) $5,800 U D) $5,800 F Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy Solution: Budgeted number of patient-visits: 7,700 Actual number of patient-visits: 7,800 Cost Formula (per patientvisit) Variable overhead costs (Laundry)... $7.20 Actual Costs Incurred for 7,800 patient-visits $61,240 Budget Based on 7,800 patient-visits $56,160

Variance $5,080 U

73. The variance for occupancy costs in the flexible budget performance report for the month is: A) $2,110 U B) $2,990 U C) $2,990 F D) $2,110 F Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy Solution: Budgeted number of patient-visits: 7,700 Actual number of patient-visits: 7,800 Actual Costs Incurred for 7,800 patient-visits $65,650 Budget Based on 7,800 patient-visits $67,760

Fixed overhead costs (Occupancy costs)

Variance $2,110 F

Use the following to answer questions 74-76: Moncrief Corporation bases its budgets on machine-hours. The company's static budget for July appears below: Budgeted number of machine-hours.......... Budgeted variable overhead costs: Supplies (@ $8.60 per machine-hour).... Power (@ $8.80 per machine-hour)....... Total variable overhead cost...................... Budgeted fixed overhead costs: Salaries................................................... Equipment depreciation.......................... Total fixed overhead cost.......................... Total budgeted overhead cost.................... Actual results for the month were: Actual number of machine-hours........... Supplies.................................................. Power...................................................... Salaries................................................... Equipment depreciation.......................... 1,000 $ 8,600 8,800 17,400 11,300 9,900 21,200 $38,60 0 1,200 $10,29 0 $10,86 0 $11,69 0 $9,990

74. The variance for supplies costs in the flexible budget performance report for the month should be: A) $30 F B) $1,690 F C) $1,690 U D) $30 U Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy Solution: Budgeted number of machine-hours: 1,000 Actual number of machine-hours: 1,200 Cost Formula (per machinehour) Variable overhead costs (Supplies)......... $8.60 Actual Costs Incurred for 1,200 machinehours $10,290 Budget Based on 1,200 machinehours $10,320

Variance $30 F

75. The variance for power costs in the flexible budget performance report for the month should be: A) $2,060 F B) $2,060 U C) $300 F D) $300 U Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy Solution: Budgeted number of machine-hours: 1,000 Actual number of machine-hours: 1,200 Cost Formula (per machinehour) Variable overhead costs (Power)............ $8.80 Actual Costs Incurred for 1,200 machinehours $10,860 Budget Based on 1,200 machinehours $10,560

Variance $300 U

76. The variance for equipment depreciation in the flexible budget performance report for the month should be: A) $1,890 U B) $90 F C) $90 U D) $1,890 F Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy Solution: Budgeted number of machine-hours: 1,000 Actual number of machine-hours: 1,200 Actual Costs Incurred for 1,200 machinehours Fixed overhead costs (Equipment depreciation)...... $9,990 Budget Based on 1,200 machinehours $9,900

Variance $90 U

Use the following to answer questions 77-79: Medlar Corporation's static budget for June appears below. The company bases its budgets on machine-hours. Budgeted number of machine-hours.......... Budgeted variable overhead costs: Supplies (@ $2.20 per machine-hour).... Power (@ $3.80 per machine-hour)........ Total variable overhead cost...................... Budgeted fixed overhead costs: Salaries.................................................... Equipment depreciation.......................... Total fixed overhead cost........................... Total budgeted overhead cost.................... 8,900 $ 19,58 0 33,82 0 53,40 0 26,700 39,16 0 65,86 0 $119,26 0

In June, the actual number of machine-hours was 9,300, the actual supplies cost was $19,760, the actual power cost was $35,720, the actual salaries cost was $27,130, and the actual equipment depreciation was $39,430. 77. The variance for supplies cost in the flexible budget performance report for the month should be: A) $180 U B) $700 U C) $700 F D) $180 F Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy

Solution: Budgeted number of machine-hours: 8,900 Actual number of machine-hours: 9,300 Cost Formula (per machinehour) Variable overhead costs (Supplies).... $2.20 Actual Costs Incurred for 9,300 machinehours $19,760 Budget Based on 9,300 machinehours $20,460

Variance $700 F

78. The variance for power cost in the flexible budget performance report for the month should be: A) $1,900 F B) $1,900 U C) $380 U D) $380 F Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy Solution: Budgeted number of machine-hours: 8,900 Actual number of machine-hours: 9,300 Cost Formula (per machinehour) Variable overhead costs (Power)................................ $3.80 Actual Costs Incurred for 9,300 machinehours $35,720 Budget Based on 9,300 machinehours $35,340

Variance $380 U

79. The variance for equipment depreciation in the flexible budget performance report for the month should be: A) $1,490 F B) $1,490 U C) $270 U D) $270 F Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy Solution: Budgeted number of machine-hours: 8,900 Actual number of machine-hours: 9,300 Actual Costs Incurred for 9,300 machinehours Fixed overhead costs (Equipment depreciation)............................ Use the following to answer questions 80-85: A manufacturing company has a standard costing system based on standard direct labor-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity................................ Overhead costs at the denominator activity level: Variable overhead cost....................................... Fixed overhead cost............................................ 1,000 DLHs $3,800 $14,25 0 $39,430 Budget Based on 9,300 machinehours $39,160

Variance $270 U

The following data pertain to operations for the most recent period: Actual hours........................................................... Standard hours allowed for the actual output........ Actual total variable overhead cost....................... Actual total fixed overhead cost............................ 1,200 DLHs 885 DLHs $4,380 $12,45 0

80. What is the predetermined overhead rate to the nearest cent? A) $14.03 B) $16.83 C) $15.04 D) $18.05 Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Medium Solution: Predetermined overhead rate = Total overhead ÷ Denominator level of activity = ($3,800 + $14,250) ÷ 1,000 DLHs = $18,050 ÷ 1,000 DLHs = $18.05 per DLH 81. How much overhead was applied to products during the period to the nearest dollar? A) $18,050 B) $16,830 C) $15,974 D) $21,660 Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Medium Solution: Predetermined overhead rate = Total overhead ÷ Denominator level of activity = ($3,800 + $14,250) ÷ 1,000 DLHs = $18,050 ÷ 1,000 DLHs = $18.05 per DLH Applied overhead = 885 DLHs × $18.05 per DLH = $15,974

82. What was the variable overhead spending variance for the period to the nearest dollar? A) $180 U B) $180 F C) $580 U D) $580 F Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Medium Solution: Budgeted direct-labor hours: 1,100 Actual direct-labor hours: 1,200 Standard direct-labor hours allowed: 800 Cost Formula (per DLH) Variable overhead costs....................... $3.80 * Actual Costs Incurred 1,200 DLHs $4,380 Budget Based on 1,200 DLHs $4,560

Spending Variance $180 F

* $3,800 ÷ 1,000 DLHs = $3.80 per DLH

83. What was the variable overhead efficiency variance for the period to the nearest dollar? A) $133 U B) $580 U C) $1,150 U D) $1,197 U Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Medium Solution: Budgeted direct-labor hours: 1,000 Actual direct-labor hours: 1,200 Standard direct-labor hours allowed: 885 Cost Formula (per DLH) Variable overhead costs....................... *$3,800 ÷ 1,000 = $3.80 84. What was the fixed overhead budget variance for the period to the nearest dollar? A) $1,800 F B) $3,268 F C) $161 U D) $4,650 U Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Medium Solution: Fixed overhead budget variance = Actual fixed overhead cost − Budgeted fixed overhead cost = $12,450 − $14,250 = $1,800 F $3.80 * Budget Based on 1,200 DLHs $4,560 Budget Based on 885 DLHs $3,363

Efficiency Variance $1,197 U

85. What was the fixed overhead volume variance for the period to the nearest dollar? A) $4,489 U B) $1,618 U C) $2,850 F D) $1,639 U Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Medium Solution: Fixed portion of predetermined overhead rate = $14,250 ÷ 1,000 DLHs = $14.25 per DLH Volume variance = Fixed portion of predetermined overhead rate × (Denominator hours − Standard hours allowed) = $14.25 per DLH × (1,000 DLHs − 885 DLHs) = $14.25 per DLH × 115 DLHs = $1,639 U Use the following to answer questions 86-88: Azzurra Company manufactures computer chips used in aircraft and automobiles. Manufacturing overhead at Azzurra is applied to production on the basis of standard machinehours. 86. Which overhead variance(s) at Azzurra would be affected in a favorable manner if more computer chips are produced during the year than originally budgeted? A) variable overhead spending variance B) variable overhead efficiency variance C) fixed overhead budget variance D) fixed overhead volume variance E) none of the above would be affected favorably Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3; 4; 6 Level: Medium

