Chapter 11—Flexible 11—Flexible Budgets and Overhead Analysis TRUE/FALE
1. A static budget compares actual cost with budgeted costs. ANS: F A performance report compares actual cost with budgeted costs. PTS: 1 DIF: Difficult: !as "#$: %": 11&1 NAT NAT: #'SP("): Analtic Analtic STA: STA: AI*PA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 1 min. 2. Static Static budgets budgets are the best best benchmar3 benchmar3ss for preparing preparing a perform performance ance report. report. ANS: F PTS: 1 DIF: Difficult: !as "#$: %": 11 11&1 NAT: #'SP("): An Analtic STA: STA: AI*PA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 1 min. -. #efore&the& #efore&the&fact fact fle4ible fle4ible budgets budgets gi5e gi5e e4pected e4pected outcomes outcomes for a range of acti5it acti5it le5els le5els.. ANS: T PTS: 1 DIF: Difficult: !as "#$: %": 11 11&1 NAT: #'SP("): An Analtic STA: STA: AI*PA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting AP*&-&#udgeting and (esponsibilit /!0: #looms: *omprehension N"T: 1 min. 6. An after&the after&the&fact &fact fle4ible fle4ible budget budget allows managers managers to generate generate financial financial results results from a number of potential scenarios. scenarios. ANS: F An after&the&fact fle4ible budget is used to compute what costs should ha5e been for the actual le5el of acti5it. PTS: 1 DIF: Difficult: !as "#$: %": 11&1 NAT NAT: #'SP("): Analtic Analtic STA: STA: AI*PA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting AP*&-&#udgeting and (esponsibilit /!0: #looms: *omprehension N"T: 1 min. 7. A static budget is a budget for a particular le5el of acti5it. ANS: T PTS: 1 DIF: Difficult: !as "#$: %": 11 11&1 NAT: #'SP("): An Analtic STA: STA: AI*PA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 1 min. . 8hen o5erhead is applied on the basis basis of direct direct labor hours9 the 5ariable o5erhead o5erhead efficienc efficienc 5ariance alwas has the same sign as the labor efficienc 5ariance. ANS: T "#$: %": 11 11&2
PTS: 1 DIF: Difficult: !as NAT: #'SP("): An Analtic
STA: STA: AI*PA: AI*PA: FN&+easurement , I+A: Performance Performance +easurement , A*#SP: A*#SP: AP*&2&; AP*&2&;ariab ariable le and Fi4ed *osts /!0: #looms: *omprehension N"T: 1 min. <. The 5ariable 5ariable o5erhead spending 5ariance is conceptuall identical to the price 5ariances 5ariances of materials and labor. ANS: F PTS: 1 DIF: Difficult: !as "#$: %": 11 11&2 NAT: #'SP("): An Analtic STA: STA: AI*PA: AI*PA: FN&+easurement , I+A: Performance Performance +easurement , A*#SP: A*#SP: AP*&2&; AP*&2&;ariab ariable le and Fi4ed *osts /!0: #looms: *omprehension N"T: 1 min. . The 5ariable 5ariable o5erhea o5erhead d 5ariance 5ariance is affected affected b input input price price changes changes onl onl.. ANS: F The 5ariable o5erhead 5ariance is affected b both input price changes and b how efficientl o5erhead is used. PTS: 1 DIF: Difficult: !as "#$: %": 11&2 NAT NAT: #'SP("): Analtic Analtic STA: STA: AI*PA: AI*PA: FN&+easurement , I+A: Performance Performance +easurement , A*#SP: A*#SP: AP*&2&; AP*&2&;ariab ariable le and Fi4ed *osts /!0: #looms: *omprehension N"T: 1 min. =. Price changes changes of 5ariable 5ariable o5erhead o5erhead items are easil contro controlled lled b production production super5i super5isors. sors. ANS: F PTS: 1 DIF: Difficult: !as "#$: %": 11 11&2 NAT: #'SP("): An Analtic STA: STA: AI*PA: AI*PA: FN&+easurement , I+A: Performance Performance +easurement , A*#SP: A*#SP: AP*&2&; AP*&2&;ariab ariable le and Fi4ed *osts /!0: #looms: *omprehension N"T: 1 min. 1>. (esponsibilit for 5ariable 5ariable o5erhead spending and efficienc efficienc 5ariances 5ariances is generall assigned to production departments. departments. ANS: T PTS: 1 DIF: Difficult: !as "#$: %": 11 11&2 NAT: #'SP("): An Analtic STA: STA: AI*PA: AI*PA: FN&+easurement , I+A: Performance Performance +easurement , A*#SP: A*#SP: AP*&2&; AP*&2&;ariab ariable le and Fi4ed *osts /!0: #looms: *omprehension N"T: 1 min. 11. 11. Practical Practical capacit capacit is is alwas alwas used to calcula calculate te fi4ed o5erhea o5erhead d rates ANS: F PTS: 1 DIF: Difficult: !as "#$: %": 11 11&NAT: #'SP("): An Analtic STA: STA: AI*PA: AI*PA: FN&+easurement , I+A: Performance Performance +easurement , A*#SP: A*#SP: AP*&2&; AP*&2&;ariab ariable le and Fi4ed *osts /!0: #looms: /nowledge N"T: 1 min. 12. Fi4ed o5erhe o5erhead ad costs costs are resource resourcess ac?uired ac?uired as used used and and needed. needed. ANS: F PTS: 1 DIF: Difficult: !as "#$: %": 11 11&NAT: #'SP("): An Analtic STA: STA: AI*PA: AI*PA: FN&+easurement , I+A: Performance Performance +easurement , A*#SP: A*#SP: AP*&2&; AP*&2&;ariab ariable le and Fi4ed *osts /!0: #looms: /nowledge N"T: 1 min. 1-. The fi4ed o5erhead spending spending 5ariance 5ariance is affected primaril primaril b changes in production production le5els. le5els. ANS: F
