Question 1

Overhead application refers to:

Accepted Answer

A)   the addition of overhead cost to work in process inventory as a product cost
B)   a system of allocating manufacturing cost to products
C)   static budget applications
D)   Both the addition of overhead cost to work in process inventory as a product cost AND a system of allocating manufacturing cost to productsE) A) and C)
F) A) and B)

Question 2

In a standard costing system,the total manufacturing overhead variance is measured as:

Accepted Answer

A)   the difference between applied overhead based on actual output and actual overhead cost incurred
B)   the difference between actual overhead costs for two subsequent periods
C)   the difference between overhead costs in the flexible budget for two subsequent periods
D)   the difference between standard overhead applied and the overhead cost in the flexible budgetE) A) and D)
F) B) and C)

Question 3

Master Products has the following information at the end of the year:
What is Master Product's sales price variance?

Accepted Answer

A)   $3000 favourable
B)   $7500 favourable
C)   $7000 favourable
D)   $10 000 unfavourableE) B) and C)
F) None of the above

Question 4

The fixed overhead volume variance:

Accepted Answer

A)   Is useless,as it does not serve a control purpose.Rather,it is calculated only as a difference between total fixed overhead variance and fixed overhead budget variance.
B)   Is useless for control purposes,but allows managers to estimate capacity costs.
C)   Is useless for control purposes,but useful for product costing purposes.
D)   Is useful only when conducting two-way overhead variance analyses.E) All of the above
F) A) and D)

Question 5

When a flexible budget is used,a decrease in the actual production level within a range of activity would:

Accepted Answer

A)   decrease variable cost per unit
B)   decrease total variable costs
C)   increase variable cost per unit
D)   decrease fixed cost per unitE) A) and B)
F) A) and C)

Question 6

Z Company uses a variable costing system.There was no opening or closing stock.The following data is available.Use this data to determine Z's sales price variance.

Accepted Answer

A)   $2000 favourable
B)   $10 000 unfavourable
C)   $58 000 unfavourable
D)   $10 000 favourableE) None of the above
F) B) and D)

Question 7

Carvelle Cabinets set the following standard cost per unit for 2008.The standards were set based on a capacity of 20 000 machine hours.During the year,5100 units were produced.What was the amount of total overhead (fixed and variable) applied to work in process inventory during 2008?

Accepted Answer

A)   $356 400
B)   $365 750
C)   $367 200
D)   $370 750E) All of the above
F) A) and C)

Question 8

Which of the following cannot cause an unfavourable variable overhead efficiency variance?

Accepted Answer

A)   Using more direct labour hours or direct machine hours than the standard quantity,given actual output.
B)   Higher than expected production accomplished in less than the standard machine hours allowed.
C)   Using more of the variable overhead item,such as electricity,than the standard amount allowed.
D)   All of the given answersE) A) and C)
F) A) and B)

Question 9

Which of the following statements on flexible budgets is false?

Accepted Answer

A)   It enables companies to control overhead costs.
B)   It can be used to calculate direct material and direct labour variances.
C)   It is the same as a static budget.
D)   It provides a useful basis for comparison between actual and expected costs for a given level of activity.E) A) and B)
F) A) and C)

Question 10

Felter Company uses a standard costing system based on direct labour hours.Last month,Felter Company used more direct labour hours than planned,while the production level was consistent with expectations.This is likely to result in:

Accepted Answer

A)   Unfavourable fixed overhead variance and unfavourable variable overhead spending variance.
B)   Unfavourable fixed overhead variance and unfavourable variable overhead efficiency variance.
C)   Unfavourable variable overhead spending variance.
D)   Unfavourable variable overhead efficiency variance.E) All of the above
F) A) and B)

Question 11

Which of the following statements is true for a standard cost system?

Accepted Answer

A)   Applied fixed manufacturing overhead is recorded as a debit to the manufacturing overhead account.
B)   Overapplied fixed overhead is always debited to cost of goods sold.
C)   Underapplied fixed overhead is always credited to finished goods inventory.
D)   Applied fixed manufacturing overhead is recorded as a debit to the work in process inventory account.E) C) and D)
F) B) and C)

Question 12

A static budget is always:

Accepted Answer

A)   based on a specific planned activity level
B)   based on a range of activity within which the firm may operate
C)   the same as a flexible budget
D)   based on maximum capacityE) None of the above
F) All of the above

Question 13

To which ledger account are the standard costs of direct material,direct labour and manufacturing overhead charged?