87. Which overhead variance(s) at Azzurra would be affected in an unfavorable manner if some indirect materials were “inadvertently” taken home by a few of the indirect laborers? A) variable overhead spending variance B) variable overhead efficiency variance C) fixed overhead budget variance D) fixed overhead volume variance E) none of the above would be affected unfavorably Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3; 4; 6 Level: Medium 88. Which overhead variance(s) at Azzurra would be affected in an unfavorable manner if fire and theft insurance rates increase by 25% unexpectedly during the period? A) variable overhead spending variance B) variable overhead efficiency variance C) fixed overhead budget variance D) fixed overhead volume variance E) both C and D above Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3; 4; 6 Level: Medium Use the following to answer questions 89-90: Single Company has a standard cost system in which manufacturing overhead is applied to units of product on the basis of standard direct labor-hours. The company has provided the following data concerning its manufacturing overhead costs for last year: Standard direct labor-hours allowed for the output........ Actual direct labor-hours worked................................... Denominator activity...................................................... Actual variable factory overhead cost............................. Variable overhead rate.................................................... 32,000 33,000 30,000 $166,00 0 $5 hours hours hours per hour

89. Given these data, the variable overhead spending variance for the year would be: A) $1,000 U B) $6,000 U C) $1,000 F D) $16,000 U Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3; 4 Level: Medium Solution: Budgeted direct-labor hours: 30,000 Actual direct-labor hours: 33,000 Standard direct-labor hours allowed: 32,000 Cost Formula (per DLH) $5.00 Actual Costs Incurred 33,000 DLHs $166,000 Budget Based on 33,000 DLHs $165,000

Variable overhead costs

Spending Variance $1,000 U

90. The variable overhead efficiency variance would be: A) $10,000 U B) $5,000 F C) $15,000 U D) $5,000 U Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3; 4 Level: Easy Solution: Budgeted direct-labor hours: 30,000 Actual direct-labor hours: 33,000 Standard direct-labor hours allowed: 32,000 Cost Formula (per DLH) $5.00 Budget Based on 33,000 DLHs $165,000 Budget Based on 32,000 DLHs $160,000 Efficiency Variance $5,000 U

Variable overhead costs.................

Use the following to answer questions 91-92: A manufacturing company that has only one product has established the following standards for its variable manufacturing overhead. The company uses machine-hours as its measure of activity. Standard hours per unit of output.............. Standard variable overhead rate................ 2.7 machine-hours $19.4 0 per machine-hour

The following data pertain to operations for the last month: Actual hours............................................... Actual total variable overhead cost........... Actual output............................................. 4,500 machine-hours $88,42 5 1,500 units

91. What is the variable overhead spending variance for the month? A) $9,855 U B) $1,125 F C) $1,125 U D) $9,855 F Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3; 4 Level: Medium Solution: Actual machine-hours: 4,500 Standard machine-hours: 4,050* Cost Formula (per MH) $19.40 Actual Costs Incurred 4,500 MHs $88,425 Budget Based on 4,500 MHs $87,300 Spending Variance $1,125 U

Variable overhead costs

*1,500 units × 2.7 machine-hours per unit = 4,050 machine-hours

92. What is the variable overhead efficiency variance for the month? A) $8,842 U B) $1,013 F C) $8,843 F D) $8,730 U Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3; 4 Level: Medium Solution: Actual machine-hours: 4,500 Standard machine-hours: 4,050* Cost Formula (per MH) $19.40 Budget Based on 4,500 MHs $87,300 Budget Based on 4,050 MHs $78,570 Efficiency Variance $8,730 U

Variable overhead costs

*1,500 units × 2.7 machine-hours per unit = 4,050 machine-hours Use the following to answer questions 93-95: Crispy Company manufactures smoke detectors and has developed the following flexible budget for its overhead costs. Manufacturing overhead at Crispy is applied to production on the basis of standard direct labor-hours: Direct labor-hours.............. Detectors produced............ Variable overhead cost...... Fixed overhead cost........... 56,000 40,000 $252,00 0 $672,00 0 70,000 50,000 $315,00 0 $672,00 0 84,000 60,000 $378,00 0 $672,00 0

Crispy was expecting to produce 40,000 detectors last year. The actual results for the year were as follows: Number of detectors produced....... Direct labor-hours incurred............ Variable overhead cost................... Fixed overhead cost....................... 43,200 62,640 $278,74 8 $714,00 0

93. What was Crispy's variable overhead spending variance? A) $3,132 favorable B) $9,720 unfavorable C) $13,608 unfavorable D) $115,884 favorable Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Medium Solution: Cost Formula (per DLH) $4.50 Actual Costs Incurred 62,640 DLHs * $278,748 Budget Based on 62,640 DLHs $281,880

Variable overhead costs..

Spending Variance $3,132 F

*$252,000 ÷ 56,000 DLHs = $4.50 per DLH 94. What was Crispy's fixed overhead budget variance? A) $11,760 favorable B) $37,680 favorable C) $42,000 unfavorable D) $53,760 favorable Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Easy Solution: Fixed overhead budget variance = Actual fixed overhead cost − Budgeted fixed overhead cost = $714,000 − $672,000 = $42,000 U

95. What total amount of manufacturing overhead cost (variable and fixed) did Crispy apply to the 43,200 detectors produced? A) $712,800 B) $924,000 C) $997,920 D) $1,033,560 Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Hard Solution: Predetermined overhead rate = Total overhead ÷ Per detector = ($252,000 + $672,000) ÷ 40,000 detectors = $924,000 ÷ 40,000 detectors = $23.10 per detector Applied overhead = 43,200 detectors × $23.10 per detector = $997,920 Use the following to answer questions 96-97: Dagle Corporation has provided the following data for a recent month:. Budgeted production................................... Actual production........................................ Standard machine-hours per motor............. Budgeted machine-hours (5.1 × 4,700)....... Standard machine-hours allowed for the actual output (5.1 × 4,800)...................... Actual machine-hours................................. 4,700 4,800 5.1 23,970 motors motors machine-hours machine-hours

24,480 machine-hours 24,740 machine-hours

Budgeted variable overhead cost per machine-hour: Indirect labor............................................ $6.30 per machine-hour Power....................................................... $2.20 per machine-hour Actual total variable overhead costs: Indirect labor............................................ Power....................................................... $151,50 6 $56,700

96. The variable overhead spending variance for indirect labor is: A) $4,356 U B) $2,718 F C) $4,356 F D) $1,638 U Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Easy Solution: Budgeted machine-hours: 23,970 Actual machine-hours: 24,740 Standard machine-hours allowed: 24,480 Cost Formula (per MH) Variable overhead costs (Indirect labor)......................... $6.30 Actual Costs Incurred 24,740 MHs $151,506 Budget Based on 24,740 MHs $155,862

Spending Variance $4,356 F

97. The variable overhead spending variance for power is: A) $2,844 U B) $2,844 F C) $572 U D) $2,272 U Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Easy Solution: Budgeted machine-hours: 23,970 Actual machine-hours: 24,740 Standard machine-hours allowed: 24,480 Cost Formula (per MH) $2.20 Actual Costs Incurred 24,740 MHs $56,700 Budget Based on 24,740 MHs $54,428

Variable overhead costs (Power)

Spending Variance $2,272 U

Use the following to answer questions 98-99: The following data have been provided by Furr Corporation: Budgeted production.................................. Standard machine-hours per motor............ Standard indirect labor............................... Standard power.......................................... Actual production...................................... Actual machine-hours (total)..................... Actual indirect labor (total)....................... Actual power (total)................................... 7,000 8.6 $7.10 $1.40 motors machine-hours per machine-hour per machine-hour

7,300 motors 62,140 machine-hours $408,34 0 $94,989

98. The variable overhead spending variance for indirect labor is: A) $32,854 F B) $32,854 U C) $37,398 F D) $4,544 F Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Easy Solution: Actual machine-hours: 62,140 Standard machine-hours: 60,200 Cost Formula (per MH) Variable overhead costs (Indirect labor)........................ $7.10 Actual Costs Incurred 62,140 MHs $408,340 Budget Based on 62,140 MHs $441,194

Spending Variance $32,854 F

99. The variable overhead spending variance for power is: A) $7,097 U B) $7,097 F C) $896 F D) $7,993 U Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Easy Solution: Actual machine-hours: 62,140 Cost Formula (per MH) $1.40 Actual Costs Incurred 62,140 MHs $94,989 Budget Based on 62,140 MHs $86,996