PTS: 1
DIF:
Difficult: !as
STA: STA: AI*PA: AI*PA: FN&+easurement , I+A: Performance Performance +easurement , A*#SP: A*#SP: AP*&2&; AP*&2&;ariab ariable le and Fi4ed *osts /!0: #looms: *omprehension N"T: 1 min. <. The 5ariable 5ariable o5erhead spending 5ariance is conceptuall identical to the price 5ariances 5ariances of materials and labor. ANS: F PTS: 1 DIF: Difficult: !as "#$: %": 11 11&2 NAT: #'SP("): An Analtic STA: STA: AI*PA: AI*PA: FN&+easurement , I+A: Performance Performance +easurement , A*#SP: A*#SP: AP*&2&; AP*&2&;ariab ariable le and Fi4ed *osts /!0: #looms: *omprehension N"T: 1 min. . The 5ariable 5ariable o5erhea o5erhead d 5ariance 5ariance is affected affected b input input price price changes changes onl onl.. ANS: F The 5ariable o5erhead 5ariance is affected b both input price changes and b how efficientl o5erhead is used. PTS: 1 DIF: Difficult: !as "#$: %": 11&2 NAT NAT: #'SP("): Analtic Analtic STA: STA: AI*PA: AI*PA: FN&+easurement , I+A: Performance Performance +easurement , A*#SP: A*#SP: AP*&2&; AP*&2&;ariab ariable le and Fi4ed *osts /!0: #looms: *omprehension N"T: 1 min. =. Price changes changes of 5ariable 5ariable o5erhead o5erhead items are easil contro controlled lled b production production super5i super5isors. sors. ANS: F PTS: 1 DIF: Difficult: !as "#$: %": 11 11&2 NAT: #'SP("): An Analtic STA: STA: AI*PA: AI*PA: FN&+easurement , I+A: Performance Performance +easurement , A*#SP: A*#SP: AP*&2&; AP*&2&;ariab ariable le and Fi4ed *osts /!0: #looms: *omprehension N"T: 1 min. 1>. (esponsibilit for 5ariable 5ariable o5erhead spending and efficienc efficienc 5ariances 5ariances is generall assigned to production departments. departments. ANS: T PTS: 1 DIF: Difficult: !as "#$: %": 11 11&2 NAT: #'SP("): An Analtic STA: STA: AI*PA: AI*PA: FN&+easurement , I+A: Performance Performance +easurement , A*#SP: A*#SP: AP*&2&; AP*&2&;ariab ariable le and Fi4ed *osts /!0: #looms: *omprehension N"T: 1 min. 11. 11. Practical Practical capacit capacit is is alwas alwas used to calcula calculate te fi4ed o5erhea o5erhead d rates ANS: F PTS: 1 DIF: Difficult: !as "#$: %": 11 11&NAT: #'SP("): An Analtic STA: STA: AI*PA: AI*PA: FN&+easurement , I+A: Performance Performance +easurement , A*#SP: A*#SP: AP*&2&; AP*&2&;ariab ariable le and Fi4ed *osts /!0: #looms: /nowledge N"T: 1 min. 12. Fi4ed o5erhe o5erhead ad costs costs are resource resourcess ac?uired ac?uired as used used and and needed. needed. ANS: F PTS: 1 DIF: Difficult: !as "#$: %": 11 11&NAT: #'SP("): An Analtic STA: STA: AI*PA: AI*PA: FN&+easurement , I+A: Performance Performance +easurement , A*#SP: A*#SP: AP*&2&; AP*&2&;ariab ariable le and Fi4ed *osts /!0: #looms: /nowledge N"T: 1 min. 1-. The fi4ed o5erhead spending spending 5ariance 5ariance is affected primaril primaril b changes in production production le5els. le5els. ANS: F
PTS: 1
DIF:
Difficult: !as
"#$: %": 11 11&NAT: #'SP("): An Analtic STA: STA: AI*PA: AI*PA: FN&+easurement , I+A: Performance Performance +easurement , A*#SP: A*#SP: AP*&2&; AP*&2&;ariab ariable le and Fi4ed *osts /!0: #looms: *omprehension N"T: 1 min. 16. The 5olume 5olume 5ariance 5ariance is often often interpre interpreted ted as a measure measure of capacit capacit utili@a utili@ation. tion. ANS: T PTS: 1 DIF: Difficult: !as "#$: %": 11 11&NAT: #'SP("): An Analtic STA: STA: AI*PA: AI*PA: FN&+easurement FN&+easurement , I+A: I+A: Performance +easurement , A*#SP: AP*&--&Incremental AP*&--&Incremental analsis /!0: #looms: /nowledge N"T: 1 min. 17. Although general responsibilit responsibilit for the 5olume 5ariance 5ariance is usuall assigned to the purchasing department9 responsibilit on occasion ma be assigned to the production department. ANS: F PTS: 1 DIF: Difficult: !as "#$: %": 11 11&NAT: #'SP("): An Analtic STA: STA: AI*PA: AI*PA: FN&+easurement FN&+easurement , I+A: I+A: Performance +easurement , A*#SP: AP*&--&Incremental AP*&--&Incremental analsis /!0: #looms: *omprehension N"T: 1 min. 1. An acti5it&based acti5it&based budgetar budgetar approach approach can be used to emphasi@e emphasi@e cost reduction and process process management. ANS: T PTS: 1 DIF: Difficult: !as "#$: %": 11 11&6 NAT: #'SP("): An Analtic STA: STA: AI*PA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 1 min. 1<. Acti5it&based budgeting focuses on estimating the costs of acti5ities acti5ities rather than than the costs costs of departments and plants. ANS: T PTS: 1 DIF: Difficult: !as "#$: %": 11 11&6 NAT: #'SP("): An Analtic STA: STA: AI*PA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 1 min. 1. Acti5it&based budgeting builds a budget for each acti5it based on the resources resources needed to pro5ide the re?uired acti5it output le5els. ANS: T PTS: 1 DIF: Difficult: !as "#$: %": 11 11&6 NAT: #'SP("): An Analtic STA: STA: AI*PA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 1 min. 1=. Acti5it&b Acti5it&based ased budgeting budgeting support supportss continuous continuous impro5ement impro5ement and process process management. management. ANS: T PTS: 1 DIF: Difficult: !as "#$: %": 11 11&6 NAT: #'SP("): An Analtic STA: STA: AI*PA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 1 min. 2>. Acti5it fle4ible fle4ible budgeting budgeting is the prediction prediction of what what acti5it costs will will be as related output output changes. ANS: T "#$: %": 11 11&6
PTS: 1 DIF: Difficult: !as NAT: #'SP("): An Analtic
STA: STA: AI*PA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 1 min. 21. #ecause acti5ities acti5ities are what consume consume resources9 resources9 acti5it&based acti5it&based budgeting budgeting ma pro5e to be a much more powerful planning and and control tool than than the traditional approach. approach. ANS: T Acti5it&based budgeting budgeting ma pro5e to be a much more powerful planning and control tool than the traditional9 functional&based budgeting budgeting approach because acti5ities are what consume resources and9 thus9 are the causes of costs. PTS: 1 DIF: Difficult: !as "#$: %": 11&6 NAT NAT: #'SP("): Analtic Analtic STA: STA: AI*PA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting AP*&-&#udgeting and (esponsibilit /!0: #looms: *omprehension N"T: 1 min. 22. An acti5it&based acti5it&based budgetar budgetar approach approach can be used to emphasi@e emphasi@e cost increases through the the reduction reduction of wasteful acti5ities and impro5ing i mpro5ing the efficienc of necessar acti5ities. ANS: F An acti5it&based budgetar approach can be used to emphasi@e cost reduction through the elimination of wasteful acti5ities and impro5ing i mpro5ing the efficienc of necessar acti5ities. PTS: 1 DIF: Difficult: !as "#$: %": 11&6 NAT NAT: #'SP("): Analtic Analtic STA: STA: AI*PA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting AP*&-&#udgeting and (esponsibilit /!0: #looms: *omprehension N"T: 1 min. 2-. The first step of building building an acti5it&based budget is to identif identif the acti5ities acti5ities within within an organi@ation organi@ation.. ANS: T Step 1 of building an acti5it&based budget is to identif the acti5ities within an organi@ation. PTS: 1 DIF: Difficult: !as "#$: %": 11&6 NAT NAT: #'SP("): Analtic Analtic STA: STA: AI*PA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 1 min. 26. For a static acti5it acti5it budget in a compan alread alread using an A#* or A#+ sstem9 sstem9 the acti5ities within the organi@ation must be identified. ANS: F PTS: 1 DIF: Difficult: !as "#$: %": 11 11&6 NAT: #'SP("): An Analtic STA: STA: AI*PA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting AP*&-&#udgeting and (esponsibilit /!0: #looms: *omprehension N"T: 1 min. 27. Acti5it&based budgeting classifies costs costs as 5ariable 5ariable or fi4ed fi4ed with respect to the acti5it output measure. ANS: T Acti5it&based budgeting9 unli3e functional&based budgeting9 identifies the o5erhead9 selling9 and administrati5e acti5ities and then builds a budget for each acti5it9 based on the resources needed to pro5ide the re?uired acti5it acti5it output le5els. le5els. *osts are classified as 5ariable or fi4ed with respect respect to the acti5it output measure.