Accepted Answer

A)   Not used at all
B)   Used for variances only
C)   Entered into work in process inventory
D)   Entered into a standard control accountE) B) and D)
F) B) and C)

Question 14

Assume the number of machine hours is the cost driver for variable overhead.The difference between the actual variable overhead and the flexible budget for variable overhead (based on standard machine hours allowed for actual output) is the:

Accepted Answer

A)   volume variance
B)   net overhead variance
C)   efficiency variance
D)   sum of variable spending and efficiency variancesE) B) and C)
F) B) and D)

Question 15

Which of the following statements is correct?

Accepted Answer

A)   Budgeted hours and standard hours are always the same.
B)   Budgeted hours and standard hours are never the same.
C)   Budgeted hours and standard hours will be the same when budgeted production equals actual production.
D)   Budgeted hours and standard hours are both related to budgeted production levels.E) A) and B)
F) A) and D)

Question 16

Since variances are temporary accounts,how are they usually handled?

Accepted Answer

A)   Closed directly to cost of goods sold at the end of each month.
B)   Closed directly to cost of goods sold at the end of each accounting period.
C)   Closed directly to cost of goods manufactured at the end of each accounting period.
D)   Closed directly to profit and loss account at the end of the year.E) A) and D)
F) A) and C)

Question 17

Management uses flexible budgets for controlling manufacturing overhead costs.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following statements is incorrect?

Accepted Answer

A)   The company's fixed overhead costs can be expressed as a flexible budget formula.
B)   The company's variable costs can be expressed as a flexible budget formula.
C)   The company's total production costs can be expressed as a flexible budget formula.
D)   A cost must have a fixed and a variable component before it can be expressed as a flexible budget formula.E) A) and B)
F) B) and C)

Question 19

A correct interpretation of an unfavourable variance is that it measures the cost of underutilising productive capacity.

Accepted Answer

A) True 
 B)False

Question 20

One of the shortcomings of ABC is that it is not easy to account for common costs shared by more than one activity.

Accepted Answer

A) True 
 B)False

Exam 11: Standard Costs for Control: Flexible Budgets and Manufacturing Overhead

A correct interpretation of an unfavourable variance is that it measures the cost of underutilising productive capacity.

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Which of the following statements is true for a standard cost system?

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A static budget is always:

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To which ledger account are the standard costs of direct material,direct labour and manufacturing overhead charged?

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In a standard costing system,the total manufacturing overhead variance is measured as:

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The fixed overhead volume variance:

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Assume the number of machine hours is the cost driver for variable overhead.The difference between the actual variable overhead and the flexible budget for variable overhead (based on standard machine hours allowed for actual output) is the:

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Which of the following cannot cause an unfavourable variable overhead efficiency variance?

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Management uses flexible budgets for controlling manufacturing overhead costs.

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Z Company uses a variable costing system.There was no opening or closing stock.The following data is available.Use this data to determine Z's sales price variance.

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Overhead application refers to:

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Since variances are temporary accounts,how are they usually handled?

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When a flexible budget is used,a decrease in the actual production level within a range of activity would:

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Which of the following statements is correct?

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One of the shortcomings of ABC is that it is not easy to account for common costs shared by more than one activity.

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Which of the following statements on flexible budgets is false?

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Carvelle Cabinets set the following standard cost per unit for 2008.The standards were set based on a capacity of 20 000 machine hours.During the year,5100 units were produced.What was the amount of total overhead (fixed and variable) applied to work in process inventory during 2008?

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Master Products has the following information at the end of the year: What is Master Product's sales price variance?

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Felter Company uses a standard costing system based on direct labour hours.Last month,Felter Company used more direct labour hours than planned,while the production level was consistent with expectations.This is likely to result in:

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Which of the following statements is incorrect?

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