Variable overhead costs (Power) Use the following to answer questions 100-101:

Spending Variance $7,993 U

Macchi Corporation has provided the following data for a recent period: Budgeted production.................................. Actual production....................................... Standard machine-hours per unit............... Budgeted machine-hours (3.1 × 2,200)...... Standard machine-hours allowed for the actual output (3.1 × 2,500)..................... Actual machine-hours................................ 2,200 2,500 3.1 6,820 units units machine-hours machine-hours

7,750 machine-hours 8,030 machine-hours

Budgeted variable overhead cost per machine-hour: Lubricants.............. $2.00 per machine-hour Supplies................... $2.60 per machine-hour Actual total variable overhead costs: $15,85 Lubricants................ 8 $20,39 Supplies................... 2

100. The variable overhead spending variance for lubricants is: A) $202 F B) $358 U C) $202 U D) $560 U Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Easy Solution: Budgeted machine-hours: 6,820 Actual machine-hours: 8,030 Standard machine-hours allowed: 7,750 Cost Formula (per MH) Variable overhead costs (Lubricants).............. $2.00 Actual Costs Incurred 8,030 MHs $15,858 Budget Based on 8,030 MHs $16,060 Spending Variance $202 F

101. The variable overhead spending variance for supplies is: A) $486 F B) $242 F C) $242 U D) $728 U Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Easy Solution: Budgeted machine-hours: 6,820 Actual machine-hours: 8,030 Standard machine-hours allowed: 7,750 Cost Formula (per MH) $2.60 Actual Costs Incurred 8,030 MHs $20,392 Budget Based on 8,030 MHs $20,878 Spending Variance $486 F

Variable overhead costs (Supplies)

Use the following to answer questions 102-103: The following data have been provided by Liggett Corporation: Budgeted production...................... Standard machine-hours per unit... Standard lubricants......................... Standard supplies........................... Actual production........................... Actual machine-hours (total)......... Actual lubricants (total)................. Actual supplies (total).................... 7,400 6.6 $3.50 $2.00 units machine-hours per machine-hour per machine-hour

7,600 units 49,840 machine-hours $179,82 1 $98,933

102. The variable overhead spending variance for lubricants is: A) $1,120 F B) $5,381 F C) $4,261 U D) $5,381 U Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Easy Solution: Actual machine-hours: 49,840 Cost Formula (per MH) Variable overhead costs (Lubricants).............. $3.50 Actual Costs Incurred 49,840 MHs $179,821 Budget Based on 49,840 MHs $174,440

Spending Variance $5,381 U

103. The variable overhead spending variance for supplies is: A) $640 F B) $1,387 F C) $1,387 U D) $747 F Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Easy Solution: Actual machine-hours: 49,840 Cost Formula (per MH) $2.00 Actual Costs Incurred 49,840 MHs $98,933 Budget Based on 49,840 MHs $99,680

Variable overhead costs (Supplies) Use the following to answer questions 104-105:

Spending Variance $747 F

Byers Corporation, which produces cellular transmission towers, has provided the following data: Budgeted production.................................. Actual production....................................... Standard machine-hours per tower............ Budgeted machine-hours (6.8 × 2,500)...... Standard machine-hours allowed for the actual output (6.8 × 2,800)..................... Actual machine-hours................................ 2,500 2,800 6.8 17,000 towers towers machine-hours machine-hours

19,040 machine-hours 18,380 machine-hours

Budgeted variable overhead cost per machine-hour: Indirect labor.......... $7.40 per machine-hour Power..................... $1.40 per machine-hour Actual total variable overhead costs: $139,66 Indirect labor.......... 0 Power..................... $26,212

104. The variable overhead efficiency variance for indirect labor is: A) $4,884 U B) $4,884 F C) $1,236 F D) $1,236 U Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Easy Solution: Budgeted machine-hours: 17,000 Actual machine-hours: 18,380 Standard machine-hours allowed: 19,040 Cost Formula (per MH) Variable overhead costs (Indirect labor)........................ $7.40 Budget Based on 18,380 MHs $136,012 Budget Based on 19,040 MHs $140,896

Efficiency Variance $4,884 F

105. The variable overhead efficiency variance for power is: A) $444 F B) $444 U C) $480 U D) $924 F Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Easy Solution: Budgeted machine-hours: 17,000 Actual machine-hours: 18,380 Standard machine-hours allowed: 19,040 Cost Formula (per MH) $1.40 Budget Based on 18,380 MHs $25,732 Budget Based on 19,040 MHs $26,656 Efficiency Variance $924 F

Variable overhead costs (Power)

Use the following to answer questions 106-107: Czlapinski Corporation, which produces highway lighting poles, has provided the following data: Budgeted production.................................. Standard machine-hours per pole............... Budgeted indirect labor.............................. Budgeted supplies...................................... Actual production....................................... Actual machine-hours................................ Actual indirect labor (total)........................ Actual supplies (total)................................ 1,000 6.4 $2.90 $1.50 poles machine-hours per machine-hour per machine-hour

1,300 poles 7,920 machine-hours $23,21 0 $13,29 7

106. The variable overhead efficiency variance for indirect labor is: A) $918 F B) $1,160 F C) $918 U D) $1,160 U Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Easy Solution: Actual machine-hours: 7,920 Standard machine-hours: 8,320* Cost Formula (per MH) Variable overhead costs (Indirect labor)........................ $2.90 Budget Based on 7,920 MHs $22,968 Budget Based on 8,320 MHs $24,128 Efficiency Variance $1,160 F

*1,300 poles × 6.4 machine-hours per pole = 8,320 machine-hours

107. The variable overhead efficiency variance for supplies is: A) $817 F B) $1,417 U C) $600 F D) $817 U Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Easy Solution: Actual machine-hours: 7,920 Standard machine-hours: 8,320* Cost Formula (per MH) $1.50 Budget Based on 7,920 MHs $11,880 Budget Based on 8,320 MHs $12,480 Efficiency Variance $600 F

Variable overhead costs (Supplies)

*1,300 poles × 6.4 machine-hours per pole = 8,320 standard machine-hours Use the following to answer questions 108-109: Quickle Corporation, which produces commercial windows, has provided the following data: Budgeted production.................................. Actual production....................................... Standard machine-hours per window......... Budgeted machine-hours (7.0 × 1,000)...... Standard machine-hours allowed for the actual output (7.0 × 1,200)..................... Actual machine-hours................................ 1,000 1,200 7.0 7,000 windows windows machine-hours machine-hours

8,400 machine-hours 7,750 machine-hours

Budgeted variable overhead cost per machine-hour: Supplies...................... $8.40 per machine-hour Actual total variable overhead costs: $68,59 Supplies...................... 5

108. The variable overhead spending variance for supplies is: A) $3,495 F B) $1,965 U C) $3,495 U D) $1,965 F Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Easy Solution: Budgeted machine-hours: 7,000 Actual machine-hours: 7,750 Standard machine-hours allowed: 8,400 Cost Formula (per MH) $8.40 Actual Costs Incurred 7,750 MHs $68,595 Budget Based on 7,750 MHs $65,100 Spending Variance $3,495 U

Variable overhead costs (Supplies)

109. The variable overhead efficiency variance for supplies is: A) $5,460 U B) $1,965 F C) $5,460 F D) $1,965 U Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Easy Solution: Budgeted machine-hours: 7,000 Actual machine-hours: 7,750 Standard machine-hours allowed: 8,400 Cost Formula (per MH) $8.40 Budget Based on 7,750 MHs $65,100 Budget Based on 8,400 MHs $70,560 Efficiency Variance $5,460 F

Variable overhead costs (Supplies)

Use the following to answer questions 110-111: Geschke Corporation, which produces commercial safes, has provided the following data: Budgeted production...................... Standard machine-hours per safe... Standard supplies cost.................... Actual production........................... Actual machine-hours.................... Actual supplies cost....................... 8,500 9.1 $1.70 8,700 79,100 $123,64 2 safes machine-hours per machine-hour safes machine-hours

110. The variable overhead spending variance for supplies is: A) $10,828 F B) $10,947 U C) $10,828 U D) $10,947 F Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Easy Solution: Actual machine-hours: 79,100 Standard machine-hours: 79,170* Cost Formula (per MH) $1.70 Actual Costs Incurred 79,100 MHs $123,642 Budget Based on 79,100 MHs $134,470

Variable overhead costs (Supplies)