PTS: 1 DIF: Difficult: !as "#$: %": 11&6 NAT NAT: #'SP("): Analtic Analtic STA: STA: AI*PA: AI*PA: FN&Decision +odeling +odeling , I+A: #udget #udget Preparation , A*#SP: A*#SP: AP*&2&;a AP*&2&;ariable riable and Fi4e Fi4ed d *ost *ostss , A*#S A*#SP: P: AP*&- P*&-&# &#ud udge geti ting ng and and (es (espo pons nsib ibil ilit it /!0 /!0: #loo #loom ms: s: /no /nowl wled edge ge N"T: 1 min. 2. In an acti5it acti5it framewor39 framewor39 control controlling ling costs costs is e?ui5alent e?ui5alent to managin managing g acti5ities acti5ities.. ANS: T In an acti5it framewor39 controlling costs translates into managing acti5ities. PTS: 1 DIF: Difficult: !as "#$: %": 11&6 NAT NAT: #'SP("): Analtic Analtic STA: STA: AI*PA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting AP*&-&#udgeting and (esponsibilit /!0: #looms: *omprehension N"T: 1 min. 2<. Acti5it fle4ible fle4ible budgeting budgeting is the prediction prediction of what what acti5it costs will will be as production output changes. ANS: F Acti5it fle4ible budgeting is the prediction of what acti5it costs will be as acti5it output changes. PTS: 1 DIF: Difficult: !as "#$: %": 11&6 NAT NAT: #'SP("): Analtic Analtic STA: STA: AI*PA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting AP*&-&#udgeting and (esponsibilit /!0: #looms: *omprehension N"T: 1 min. 2. An acti5it&based acti5it&based budgeting sstem ma ma help support continuous impro5ement and process process management. ANS: T An acti5it&based budgeting sstem9 sstem9 a budgetar sstem at the acti5it le5el9 can be a useful approach to support continuous impro5ement and process management. PTS: 1 DIF: Difficult: !as "#$: %": 11&6 NAT NAT: #'SP("): Analtic Analtic STA: STA: AI*PA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting AP*&-&#udgeting and (esponsibilit /!0: #looms: *omprehension N"T: 1 min. !ATC"#
%$ Match the following following terms with the items items below: a. Actual hours − Standard hoursBS;"( b. Prediction of what acti5it acti5it costs will be be as acti5it output changes changes c. A measur measuree of capaci capacit t util utili@a i@atio tion n d. Actual 5ariable o5erhead − S;"( × Actual hoursB e. Differenc Differencee between between the actua actuall amount amount and the fle4i fle4ible ble budget budget amount amount f. A budg budget et that that speci specifie fiess costs costs for for a range range of acti5i acti5it t g. A budg budget et for for a particu particular lar le5el le5el of of acti5it acti5it h. !stimating !stimating acti5it acti5it output output and then then assessing assessing the the cost of resources resources to produce produce this output output i. A repo report rt that that comp compare aress actual actual with with plan planned ned cost costss C. Difference between actual actual and budgeted fi4ed o5erhead
1. 2. -. 6. 7. . <. . =. 1>.
Performance report Static budget Fle4ible budget Acti5it&based budgeting Fi4ed o5erhead spending 5ariance Acti5it fle4ible budget Fi4ed o5erhead 5olume 5ariance ;ariable o5erhead efficienc 5ariance ;ariable o5erhead spending 5ariance Fle4ible budget 5ariance
1. ANS: I PTS: 1 DIF: Difficult: !as "#$: %": 11&1 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 1 min. 2. ANS: ) PTS: 1 DIF: Difficult: !as "#$: %": 11&1 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 1 min. -. ANS: F PTS: 1 DIF: Difficult: !as "#$: %": 11&1 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 1 min. 6. ANS: PTS: 1 DIF: Difficult: !as "#$: %": 11&6 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 1 min. 7. ANS: $ PTS: 1 DIF: Difficult: !as "#$: %": 11&NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: /nowledge N"T: 1 min. . ANS: # PTS: 1 DIF: Difficult: !as "#$: %": 11&6 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 1 min. <. ANS: * PTS: 1 DIF: Difficult: !as "#$: %": 11&NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: /nowledge N"T: 1 min. . ANS: A PTS: 1 DIF: Difficult: !as "#$: %": 11&2 NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: /nowledge N"T: 1 min. =. ANS: D PTS: 1 DIF: Difficult: !as "#$: %": 11&2 NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: /nowledge N"T: 1 min. 1>. ANS: ! PTS: 1 DIF: Difficult: !as "#$: %": 11&1 NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: /nowledge N"T: 1 min.
