devry acct349 week 1 homework

| August 14, 2017

Review
Questions and Exercises
Completion Statements Fill in the
blank(s) to complete each statement.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Actual
variable overhead

$73,000

Actual
fixed overhead

$17,000

Budgeted
hours allowed for actual output produced

32,000

Budgeted
variable overhead cost rate per machine-hour

$2.50

Budgeted
fixed overhead cost rate per machine-hour

$0.50

The total overhead variance is:
b.
$6,000 favorable.

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

Actual
units of output

produced

9,500

Machine-hours
used

19,500

Total
overhead incurred

$79,500

What
total amount of variable and fixed overhead should Geyer credit to the Manufacturing
Overhead Allocated account for April 2011?
a.
$76,000

_C___
3. The following information is for Pappillon Corporation’s variable
manufacturing overhead costs last month: favorable flexible-budget variance of
$3,000, unfavorable efficiency variance of $2,500.
The
spending variance is:
c.
$5,500 favorable.

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

Static Budget

Maximum Capacity

Percent of capacity

80%

100%

Machine-hours

3,200

4,000

Variable overhead

$64,000

$80,000

Fixed overhead

$160,000

$160,000

Fawcett
operated at 90% of maximum capacity during 2010. Actual manufacturing overhead
for 2010 is $252,000. Fawcett uses the 2-variance analysis of manufacturing
overhead. The total overhead flexible-budget variance for the year is:
d.
$20,000 unfavorable.

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

= $252,000 ? ($160,000 + $72,000)

= $252,000 ? $232,000 = $20,000, or $20,000 U

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

Direct
materials

$14.50

Direct
manufacturing labor

16.00

Manufacturing
overhead
2
machine-hours @ $11

22.00

Total
standard cost

$52.50

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

Variable

$3,600,000

Fixed

3,000,000

Total

$6,600,000

During
November 2010, Edney Company produced 26,000 units. Edney used 53,500
machine-hours in November. Actual manufacturing overhead for the month is
$315,000 variable and $260,000 fixed. The total manufacturing overhead
allocated during November is $572,000. The variable overhead spending variance
for November is:
e.
$6,000 favorable.

__B__ 6. Using the information in question 5, the variable
overhead efficiency variance for November is:
b.
$9,000 unfavorable.

__B__ 7. Using the information in question 5, the fixed
overhead flexible-budget (spending) variance for November is:
b.
$10,000 unfavorable.

__A__ 8. Using the information in question 5, the production-volume
variance for November is:
a.
$10,000 favorable.

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

Review Exercises

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

Production in output units

400

Budgeted variable overhead cost rate per output unit

$3

Actual machine-hours used

700

Actual variable overhead costs

$1,350

Budgeted machine-hours allowed per output unit

1.50

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

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

c.
Using the columnar format below, compute the variable overhead spending and
efficiency variances.
Use
F for favorable variances and U for unfavorable variances.

Actual Costs Incurred

Actual Input Quantity
× Budgeted Rate

Flexible Budget:
Budgeted Input Quantity
Allowed for Actual Output
× Budgeted Rate

? VOH spending
variance ? VOH efficiency variance ?

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

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

Budgeted fixed overhead

$1,800

Actual fixed overhead costs

$1,750

Denominator level in machine-hours

300

Budgeted machine-hours allowed for
actual output produced

280

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

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

Actual
Costs Incurred

Same
Budgeted Lump-
Sum
Regardless of
Output
Level

Allocated:
Budgeted
Input
Quantity
Allowed for Actual Output
×
Budgeted Rate

$1,750
$1,800 280 x $6 = $1,680

$50 F
$120 U

? FOH spending variance ? Production-volume variance ?

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

Actual total overhead costs

$178,500

Flexible-budget formula based on machine-hours (MH)

$110,000 + $0.50 per MH

Budgeted total overhead cost rate per MH

$1.50 per MH

Total overhead spending variance

$8,000 unfavorable

Production-volume variance

$5,000 favorable

Herman
uses the 3-variance analysis of overhead costs.
a.
Compute the actual machine-hours used.

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

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