Spending Variance $10,828 F

*8,700 safes × 9.1 machine-hours = 79,170 standard machine-hours

111. The variable overhead efficiency variance for supplies is: A) $10,947 F B) $119 U C) $10,947 U D) $119 F Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Easy Solution: Actual machine-hours: 79,100 Standard machine-hours: 79,170* Cost Formula (per MH) $1.70 Budget Based on 79,100 MHs $134,470 Budget Based on 79,170 MHs $134,589 Efficiency Variance $119 F

Variable overhead costs (Supplies)

*8,700 safes × 9.1 machine-hours = 79,170 standard machine-hours Use the following to answer questions 112-113: Bagley Company has a standard cost system in which manufacturing overhead is applied to units of product on the basis of standard machine-hours. The company has provided the following data concerning its manufacturing overhead costs for last year: Actual total overhead cost.......................... Budgeted fixed overhead cost.................... Variable overhead rate............................... Fixed overhead rate.................................... Standard hours allowed for the output....... $260,00 0 $180,00 0 $2 per hour $6 per hour 32,000 hours

112. The volume variance for the year was: A) $12,000 F B) $4,000 F C) $4,000 U D) $16,000 U Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Medium Solution: Fixed overhead rate = Budgeted fixed overhead cost ÷ Denominator activity level = $6 per hour = $180,000 ÷ Denominator activity level Denominator activity level × $6 per hour = $180,000 Denominator activity level = $180,000 ÷ $6 per hour = 30,000 hours Volume variance = Fixed portion of predetermined overhead rate × (Denominator hours − Standard hours allowed) = $6 per hour × (30,000 hours − 32,000 hours) = $6 per hours × 2,000 hours = $12,000 F 113. The denominator activity level used to compute predetermined overhead rates was: A) 32,000 hours B) 22,500 hours C) 30,000 hours D) it is impossible to determine from the data given Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Medium Solution: Fixed overhead rate = Budgeted fixed overhead cost ÷ Denominator activity level $6 per hour = $180,000 ÷ Denominator activity level Denominator activity level × $6 per hour = $180,000 Denominator activity level = $180,000 ÷ $6 per hour = 30,000 hours

Use the following to answer questions 114-117: A furniture manufacturer has a standard costing system based on standard direct labor-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity......................................... Overhead costs at the denominator activity level: Variable overhead cost................................................. Fixed overhead cost..................................................... 8,500 DLHs $19,55 0 $93,07 5

The following data pertain to operations for the most recent period: Actual hours.................................................................... Standard hours allowed for the actual output................. Actual total variable overhead cost................................. Actual total fixed overhead cost..................................... 8,600 DLHs 8,575 DLHs $18,49 0 $91,22 5

114. What is the predetermined overhead rate to the nearest cent? A) $12.91 B) $13.10 C) $12.76 D) $13.25 Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Medium Solution: Predetermined overhead rate = ($19,550 + $93,075) ÷ 8,500 DLHs = $112,625 ÷ 8,500 DLHs = $13.25 per DLH

115. How much overhead was applied to products during the period to the nearest dollar? A) $109,715 B) $112,625 C) $113,619 D) $113,950 Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Medium Solution: Predetermined overhead rate = ($19,550 + $93,075) ÷ 8,500 DLHs = $112,625 ÷ 8,500 DLHs = $13.25 per DLH Applied overhead = Standard hours allowed for actual output × Predetermined overhead rate = 8,575 DLHs × $13.25 per DLH = $113,619 116. What was the fixed overhead budget variance for the period to the nearest dollar? A) $265 F B) $1,850 F C) $2,671 U D) $2,945 U Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Medium Solution: Budget variance = Actual fixed overhead cost − Budgeted fixed overhead cost = $91,225 − $93,075 = $1,850 F

117. What was the fixed overhead volume variance for the period to the nearest dollar? A) $274 U B) $1,095 F C) $798 F D) $821 F Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Medium Solution: Fixed portion of predetermined overhead rate = Budgeted fixed overhead cost ÷ Denominator activity level $93,075 ÷ 8,500 DLHs = $10.95 per DLH Volume variance = Fixed portion of predetermined overhead rate × (Denominator hours − Standard hours allowed) = $10.95 per DLH × (8,500 DLHs − 8,575 DLHs) = $10.95 per DLH × 75 DLHs = $821 F Use the following to answer questions 118-121: A manufacturer of playground equipment has a standard costing system based on standard machine-hours (MHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity................................ Fixed overhead cost............................................... 8,800 MHs $71,72 0

The following data pertain to operations for the most recent period: Actual hours........................................................... Standard hours allowed for the actual output........ Actual total fixed overhead cost............................ 8,500 MHs 8,556 MHs $71,47 0

118. What is the predetermined fixed overhead rate to the nearest cent? A) $8.41 B) $8.12 C) $8.15 D) $8.44 Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Medium Solution: Predetermined fixed overhead rate = $71,720 ÷ 8,800 MHs = $8.15 per MH 119. How much fixed overhead was applied to products during the period to the nearest dollar? A) $71,470 B) $69,275 C) $71,720 D) $69,731 Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Medium Solution: Predetermined fixed overhead rate = $71,720 ÷ 8,800 MHs = $8.15 per MH Applied fixed overhead = 8,556 MHs × $8.15 per MH = $69,731 120. What was the fixed overhead budget variance for the period to the nearest dollar? A) $1,739 F B) $471 U C) $250 F D) $2,195 F Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Medium Solution: Budget variance = Actual fixed overhead cost − Budgeted fixed overhead cost = $71,470 − $71,720 = $250 F

121. What was the fixed overhead volume variance for the period to the nearest dollar? A) $2,038 U B) $456 F C) $2,445 U D) $1,989 U Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Medium Solution: Volume variance = Fixed portion of predetermined overhead rate × (Denominator hours − Standard hours allowed) = ($71,720 ÷ 8,800 MHs) × (8,800 MHs − 8,556 MHs) = $8.15 per MH × 244 MHs = $1,989 U Use the following to answer questions 122-123: Rodriquez Manufacturing Company uses a standard cost system with machine-hours as the activity base for overhead. Rodriquez used a denominator activity level of 15,000 machinehours last year. At this level, budgeted variable manufacturing overhead totaled $108,000 and budgeted fixed manufacturing overhead totaled $378,000. During the year, 18,000 machinehours were actually incurred. The standard machine-hours allowed for actual output were 20,000. Total actual manufacturing overhead was $135,000 for variable overhead and $394,200 for fixed overhead. 122. What was Rodriquez's fixed overhead budget variance? A) $16,200 unfavorable B) $59,400 favorable C) $109,800 favorable D) $126,000 unfavorable Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Medium Solution: Budget variance = Actual fixed overhead cost − Budgeted fixed overhead cost = $394,200 − $378,000 = $16,200 U

123. What is Rodriquez's total under- or overapplied overhead cost? A) $21,600 underapplied B) $43,200 underapplied C) $54,000 overapplied D) $118,800 overapplied Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Hard Solution: Predetermined overhead rate = ($108,000 + $378,000) ÷ 15,000 MHs = $486,000 ÷ 15,000 MHs = $32.40 per MH Applied overhead = 20,000 MHs × $32.40 per MH = $648,000 Actual overhead = $135,000 + $394,200 = $529,200 $648,000 − $529,200 = $118,800 overapplied Use the following to answer questions 124-125: A manufacturer of industrial equipment has a standard costing system based on standard direct labor-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity......................................... Overhead costs at the denominator activity level: Variable overhead cost................................................. Fixed overhead cost..................................................... 2,200 DLHs $12,76 0 $29,81 0

The following data pertain to operations for the most recent period: Actual hours.................................................................... Standard hours allowed for the actual output................. Actual total variable overhead cost................................. Actual total fixed overhead cost..................................... 2,100 DLHs 2,108 DLHs $12,39 0 $29,36 0

124. What is the predetermined overhead rate to the nearest cent? A) $18.98 B) $20.27 C) $19.88 D) $19.35 Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Medium Solution: Predetermined overhead rate = ($12,760 + $29,810) ÷ 2,200 DLHs = $19.35 per DLH 125. How much overhead was applied to products during the period to the nearest dollar? A) $42,570 B) $40,790 C) $40,635 D) $41,750 Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Medium Solution: Predetermined overhead rate = ($12,760 + $29,810) ÷ 2,200 DLHs = $19.35 per DLH Applied overhead = Standard hours for actual output × Predetermined overhead rate = 2,108 DLHs × $19.35 per DLH = $40,790

Use the following to answer questions 126-128: Muscato Corporation's flexible budget for two levels of activity appears below: Cost Formula (per machinehour) Variable overhead costs: Supplies................................ Indirect labor........................ Total variable overhead cost.... Fixed overhead costs: Salaries................................. Occupancy costs................... Total fixed overhead cost........ Total overhead cost.................. $ 9.70 9.30 $19.00