CO!&LET#O$
1. A EEEEEEEEEEEEEEEEEEEEE compares actual costs with budgeted costs. ANS: performance report PTS: 1 DIF: Difficult: !as "#$: %": 11&1 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 2 min. 2. A EEEEEEEEEEEEEEE is a budget created in ad5ance that is based on a particular le5el of acti5it. ANS: static budget PTS: 1 DIF: Difficult: !as "#$: %": 11&1 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 2 min. -. A EEEEEEEEEEEEEEEEE enables a firm to compute e4pected costs for a range of acti5it le5els. ANS: fle4ible budget PTS: 1 DIF: Difficult: !as "#$: %": 11&1 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 2 min. 6. #udgeted costs change because total 5ariable costs go up as output increases9 therefore fle4ible budgets are sometimes referred to as EEEEEEEEEEEEEEE. ANS: 5ariable budgets PTS: 1 DIF: Difficult: !as "#$: %": 11&1 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 2 min. 7. A difference between the actual amount and the fle4ible budget amount is 3nown as the EEEEEEEEEEEEEEEEEEEE. ANS: fle4ible budget 5ariance PTS: 1 DIF: Difficult: !as "#$: %": 11&1 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 2 min. . The EEEEEEEEEEEEEEEEEEEE budget gi5es e4pected outcomes for a range of acti5it le5els. ANS: before&the&fact
PTS: 1 DIF: Difficult: !as "#$: %": 11&1 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 2 min. <. The EEEEEEEEEEEEEEEE budget is based on the actual le5el of acti5it. ANS: after&the&fact PTS: 1 DIF: Difficult: !as "#$: %": 11&1 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 2 min. . "ften9 the fle4ible budget formulas are based on EEEEEEEEEEEEEEEE instead of units. ANS: direct labor hours PTS: 1 DIF: Difficult: +oderate "#$: %": 11&1 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: *omprehension N"T: 2 min. =. The EEEEEEEEEEEEEEEEEEEEE measures the aggregate effect of differences between the actual 5ariable o5erhead rate and the standard 5ariable o5erhead rate. ANS: 5ariable o5erhead spending 5ariance PTS: 1 DIF: Difficult: +oderate "#$: %": 11&2 NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: /nowledge N"T: 2 min. 1>. The EEEEEEEEEEEEEEEEEEEEEEEE measures the change in the actual 5ariable o5erhead cost that occurs because of efficient or inefficientB use of direct labor ANS: 5ariable o5erhead efficienc 5ariance PTS: 1 DIF: Difficult: +oderate "#$: %": 11&2 NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: /nowledge N"T: 2 min. 11. EEEEEEEEEEEEEEEEEEEEEEE is the difference between the actual 5ariable o5erhead and applied 5ariable o5erhead. ANS: Total 5ariable o5erhead PTS: 1 DIF: Difficult: +oderate "#$: %": 11&2 NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: /nowledge N"T: 2 min.
