Objective 8.6

1) The fixed overhead cost variance can be further subdivided into the:

A) price variance and the efficiency variance

B) spending variance and flexible-budget variance

C) production-volume variance and the efficiency variance

D) flexible-budget variance and the production-volume variance

Answer the following questions using the information below:

Jenny's Corporation manufactured 25,000 grooming kits for horses during March. The fixed-overhead cost-allocation rate is $20.00 per machine-hour. The following fixed overhead data pertain to March:

ActualStatic Budget

Production25,000 units24,000 units

Machine-hours6,100 hours6,000 hours

Fixed overhead costs for March$123,000$120,000

2) What is the fixed overhead production-volume variance?

A) $1,000 unfavorable

B) $2,000 favorable

C) $3,000 unfavorable

D) $5,000 favorable

Answer the following questions using the information below:

Gus Corporation manufactured 10,000 golf bags during April. The fixed overhead cost-allocation rate is $40.00 per machine-hour. The following fixed overhead data pertain to March:

ActualStatic Budget

Production10,000 units12,000 units

Machine-hours5,100 hours6,000 hours

Fixed overhead cost for March$244,000$240,000

3) What is the fixed overhead production-volume variance?

A) $4,000 unfavorable

B) $36,000 favorable

C) $40,000 unfavorable

D) $44,000 unfavorable

4) The production-volume variance may also be referred to as the:

A) flexible-budget variance

B) denominator-level variance

C) spending variance

D) efficiency variance

5) A favorable production-volume variance indicates that the company:

A) has good management

B) has allocated more fixed overhead costs than budgeted

C) has a total economic gain from using excess capacity

D) should increase capacity

6) An unfavorable production-volume variance of $20,000 indicates that the company has:

A) unused fixed manufacturing overhead capacity

B) overallocated $20,000 of fixed manufacturing overhead costs

C) $20,000 more capacity than needed

D) an economic loss of $20,000 from selling fewer products than planned

7) An unfavorable production-volume variance:

A) is not a good measure of a lost production opportunity

B) measures the total economic gain or loss due to unused capacity

C) measures the amount of extra fixed costs planned for but not used

D) takes into account the effect of additional revenues due to maintaining higher prices

8) The difference between budgeted fixed manufacturing overhead and the fixed manufacturing overhead allocated to actual output units achieved is called the fixed overhead:

A) efficiency variance

B) flexible-budget variance

C) combined-variance analysis

D) production-volume variance

9) The production volume variance arises only for fixed costs.

10) The production-volume variance arises whenever the actual level of the denominator differs from the level used to calculate the budgeted fixed overhead rate.

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