Activity (in machinehours) 7,500 7,600 $ 72,750 69,750 142,500 $ 73,720 70,680 144,400

672,600 769,500 1,442,100 $1,584,600

672,600 769,500 1,442,100 $1,586,50 0

126. If the denominator level of activity is 7,500 machine-hours, the variable element in the predetermined overhead rate would be: A) $208.75 B) $192.28 C) $211.28 D) $19.00 Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Easy Solution: Variable element = $142,500 ÷ 7,500 MHs = $19.00 per MH

127. If the denominator level of activity is 7,500 machine-hours, the fixed element in the predetermined overhead rate would be: A) $192.28 B) $211.28 C) $19.00 D) $1,900.00 Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Easy Solution: Fixed element = $1,442,100 ÷ 7,500 MHs = $192.28 per MH 128. If the denominator level of activity is 7,600 machine-hours, the predetermined overhead rate would be: A) $1,900.00 B) $19.00 C) $189.75 D) $208.75 Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Easy Solution: Predetermined overhead rate = $1,586,500 ÷ 7,600 MHs = $208.75 per MH

Use the following to answer questions 129-131: Keeran Corporation's flexible budget for two levels of activity appears below: Cost Formula (per machinehour) Variable overhead costs: Lubricants............................. Power.................................... Total variable overhead cost.... Fixed overhead costs: Depreciation.......................... Taxes..................................... Total fixed overhead cost......... Total overhead cost.................. $3.70 1.50 $5.20

Activity (in machine-hours) 6,100 6,200 $ 22,570 9,150 31,720 173,972 68,076 242,048 $273,768 $ 22,940 9,300 32,240 173,972 68,076 242,048 $274,288

129. If the denominator level of activity is 6,100 machine-hours, the variable element in the predetermined overhead rate would be: A) $5.20 B) $44.24 C) $39.68 D) $44.88 Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Easy Solution: Variable element = $31,720 ÷ 6,100 MHs = $5.20 per MH

130. If the denominator level of activity is 6,100 machine-hours, the fixed element in the predetermined overhead rate would be: A) $520.00 B) $39.68 C) $5.20 D) $44.88 Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Easy Solution: Fixed element = $242,048 ÷ 6,100 MHs = $39.68 per MH 131. If the denominator level of activity is 6,200 machine-hours, the predetermined overhead rate would be: A) $520.00 B) $5.20 C) $44.24 D) $39.04 Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Easy Solution: Predetermined overhead rate = $274,288 ÷ 6,200 MHs = $44.24 per MH Use the following to answer questions 132-133: Kasteron Corporation has a standard cost system in which manufacturing overhead is applied to units of product on the basis of standard machine-hours. The company has provided the following data concerning its manufacturing overhead costs for last year: Actual machine-hours................................................... Standard machine-hours allowed for the actual output. Denominator activity..................................................... Actual fixed overhead costs.......................................... Budgeted fixed overhead costs...................................... Predetermined overhead rate ($1 variable + $3 fixed).. 640 650 700 $2,00 0 $2,10 0 $4 hours hours hours

per hour

132. The fixed overhead budget variance would be: A) $100 F B) $300 F C) $300 U D) $200 F Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Easy Solution: Budget variance = Actual fixed overhead cost − Budgeted fixed overhead cost = $2,000 − $2,100 = $100 F 133. The volume variance would be: A) $180 F B) $240 F C) $150 U D) $200 U Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Medium Solution: Volume variance = Fixed portion of predetermined overhead rate × (Denominator hours − Standard hours allowed) = $3 per hour × (700 hours − 650 hours) = $3 per hours × 50 hours = $150 U Use the following to answer questions 134-135: Asper Corporation has provided the following data for February. Denominator level of activity.................... Budgeted fixed overhead costs.................. Fixed portion of the predetermined overhead rate.......................................... Actual level of activity.............................. Standard machine-hours allowed for the actual output........................................... Actual fixed overhead costs....................... 7,700 machine-hours $266,42 0 $34.60 per machine-hour 7,900 machine-hours 8,200 machine-hours $259,96 0

134. The budget variance for February is: A) $6,460 F B) $6,920 U C) $6,460 U D) $6,920 F Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Easy Solution: Budget variance = Actual fixed overhead cost − Budgeted fixed overhead cost = $259,960 − $266,420 = $6,460 F 135. The volume variance for February is: A) $17,300 U B) $17,300 F C) $6,920 F D) $6,920 U Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Easy Solution: Volume variance = Fixed portion of predetermined overhead rate × (Denominator hours − Standard hours allowed) = $34.60 per MH × (7,700 MHs − 8,200 MHs) = $34.60 per MH × 500 MHs = $17,300 F Use the following to answer questions 136-137: The following data for May has been provided by Mccawley Corporation. Denominator level of activity........ Budgeted fixed overhead costs...... Actual level of activity................... Standard machine-hours allowed for the actual output.................... Actual fixed overhead costs........... 2,600 machine-hours $53,82 0 2,700 machine-hours 2,800 machine-hours $56,29 0

136. The budget variance for May is: A) $2,070 U B) $2,470 F C) $2,070 F D) $2,470 U Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Easy Solution: Budget variance = Actual fixed overhead cost − Budgeted fixed overhead cost = $56,290 − $53,820 = $2,470 U 137. The volume variance for May is: A) $2,070 U B) $4,140 U C) $4,140 F D) $2,070 F Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Easy Solution: Volume variance = Fixed portion of predetermined overhead rate × (Denominator hours − Standard hours allowed) = ($53,820 ÷ 2,600 MHs) × (2,600 MHs − 2,800 MHs) = = $20.70 per MH × 200 MHs = $4,140 F

138. The following overhead data are for a department in a large company. Activity level (in units)...... Variable costs: Indirect materials............ Power.............................. Fixed costs: Supervision..................... Depreciation.................... Required: Prepare a report that would be useful in assessing how well costs were controlled in this department. Ans: Cost formula per unit Variable costs: Indirect materials.... Power...................... Total variable cost..... Fixed costs: Supervision............. Depreciation........... Total fixed cost.......... Total cost................... $13.50 9.20 $22.70 Actual costs incurred $3,625 2,648 6,273 9,670 4,210 13,880 $20,153 Flexible budget based on actual activity $3,915 2,668 6,583 9,700 4,200 13,900 $20,483 Actual 290 $3,625 $2,648 $9,670 $4,210 Static budget 280 $3,780 $2,576 $9,700 $4,200

Variance $290 F 20 F 310 F 30 F 10 U 20 F $330 F

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement; Reporting LO: 1; 2 Level: Easy

139. You have been recently hired by Ritter Enterprises as an assistant manager. As your first task, you have been asked to set up a flexible budgeting system for manufacturing overhead. The major purpose of this system will be to prepare performance reports. Required: What three criteria should be used when selecting an activity base for constructing a flexible budget? Why are these criteria important? Ans: The three criteria and the reasons for their importance are: 1. There should be a causal relationship between the activity base and the overhead costs in the flexible budget. If variations in the activity base do not cause variations in the costs, then the performance report will have little value. 2. The activity base should not be expressed in dollars or other currency. Activity bases stated in dollars are subject to price-level changes that may have little to do with overhead costs. For example, an increase in the wage rate of direct labor would cause a direct labor cost activity base to change even though a proportionate change may not take place in the overhead costs themselves. 3. The activity base should be simple and easy to understand. If the activity base is complex or difficult to understand, it will probably cause confusion and misunderstanding rather than serve as a means of positive cost control. AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement; Reporting LO: 1 Level: Easy

140. Elvin Hospital bases its budgets on patient-visits. The hospital's static budget for May appears below: Budgeted number of patient-visits............. Budgeted variable overhead costs: Supplies (@ $2.70 per patient-visit)....... Laundry (@ $3.00 per patient-visit)....... Total variable overhead cost...................... Budgeted fixed overhead costs: Wages and salaries.................................. Occupancy costs..................................... Total fixed overhead cost........................... Total budgeted overhead cost.................... Required: Prepare a flexible budget for an activity level of 5,300 patient-visits per month. Ans: Cost Formula (per patientvisit) Variable overhead costs: Supplies.................................... Laundry.................................... Total variable overhead cost....... Fixed overhead costs: Wages and salaries................... Occupancy costs...................... Total fixed overhead cost............ Total overhead cost..................... $2.70 3.00 $5.70 Flexible Budget Based on 5,300 Patient-Visits $14,310 15,900 30,210 16,830 16,830 33,660 $63,870 5,100 $13,77 0 15,300 29,070 16,830 16,830 33,660 $62,73 0