12. EEEEEEEEEEEEEEEEEEEEEE is a prere?uisite for assigning responsibilit. ANS: *ontrollabilit PTS: 1 DIF: Difficult: +oderate "#$: %": 11&2 NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: /nowledge N"T: 2 min. 1-. The 5ariable o5erhead efficienc 5ariance is directl related to the EEEEEEEEEEEEEEEEEE or usage 5ariance. ANS: direct labor efficienc PTS: 1 DIF: Difficult: +oderate "#$: %": 11&2 NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: *omprehension N"T: 2 min. 16. The EEEEEEEEEEEEEEEEEEEEE is the difference between actual fi4ed o5erhead and applied fi4ed o5erhead. ANS: total fi4ed o5erhead 5ariance PTS: 1 DIF: Difficult: !as "#$: %": 11& NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: *omprehension N"T: 2 min. 17. The EEEEEEEEEEEEEEEEEEEEEE is the difference between the actual fi4ed o5erhead and the budgeted fi4ed o5erhead. ANS: fi4ed o5erhead spending 5ariance PTS: 1 DIF: Difficult: +oderate "#$: %": 11& NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: *omprehension N"T: 2 min. 1. The EEEEEEEEEEEEEEEEEEEE is the difference between budgeted fi4ed o5erhead and applied fi4ed o5erhead. ANS: fi4ed o5erhead 5olume 5ariance PTS: 1 DIF: Difficult: +oderate "#$: %": 11& NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: *omprehension N"T: 2 min. 1<. EEEEEEEEEEEEEEEEE are capacit costs ac?uired in ad5ance of usage. ANS: Fi4ed o5erhead costs PTS: 1
DIF:
Difficult: +oderate
"#$: %": 11&-
NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: /nowledge N"T: 2 min. 1. The EEEEEEEEEEEEEEEEEEEEEEEEE focuses on the estimation of the costs of acti5ities rather than the costs of departments and plants. ANS: Acti5it&based budgeting sstem PTS: 1 DIF: Difficult: !as "#$: %": 11&6 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 2 min. 1=. Acti5it&based budgeting begins with the EEEEEEEEEEEEE and EEEEEEEEEEEEEEE budgets. ANS: sales9 production production9 sales PTS: 1 DIF: Difficult: !as "#$: %": 11&6 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 2 min. 2>. EEEEEEEEEEEEEEEEEEEEEEE is the prediction of what acti5it costs will be as related output changes. ANS: Acti5it fle4ible budgeting PTS: 1 DIF: Difficult: +oderate "#$: %": 11&6 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: *omprehension N"T: 2 min. !ULT#&LE C"O#CE
1. A static budget is a. considered a good choice for benchmar3s in preparing a performance report. b. computes e4pected costs for a range of acti5it le5els. c. compares actual costs with budgeted costs. d. prepared for a particular le5el of acti5it. e. None of these are correct. ANS: D PTS: 1 DIF: Difficult: !as "#$: %": 11&1 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 2 min. 2. 8hich budget should be used to determine managerial effecti5eness a. before&the&fact fle4ible budget b. after&the&fact fle4ible budget c. static budget d. financial budget
e. cash budget ANS: * PTS: 1 DIF: Difficult: +oderate "#$: %": 11&1 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 2 min. -. 8hich budget is used to assess managerial efficienc a. sales budget b. production budget c. static budget d. fle4ible budget e. cash budget ANS: D PTS: 1 DIF: Difficult: +oderate "#$: %": 11&1 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 2 min. 6. A budget that allows the determination of e4pected costs for 5arious le5els of acti5it is anB a. operational budget. b. sales budget. c. production budget. d. financial budget. e. fle4ible budget. ANS: ! PTS: 1 DIF: Difficult: !as "#$: %": 11&1 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 2 min. 7. To create a meaningful performance report9 a. actual costs are compared with the e4pected costs found in the static budget. b. actual costs are calculated as a percentage of sales. c. actual costs are compared with the prior ears actual costs. d. e4pected costs of the static budget are compared with the e4pected costs of the fle4ible budget. e. actual costs are compared with the e4pected costs at the same le5el of acti5it. ANS: ! PTS: 1 DIF: Difficult: +oderate "#$: %": 11&1 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: *omprehension N"T: 2 min. . A before&the&fact fle4ible budget a. calculates e4pected costs for 5arious le5els of acti5it. b. allows managers to deal with uncertaint. c. can be used to generate results for a number of plausible scenarios. d. is a useful planning tool. e. All of these. ANS: ! PTS: 1 DIF: Difficult: +oderate "#$: %": 11&1 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 2 min.
<. An after&the&fact fle4ible budget a. is a budget for the actual le5el of acti5it. b. is used for performance reports. c. calculates what costs should ha5e been for the actual le5el of acti5it. d. is used to compare e4pected costs with actual costs. e. All of these. ANS: ! PTS: 1 DIF: Difficult: !as "#$: %": 11&1 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 2 min. . A budget prepared for a particular le5el of acti5it is anB a. operational budget. b. A## budget. c. static budget. d. fle4ible budget. e. 5ariable budget. ANS: * PTS: 1 DIF: Difficult: !as "#$: %": 11&1 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 2 min. =. A static budget is best used to a. measure whether or not a manager accomplishes his or her goals. b. compare e4pected costs at the actual le5el of acti5it with the actual costs. c. assess how well costs were controlled during the ear. d. determine managerial efficienc. e. None of these. ANS: A PTS: 1 DIF: Difficult: +oderate "#$: %": 11&1 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: *omprehension N"T: 2 min. 1>. Assume that the e4pectations on the static budget were met. 8e can conclude that a. the static budget was ill concei5ed. b. the effecti5eness of the manager is not in ?uestion. c. the manager is 5er efficient. d. there is no need for a fle4ible budget. e. None of these. ANS: # PTS: 1 DIF: Difficult: +oderate "#$: %": 11&1 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: *omprehension N"T: 2 min. 11. A performance report a. alwas uses static budgets. b. compares actual costs with budgeted costs. c. uses a static or a fle4ible budget. d. both compares actual costs with budgeted costs and alwas uses static budget. e. both alwas uses static budgets and usuall uses fle4ible budgets.
