Question : 11) One way to manage both variable and fixed overhead : 1217267

 

11) One way to manage both variable and fixed overhead costs is to eliminate value-adding activities.

12) The planning of fixed overhead costs does NOT differ from the planning of variable overhead costs.

 

13) Jael Equipment uses a flexible budget for its indirect manufacturing costs. For 20X5, the company anticipated that it would produce 18,000 units with 3,500 machine-hours and 7,200 employee days. The costs and cost drivers were to be as follows:

 

FixedVariableCost driver

Product handling$30,000$0.40per unit

Inspection8,0008.00per 100 unit batch

Utilities4004.00per 100 unit batch

Maintenance1,0000.20per machine-hour

Supplies5.00per employee day

 

During the year, the company processed 20,000 units, worked 7,500 employee days, and had 4,000 machine-hours. The actual costs for 20X5 were:

 

Actual costs

Product handling$36,000

Inspection9,000

Utilities1,600

Maintenance1,200

Supplies37,500

 

Required:

a.Prepare the static budget using the overhead items above and then compute the static-budget variances.

b.Prepare the flexible budget using the overhead items above and then compute the flexible-budget variances.

Answer:

a.Jael Equipment

Overhead Static Budget with Variances

20X5

 

Static

ActualBudgetVariances

Product handling$36,000$37,200$1,200F

Inspection9,0009,440440F

Utilities1,6001,120480U

Maintenance1,2001,700500F

Supplies37,50036,0001,500U

Total$85,300$85,460$160F

 

b.Jael Equipment

Overhead Flexible Budget with Variances

20X5

 

Flexible

ActualBudgetVariances

Product handling$36,000$38,000$2,000F

Inspection9,0009,600600F

Utilities1,6001,200400U

Maintenance1,2001,800600F

Supplies37,50037,5000

Total$85,300$88,100$2,800F

 

Objective 8.2

 

1) In a standard costing system, a cost-allocation base would most likely be:

A) actual machine-hours

B) normal machine-hours

C) standard machine-hours

D) Any of these answers is correct.

2) For calculating the costs of products and services, a standard costing system:

A) only requires a simple recording system

B) uses standard costs to determine the cost of products

C) does not have to keep track of actual costs

D) All of these answers are correct.

 

3) Which of the following is NOT a step in developing budgeted variable overhead rates?

A) identifying the variable overhead costs associated with each cost-allocation base

B) estimating the budgeted denominator level based on expected utilization of available capacity

C) selecting the cost-allocation bases to use

D) choosing the period to be used for the budget

 

4) Which of the following is NOT a step in developing budgeted fixed overhead rates?

A) Choose the period to use for the budget.

B) Select the cost-allocation bases to use in allocating fixed overhead costs to output produced.

C) Identify the fixed overhead costs associated with each cost-allocation base.

D) All of the above are steps in developing budgeted fixed overhead rates.

 

5) In flexible budgets, costs that remain the same regardless of the output levels within the relevant range are:

A) allocated costs

B) budgeted costs

C) fixed costs

D) variable costs

Answer the following questions using the information below:

 

Willis Corporation manufactures industrial-sized gas furnaces and uses budgeted machine-hours to allocate variable manufacturing overhead. The following information pertains to the company’s manufacturing overhead data:

 

Budgeted output units30,000 units

Budgeted machine-hours10,000 hours

Budgeted variable manufacturing overhead costs for 15,000 units$322,500

 

Actual output units produced44,000 units

Actual machine-hours used14,400 hours

Actual variable manufacturing overhead costs$484,000

 

6) What is the budgeted variable overhead cost rate per output unit?

A) $10.75

B) $11.00

C) $32.25

D) $48.40