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement; Reporting LO: 1 Level: Easy

141. Wytch Corporation bases its budgets on machine-hours. The company's static budget for February appears below: Budgeted number of machine-hours.......... Budgeted variable overhead costs: Supplies (@ $6.90 per machine-hour).... Power (@ $3.70 per machine-hour)....... Total variable overhead cost...................... Budgeted fixed overhead costs: Salaries................................................... Equipment depreciation.......................... Total fixed overhead cost.......................... Total budgeted overhead cost.................... Required: Prepare a flexible budget in good form for an activity level of 6,400 machine-hours per month. Ans: Cost Formula Flexible Budget Based (per machine-hour) on 6,400 Machine-Hours Variable overhead costs: Supplies................................. Power..................................... Total variable overhead cost..... Fixed overhead costs: Salaries.................................. Equipment depreciation......... Total fixed overhead cost......... Total overhead cost................... $6.90 3.70 $10.60 $44,160 23,680 67,840 51,600 26,400 78,000 $145,840 6,000 $ 41,40 0 22,200 63,600 51,600 26,400 78,000 $141,60 0

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement; Reporting LO: 1 Level: Easy

142. Lobato Hospital bases its budgets on patient-visits. The hospital's static budget for September appears below: Budgeted number of patient-visits............. Budgeted variable overhead costs: Supplies (@ $2.20 per patient-visit)....... Laundry (@ $1.10 per patient-visit)....... Total variable overhead cost...................... Budgeted fixed overhead costs: Salaries.................................................... Occupancy costs..................................... Total fixed overhead cost........................... Total budgeted overhead cost.................... Actual results for the month were: Actual number of patient-visits.................. Supplies...................................................... Laundry...................................................... Salaries....................................................... Occupancy costs......................................... Required: Prepare a flexible budget performance report in good form. 10,000 $22,04 0 $10,64 0 $28,48 0 $11,36 0 9,900 $21,78 0 10,89 0 32,67 0 28,710 10,89 0 39,60 0 $72,27 0

Ans: Cost Formula (per patientvisit) Variable overhead costs: Supplies............................... Laundry............................... Total variable overhead cost. . Fixed overhead costs: Salaries................................ Occupancy costs................. Total fixed overhead cost....... Total overhead cost................ $2.20 1.10 $3.30 Actual Costs Incurred for 10,000 PatientVisits $22,040 10,640 32,680 28,480 11,360 39,840 $72,520 Flexible Budget Based on 10,000 PatientVisits $22,000 11,000 33,000 28,710 10,890 39,600 $72,600

Variances $40 U 360 F 320 F 230 F 470 U 240 U $80 F

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement; Reporting LO: 2 Level: Easy

143. Weakly Corporation bases its budgets on machine-hours. The company's static budget for September appears below: Budgeted number of machine-hours.......... Budgeted variable overhead costs: Power (@ $9.30 per machine-hour)........ Supplies (@ $5.20 per machine-hour).... Total variable overhead cost...................... Budgeted fixed overhead costs: Salaries.................................................... Equipment depreciation.......................... Total fixed overhead cost........................... Total budgeted overhead cost.................... Actual results for the month were: Actual number of machine-hours............... Power......................................................... Supplies...................................................... Salaries....................................................... Equipment depreciation............................. Required: Prepare a flexible budget performance report in good form. 6,400 $59,87 0 $34,96 0 $65,10 0 $44,61 0 6,000 $ 55,800 31,200 87,000 68,400 46,200 114,600 $201,60 0

Ans: Cost Formula (per machine -hour) Variable overhead costs: Power.................................. Supplies............................... Total variable overhead cost. . Fixed overhead costs: Salaries................................ Equipment depreciation...... Total fixed overhead cost....... Total overhead cost................ $9.30 5.20 $14.50 Actual Costs Incurred for 6,400 MachineHours $59,870 34,960 94,830 65,100 44,610 109,710 $204,540 Flexible Budget Based on 6,400 MachineHours Variances $59,520 33,280 92,800 68,400 46,200 114,600 $207,400 $350 U 1,680 U 2,030 U 3,300 F 1,590 F 4,890 F $2,860 F

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement; Reporting LO: 2 Level: Easy

144. Cashaw Corporation, which produces only a single product, bases its budgets on units produced. The company's static budget for September appears below: Budgeted number of units produced.......... Budgeted variable overhead costs: Power (@ $6.50 per unit)........................ Supplies (@ $1.10 per unit).................... Total variable overhead cost...................... Budgeted fixed overhead costs: Salaries.................................................... Occupancy costs..................................... Total fixed overhead cost........................... Total budgeted overhead cost.................... Actual results for the month were: Actual number of units produced............... Power......................................................... Supplies...................................................... Salaries....................................................... Occupancy costs......................................... Required: Prepare a flexible budget performance report in good form. Ans: Cost Formula (per unit) Variable overhead costs: Power.................................. Supplies............................... Total variable overhead cost. . Fixed overhead costs: Salaries................................ Occupancy costs................. Total fixed overhead cost....... $6.50 1.10 $7.60 Actual Costs Incurred for 4,500 Units $31,840 4,730 36,570 32,480 4,800 37,280 Flexible Budget Based on 4,500 Units $29,250 4,950 34,200 34,020 4,620 38,640 4,500 $31,84 0 $4,730 $32,48 0 $4,800 4,200 $27,30 0 4,620 31,920 34,020 4,620 38,640 $70,56 0

Variances $2,590 U 220 F 2,370 U 1,540 F 180 U 1,360 F

Total overhead cost................

$73,850

$72,840

$1,010 U

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement; Reporting LO: 2 Level: Easy

145. Flick Company uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of standard direct labor-hours. The company's total budgeted variable and fixed manufacturing overhead costs at the denominator level of activity are $20,000 for variable overhead and $30,000 for fixed overhead. The predetermined overhead rate, including both fixed and variable components, is $2.50 per direct labor-hour. The standards call for two direct labor-hours per unit of output produced. Last year, the company produced 11,500 units of product and worked 22,000 direct labor-hours. Actual costs were $22,500 for variable overhead and $31,000 for fixed overhead. Required: a. b. c. d. e. f. What is the denominator level of activity? What were the standard hours allowed for the output last year? What was the variable overhead spending variance? What was the variable overhead efficiency variance? What was the fixed overhead budget variance? What was the fixed overhead volume variance?

Ans: a. Total overhead at the denominator level of activity........ ÷ Predetermined overhead rate........................................ = Denominator level of activity....................................... b . Actual output............................... × Standard DLH per unit............. = Standard DLHs allowed........... 11,500 units 2 DLH per unit 23,000 DLHs $50,000 $2.50/DLH 20,000 DLHs

c. Computation of variable overhead spending variance: Spending variance = (AH × AR) − (AH × SR) = ($22,500) − (22,000 × $1.00*) = $500 U *$20,000 ÷ 20,000 DLHs = $1.00 d. Computation of variable overhead efficiency variance: Spending variance = (AH × SR) − (SH × SR) = (22,000 × $1.00) − (23,000* × $1.00) = $1,000 F * 2 DLHs per unit × 11,500 units = 23,000 DLHs e. Computation of the fixed overhead budget variance: Budget variance = Actual fixed overhead − Budgeted Fixed overhead = $31,000 − $30,000 = $1,000 U f. Computation of the fixed overhead volume variance: Volume variance = Fixed portion of predetermined overhead rate × (Denominator hours − Standard hours allowed) = $1.50* (20,000 − 23,000) = $4,500 F *$30,000 ÷ 20,000 DLH = $1.50 per DLH AACSB: Analytic AICPA BB: Critical Thinking LO: 3; 4; 5; 6 Level: Medium AICPA FN: Reporting

146. Wattis Manufacturing has established the following master flexible budget: Sales in units..................................... Sales.................................................. Variable expenses: Raw materials................................ Direct labor.................................... Variable manufacturing overhead.. Variable selling and administrative Total variable expenses..................... Contribution margin.......................... Fixed expenses: Fixed manufacturing overhead...... Fixed selling and administrative.... Total fixed expenses......................... Net operating income........................ 100,000 $1,500,00 0 220,000 240,000 180,000 100,000 740,000 760,000 337,500 250,000 587,500 $ 172,500 150,000 $2,250,00 0 330,000 360,000 270,000 150,000 1,110,000 1,140,000 337,500 250,000 587,500 $ 552,500 200,000 $3,000,00 0 440,000 480,000 360,000 200,000 1,480,000 1,520,000 337,500 250,000 587,500 $ 932,500

Manufacturing overhead is applied on the basis of standard machine-hours. At standard, each unit of product requires one machine-hour to complete. Required: a. The denominator activity level is 150,000 units. What are the predetermined variable and fixed manufacturing overhead rates? b. Actual data for the year were as follows: Actual variable manufacturing overhead cost................. Actual fixed manufacturing overhead cost..................... Actual machine-hours incurred....................................... Units produced and sold.................................................. $211,68 0 $343,00 0 126,000 120,000

Compute the variable overhead spending and efficiency variances and the fixed overhead budget and volume variances for the year.