ANS: # PTS: 1 DIF: Difficult: +oderate "#$: %": 11&1 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 2 min. 12. Fle4ible budgets are powerful control tools because a. the allow managers to deal with uncertaint. b. the allow the calculation of what cost should be for the actual le5el of acti5it. c. the allow the preparation of meaningful performance reports. d. the help measure managerial efficienc. e. All of these. ANS: ! PTS: 1 DIF: Difficult: !as "#$: %": 11&1 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 2 min. 1-. The 5ariable o5erhead spending 5ariance measures the aggregate effect of differences between the a. the total 5ariable o5erhead and the applied 5ariable o5erhead. b. the total 5ariable o5erhead and total budgeted o5erhead costs. c. the total 5ariable o5erhead and the budgeted o5erhead for the e4pected acti5it. d. the actual 5ariable o5erhead rate and the standard 5ariable o5erhead rate. e. None of these. ANS: D The 5ariable o5erhead spending 5ariance measures the aggregate effect of differences between the actual 5ariable o5erhead rate A;"(B and the standard 5ariable o5erhead rate S;"(B. PTS: 1 DIF: Difficult: !as "#$: %": 11&2 NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: /nowledge N"T: 2 min. Figure 11'1( $ason9 Inc. produces leather purses. $ason has de5eloped a static budget for the first ?uarter9 based on 2>9>>> direct labor hours. During the ?uarter9 the actual acti5it was 229>>> direct labor hours. Data for the first ?uarter are summari@ed as follows:
Direct materials cost Direct labor cost #uilding rental Total
Static budget 2>9>>> hoursB G >9>>> 1>9>>> 69>>> G29>>>
Actual costs 229>>> hoursB G <9>>> 1<69>>> 7>9>>> G-119>>>
16. (efer to Figure 11&1. *omparing the static budget to the actual outcomes9 we can sa the following: a. the manager had more direct labor hours. b. the 5ariances are all unfa5orable. c. the comparison is not useful for assessing managerial efficienc. d. a fle4ible budget should be used for assessing efficienc. e. All of these. ANS: ! "#$: %": 11&1
PTS: 1 DIF: Difficult: !as NAT: #'SP("): Analtic
STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: Application N"T: - min. 17. (efer to Figure 11&1. 8hat is the fle4ible budget amount for the first ?uarter a. G29>>> b. G-119>>> c. G-129>>> d. G219>>> e. *annot be determined. ANS: * Supporting calculations: Direct materials cost G6 × 229>>>B Direct labor cost G × 229>>>B #uilding rental Total fle4ible budget
G 9>>> 1<9>>> 69>>> G-129>>>
PTS: 1 DIF: Difficult: +oderate "#$: %": 11&1 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: Application N"T: - min. 1. (efer to Figure 11&1. 8hat is the fle4ible budget 5ariance for the first ?uarter a. G19>>> ' b. G2-9>>> ' c. G2-9>>> F d. G19>>> F e. None of these. ANS: D
Direct materials Direct labor #uilding rental Total
Fle4ible #udget 229>>> hoursB G 9>>> 1<9>>> 69>>> G-129>>>
Actual *osts 229>>> hoursB G <9>>> 1<69>>> 7>9>>> G-119>>>
;ariance G19>>> F 29>>> F 29>>> ' G19>>> F
The fle4ible budget here is created b creating standard rates fr om the static budget. G>9>>> or direct laborH2>9>>> labor hours ields G6Hlabor hour. This standard rate is multiplied b the actual labor hours to get the standard labor hours for the actual acti5it le5el. PTS: 1 DIF: Difficult: +oderate "#$: %": 11&1 NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&--&Incremental analsis /!0: #looms: Application N"T: 7 min. Figure 11')( %awson9 Inc. produces plastic grocer bags. %awson has de5eloped a static budget for the month of $ul based on 9>>> direct labor hours. During the ?uarter9 the actual acti5it was =9>>> direct labor hours. Data for $ul are summari@ed as follows:
Direct materials cost
Static budget 9>>> hoursB G =9>>>
Actual costs =9>>> hoursB G119>>>
Power Salar of plant super5isor Total
6>9>>> 9>>> G1629>>>
6<9>>> 9>>> G1<19>>>
1<. (efer to Figure 11&2. *omparing the static budget to the actual costs9 we can conclude that a. the manager spent more than should ha5e been spent. b. immediate action is needed to reduce costs. c. the plant manager was clearl not efficient. d. the plant manager should be dismissed. e. None of these. ANS: ! PTS: 1 DIF: Difficult: !as "#$: %": 11&1 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: *omprehension N"T: 2 min. 1. (efer to Figure 11&2. 8hat is the fle4ible budget for $ul a. G1629>>> b. G17=9>>> c. G1<19>>> d. G179>>> e. None of these. ANS: # Supporting calculations: Direct materials cost G12 × =9>>>B Direct labor cost G7 × =9>>>B Salar Total fle4ible budget
G1>9>>> 679>>> 9>>> G17=9>>>
PTS: 1 DIF: Difficult: +oderate "#$: %": 11&1 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: Application N"T: - min. 1=. (efer to Figure 11&2. 8hat is the fle4ible budget 5ariance for $ul a. G129>>> ' b. G129>>> F c. G2=9>>> ' d. G2=9>>> F e. None of these. ANS: A
Direct materials Power (ent Total
Fle4ible #udget =9>>> hoursB G1>9>>> 679>>> 9>>> G17=9>>>
Actual *osts =9>>> hoursB G119>>> 6<9>>> 9>>> G1<19>>>
;ariance G1>9>>> ' 29>>> ' > G129>>> '
PTS: 1 DIF: Difficult: +oderate "#$: %": 11&1 NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&--&Incremental analsis /!0: #looms: Application N"T: - min.
