# 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

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

\$73,000

Actual

\$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

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

\$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

\$64,000

\$80,000

\$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
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
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

\$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
variable

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

\$1,800

\$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:

\$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

\$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.