Ans: a. Predetermined variable overhead rate = $270,000 ÷ 150,000 machine-hours = $1.80 per machine-hour Predetermined fixed overhead rate = $337,500 ÷ 150,000 machine-hours = $2.25 per machine-hour b. Variable overhead variances: Spending variance = AH (AR − SR) = 126,000 ($1.68* − $1.80) = $15,120 F *AR = $211,680 ÷ 126,000 actual machine-hours = $1.68 Efficiency variance = SR (AH − SH) = $1.80 (126,000 − 120,000*) = $10,800 U *SH = 120,000 units × 1 hour per unit = 120,000 hours Fixed overhead variances: Budget variance = Actual fixed overhead − Budgeted fixed overhead = $343,000 − $337,500 = $5,500 U Volume variance = Fixed rate (Denominator hours − Standard hours) = $2.25 (150,000 − 120,000*) = $67,500 U *Standard hours = 120,000 units × 1 hour per unit = 120,000 hours AACSB: Analytic AICPA BB: Critical Thinking LO: 3; 4; 5; 6 Level: Hard AICPA FN: Reporting

147. Sorrick Corporation, which makes sophisticated industrial valves, has provided the following data from its standard costing system and for its actual operations in March: Budgeted production..................................... Actual production.......................................... Standard machine-hours per valve................ Budgeted machine-hours (7.5 × 5,300)......... Standard machine-hours allowed for the actual output (7.5 × 5,400)........................ Actual machine-hours................................... 5,300 5,400 7.5 39,750 valves valves machine-hours machine-hours

40,500 machine-hours 41,160 machine-hours

Budgeted variable overhead cost per machine-hour: Indirect labor............. $9.30 per machine-hour Power........................ $2.40 per machine-hour Actual total variable overhead costs: $363,40 Indirect labor............. 0 Power........................ $94,821 Required: Compute the variable overhead spending variances for indirect labor and for power for March. Indicate whether each of the variances is favorable (F) or unfavorable (U). Show your work! Ans: Cost Formula (per machinehour) $9.30 $2.40 Actual Costs Incurred 41,160 MachineHours $363,400 $94,821 Flexible Budget Based on 41,160 MachineHours $382,788 $98,784

Indirect labor.. Power.............

Spending Variance $19,388 F $3,963 F

AACSB: Analytic AICPA BB: Critical Thinking LO: 3 Level: Easy

AICPA FN: Reporting

148. The following data for November have been provided by Hunn Corporation, a producer of precision drills for oil exploration: Budgeted production...................... Standard machine-hours per drill... Standard indirect labor................... Standard power.............................. Actual production........................... Actual machine-hours.................... Actual indirect labor...................... Actual power.................................. Required: Compute the variable overhead spending variances for indirect labor and for power for November. Indicate whether each of the variances is favorable (F) or unfavorable (U). Show your work! Ans: Actual Costs Incurred 35,350 MachineHours $313,923 $83,310 Flexible Budget Based on 35,350 MachineHours $311,080 $84,840 3,700 9.0 $8.80 $2.40 drills machine-hours per machine-hour per machine-hour

3,900 drills 35,350 machine-hours $313,92 3 $83,310

Indirect labor.. Power.............

Cost Formula (per machinehour) $8.80 $2.40

Spending Variance $2,843 U $1,530 F

AACSB: Analytic AICPA BB: Critical Thinking LO: 3 Level: Easy

AICPA FN: Reporting

149. Hammond Corporation has provided the following data for October: Budgeted production.................................. Actual production....................................... Standard machine-hours per unit............... Budgeted machine-hours (6.0 × 2,100)...... Standard machine-hours allowed for the actual output (6.0 × 2,400)..................... Actual machine-hours................................ 2,100 2,400 6.0 12,60 0 14,40 0 14,22 0 units units machine-hours machine-hours machine-hours machine-hours

Budgeted variable overhead cost per machine-hour: Lubricants........... $1.00 per machine-hour Supplies............... $1.60 per machine-hour Actual total variable overhead costs: $13,97 Lubricants........... 4 $23,55 Supplies............... 8 Required: Compute the variable overhead spending variances for lubricants and for supplies for October. Indicate whether each of the variances is favorable (F) or unfavorable (U). Show your work! Ans: Cost Formula (per machinehour) Lubricants...... $1.00 Supplies......... $1.60 Actual Costs Incurred 14,220 Machine-Hours $13,974 $23,558 Flexible Budget Based on 14,220 Machine-Hours $14,220 $22,752 Spending Variance $246 F $806 U

AACSB: Analytic AICPA BB: Critical Thinking LO: 3 Level: Easy

AICPA FN: Reporting

150. The following data have been provided by Lopus Corporation: Budgeted production.................................. Standard machine-hours per unit............... Standard lubricants..................................... Standard supplies....................................... Actual production....................................... Actual machine-hours................................ Actual lubricants (total)............................. Actual supplies (total)................................ Required: Compute the variable overhead spending variances for lubricants and for supplies. Indicate whether each of the variances is favorable (F) or unfavorable (U). Show your work! Ans: Cost Formula (per machinehour) Lubricants...... $4.20 Supplies......... $2.90 Actual Costs Incurred 8,080 Machine-Hours $35,151 $23,038 Flexible Budget Based on 8,080 Machine-Hours $33,936 $23,432 Spending Variance $1,215 U $394 F 2,600 2.7 $4.20 $2.90 units machine-hours per machine-hour per machine-hour

2,900 units 8,080 machine-hours $35,15 1 $23,03 8

AACSB: Analytic AICPA BB: Critical Thinking LO: 3 Level: Easy

AICPA FN: Reporting

151. Osika Corporation, which makes helicopter rotors, has provided the following data for November: Budgeted production.................................. Actual production....................................... Standard machine-hours per rotor.............. Budgeted machine-hours (8.7 × 3,300)...... Standard machine-hours allowed for the actual output (8.7 × 3,500)..................... Actual machine-hours................................ 3,300 3,500 8.7 28,71 0 30,45 0 31,01 0 rotors rotors machine-hours machine-hours machine-hours machine-hours

Budgeted variable overhead cost per machine-hour: Indirect labor........... $1.00 per machine-hour Power....................... $2.50 per machine-hour Actual total variable overhead costs: $32,67 Indirect labor........... 3 $70,91 Power....................... 3 Required: Prepare a variable overhead performance report in good form showing the total variances, the spending variances, and the efficiency variances.

Ans: Osika Corporation Variable Overhead Performance Report For the Month Ended November 30 Budgeted machine-hours......................... Actual machine-hours.............................. Standard machine-hours allowed............. 28,710 31,010 30,450 (1) (2) (3) Actual Flexible Flexible Costs Budget Budget Incurred Based on Based on 31,010 31,010 30,450 Machine- Machine- MachineHours Hours Hours $32,673 $31,010 $30,450 70,913 77,525 76,125 $103,586 $108,535 $106,575 Spending Variance (1) − (2) $1,663 U 6,612 F $4,949 F Efficiency Variance (2) − (3) $560 U 1,400 U $1,960 U

Variable overhead costs: Indirect labor............................. Power........................................ Total..........................................

Cost Formula (per machine -hour) $1.00 2.50 $3.50 Total Variance (1) − (3) $2,223 U 5,212 F $2,989 F

Variable overhead costs: Indirect labor............................. Power........................................ Total..........................................

AACSB: Analytic AICPA BB: Critical Thinking LO: 4 Level: Easy

AICPA FN: Reporting

152. Koppa Corporation, which makes skylights, has provided the following data for January: Budgeted production.................................. Actual production...................................... Standard machine-hours per skylight........ Actual machine-hours................................ 6,100 6,300 6.6 42,12 0 skylights skylights machine-hours machine-hours

Budgeted variable overhead cost per machine-hour: Indirect labor.......... $5.90 per machine-hour Power..................... $1.00 per machine-hour Actual total variable overhead costs: $268,30 Indirect labor.......... 6 Power..................... $41,922 Required: Prepare a variable overhead performance report in good form showing the total variances, the spending variances, and the efficiency variances.

Ans: Koppa Corporation Variable Overhead Performance Report For the Month Ended January 31 Budgeted machine-hours (6.6 × 6,100)................................................ Actual machine-hours........................................................................... Standard machine-hours allowed for the actual output (6.6 × 6,300)... (1) Actual Cost Costs Formula Incurred (per 42,120 machine Machine-hour) Hours $5.90 $268,306 1.00 41,922 $6.90 $310,228 Total Variance (1) − (3) $22,984 U 342 U $23,326 U 40,260 42,120 41,580

Variable overhead costs: Indirect labor.................... Power............................... Total.................................

(2) (3) Flexible Flexible Budget Budget Based on Based on 42,120 41,580 Machine- MachineHours Hours $248,508 $245,322 42,120 41,580 $290,628 $286,902 Efficiency Variance (2) − (3) $3,186 U 540 U $3,726 U

Variable overhead costs: Indirect labor.................... Power............................... Total.................................

Spending Variance (1) − (2) $19,798 U 198 F $19,600 U

AACSB: Analytic AICPA BB: Critical Thinking LO: 4 Level: Easy

AICPA FN: Reporting

153. Creger Corporation, which makes landing gears, has provided the following data for a recent month: Budgeted production.................................. Standard machine-hours per gear.............. Budgeted supplies cost.............................. Actual production...................................... Actual machine-hours................................ Actual supplies cost (total)........................ Required: Determine the total variance, the spending variance, and the efficiency variance for the variable overhead item supplies cost that would appear on the company's variable overhead performance report. Show your work! Ans: Budgeted machine-hours (9.3 × 7,900)................................................ Actual machine-hours........................................................................... Standard machine-hours allowed for the actual output (9.3 × 8,300). . (1) Actual Costs Incurred 76,930 MachineHours $479,438 Spending Variance (1) − (2) $2,472 U (2) Flexible Budget Based on 76,930 MachineHours $476,966 Efficiency Variance (2) − (3) $1,612 F 73,470 76,930 77,190 (3) Flexible Budget Based on 77,190 MachineHours $478,578 7,900 9.3 $6.20 8,300 76,930 $479,43 8 gears machine-hours per machine-hour gears machine-hours

Variable overhead costs: Supplies cost......................

Cost Formula (per machine -hour) $6.20 Total Variance (1) − (3) $860 U

Variable overhead costs: Supplies cost......................

AACSB: Analytic AICPA BB: Critical Thinking LO: 4 Level: Easy

AICPA FN: Reporting

154. Bondi Corporation makes automotive engines. For the most recent month, budgeted production was 1,500 engines. The budgeted power cost is $3.10 per machine-hour. The company's standards indicate that each engine requires 9.3 machine-hours. Actual production was 1,800 engines. Actual machine-hours were 15,860 machine-hours. Actual power cost totaled $51,593. Required: Determine the total variance, the spending variance, and the efficiency variance for the variable overhead item power cost that would appear on the company's variable overhead performance report. Show your work! Ans: Budgeted machine-hours (9.3 × 1,500)................................................... Actual machine-hours.............................................................................. Standard machine-hours allowed for the actual output (9.3 × 1,800)..... (1) Actual Costs Incurred 15,860 MachineHours $51,593 Spending Variance (1) − (2) $2,427 U (2) Flexible Budget Based on 15,860 MachineHours $49,166 Efficiency Variance (2) − (3) $2,728 F AICPA FN: Reporting 13,950 15,860 16,740

Variable overhead costs: Power cost........................

Cost Formula (per machinehour) $3.10 Total Variance (1) − (3) $301 F

(3) Flexible Budget Based on 16,740 MachineHours $51,894

Variable overhead costs: Power cost........................

AACSB: Analytic AICPA BB: Critical Thinking LO: 4 Level: Easy

155. Hykes Corporation's flexible budget for two levels of activity appears below: Cost Formula (per machinehour) Variable overhead costs: Supplies................................. Indirect labor......................... Total variable overhead cost.... Fixed overhead costs: Salaries.................................. Depreciation.......................... Total fixed overhead cost......... Total overhead cost.................. Required: Determine the predetermined overhead rate if the denominator level of activity is 3,100 machine-hours. Show your work! Ans: Predetermined overhead rate = Overhead from the flexible budget/Denominator level of activity = $141,670/3,100 machine-hours = $45.70 per machine-hour AACSB: Analytic AICPA BB: Critical Thinking LO: 5 Level: Easy AICPA FN: Reporting $4.40 4.40 $8.80

Activity (in machine-hours) 3,000 3,100 $ 13,200 13,200 26,400 55,800 58,590 114,390 $140,790 $ 13,640 13,640 27,280 55,800 58,590 114,390 $141,670

156. Benoit Corporation has provided its flexible budget for two levels of activity: Cost Formula (per machinehour) Variable overhead costs: Supplies....................................... Wearing tools.............................. Total variable overhead cost.......... Fixed overhead costs: Salaries........................................ Occupancy costs......................... Total fixed overhead cost............... Total overhead cost........................ Required: Determine the predetermined overhead rate for the denominator level of activity of 5,700 machine-hours. Show your work! Ans: Predetermined overhead rate = Overhead from the flexible budget/Denominator level of activity = $630,648/5,700 machine-hours = $110.64 per machine-hour AACSB: Analytic AICPA BB: Critical Thinking LO: 5 Level: Easy AICPA FN: Reporting $ 4.60 8.60 $13.20

Activity (in machine-hours) 5,600 5,700 $ 25,760 48,160 73,920 201,096 354,312 555,408 $629,328 $ 26,220 49,020 75,240 201,096 354,312 555,408 $630,64 8

157. Coppin Corporation has provided the following data for August. Denominator level of activity................... Budgeted fixed overhead costs................. Fixed portion of the predetermined overhead rate......................................... Actual level of activity............................. Standard machine-hours allowed for the actual output.......................................... Actual fixed overhead costs...................... Required: a. Compute the budget variance for August. Show your work! b. Compute the volume variance for August. Show your work! Ans: a. Budget variance = Actual fixed overhead cost − Budgeted fixed overhead cost = $193,710 − $196,560 = $2,850 F b. Volume variance = Fixed portion of the predetermined overhead rate × (Denominator hours − Standard hours allowed) = $35.10 × (5,600 − 6,000) = $14,040 F AACSB: Analytic AICPA BB: Critical Thinking LO: 6 Level: Easy AICPA FN: Reporting 5,600 machine-hours $196,56 0 $35.10 per machine-hour 5,800 machine-hours 6,000 machine-hours $193,71 0

158. Holl Corporation has provided the following data for November. Denominator level of activity............................. Budgeted fixed overhead costs........................... Standard machine-hours allowed for the actual output.............................................................. Actual fixed overhead costs................................ Required: a. Compute the budget variance for November. Show your work! 4,800 machine-hours $56,64 0 5,100 machine-hours $55,86 0

b. Compute the volume variance for November. Show your work!

Ans: a. Budget variance = Actual fixed overhead cost − Budgeted fixed overhead cost = $55,860 − $56,640 = $780 F b. Fixed portion of the predetermined overhead rate = $56,640/4,800 machine-hours = $11.80 per machine-hour Volume variance = Fixed portion of the predetermined overhead rate × (Denominator hours − Standard hours allowed) = $11.80 × (4,800 − 5,100) = $3,540 F AACSB: Analytic AICPA BB: Critical Thinking LO: 6 Level: Easy AICPA FN: Reporting

159. Wangerin Corporation applies overhead to products based on machine-hours. The denominator level of activity is 6,900 machine-hours. The budgeted fixed overhead costs are $240,810. In April, the actual fixed overhead costs were $245,640 and the standard machine-hours allowed for the actual output were 7,200 machine-hours. Required: a. Compute the budget variance for April. Show your work! b. Compute the volume variance for April. Show your work! Ans: a. Budget variance = Actual fixed overhead cost − Budgeted fixed overhead cost = $245,640 − $240,810 = $4,830 U b. Fixed portion of the predetermined overhead rate = $240,810/6,900 machine-hours = $34.90 per machine-hour Volume variance = Fixed portion of the predetermined overhead rate × (Denominator hours − Standard hours allowed) = $34.90 × (6,900 − 7,200) = $10,470 F AACSB: Analytic AICPA BB: Critical Thinking LO: 6 Level: Easy AICPA FN: Reporting

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