Figure 11'*( +ontgomer *ompan has de5eloped the following fle4ible budget formulas for its four o5erhead items:
"5erhead item +aintenance Power Indirect labor cost !?uipment lease Total
;ariable rate per Fi4ed *ost direct labor hour G1>9>>> G-.>> G197>> G>.-> G12.>> G<9>>> G197>> G17.->
+ontgomer normall produces 179>>> units each unit re?uires >.-> direct labor hoursB howe5er this ear 1=9>>> units were produced with the following actual costs: "5erhead item +aintenance Power Indirect labor cost !?uipment lease Total costs
Actual costs G169>>> G292>> G<>9>>> G<9>>> G=-92>>
2>. (efer to Figure 11&-. Prepare an o5erhead budget for the e4pected acti5it le5el of 1>9>>> units. The total budgeted o5erhead is a. G1-=96>>. b. G696>>. c. G1269>>>. d. G1296>>. e. None of these. ANS: # 1>9>>> 4 >.-> J -9>>> labor hours G1>9>>> K G- 4 -9>>>B J G1=9>>> G197>> K G>.-> 4 -9>>>B J G296>> G12 4 -9>>> J G-9>>> indirect labor G1=9>>> K G296>> K G-9>>> K G<9>>> J G696>> PTS: 1 DIF: Difficult: +oderate "#$: %": 11&1 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: Application N"T: 6 min. 21. (efer to Figure 11&-. *alculate the after&the&fact budget for the actual le5el of acti5it. a. G=19>> b. G1179>>> c. G119>> d. G<<96>>
e. None of these. ANS: ! After&the fact budget J G197>> K G17.-> 4 79<>>B J G1>79<1> PTS: 1 DIF: Difficult: *hallenging "#$: %": 11&1 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: Application N"T: - min. 22. (efer to Figure 11&-. *alculate the 5ariance for maintenance using an after&the&fact fle4ible budget. a. G1-9>>> ' b. G1-91>> F c. G119>>> ' d. G19>>> F e. None of these. ANS: # ;ariance J G169>>> & G1>9>>> K G-.>> 4 79<>>BB J G1-91>> F PTS: 1 DIF: Difficult: +oderate "#$: %": 11&1 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: Application N"T: - min. 2-. (efer to Figure 11&-. 'sing an after&the&fact fle4ible budget9 calculate the 5ariance for power. a. G19>>> F b. G19>1> ' c. G-9>>> ' d. G19>1> F e. None of these. ANS: D ;ariance J G292>> & G197>> K G>.-> 4 G79<>>BB J G19>1> F PTS: 1 DIF: Difficult: +oderate "#$: %": 11&1 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: Application N"T: - min. 26. (efer to Figure 11&-. 'sing an after&the&fact fle4ible budget9 calculate the total budget 5ariance. a. G12971> ' b. G-9>> ' c. G79>>> F d. G12971> F e. None of these. ANS: D ;ariance J G=-92>> & G197>> K G17.-> 4 79<>>BB J G12971> F PTS: 1 DIF: Difficult: +oderate "#$: %": 11&1 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: Application N"T: - min.
27. The total 5ariable o5erhead 5ariance is the difference between a. the actual o5erhead and the budgeted o5erhead. b. the total actual 5ariable o5erhead and the total budgeted 5ariable o5erhead. c. the total actual 5ariable o5erhead and the total applied 5ariable o5erhead. d. the total actual 5ariable o5erhead and the total applied o5erhead. e. None of these. ANS: * PTS: 1 DIF: Difficult: +oderate "#$: %": 11&2 NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: /nowledge N"T: 2 min. 2. In a standard cost sstem9 5ariable o5erhead is applied a. using actual direct labor hours. b. using budgeted indirect labor hours. c. using direct labor hours at practical capacit. d. using standard direct labor hours. e. All of these. ANS: D PTS: 1 DIF: Difficult: +oderate "#$: %": 11&2 NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: /nowledge N"T: 2 min. 2<. The formula for the 5ariable o5erhead spending 5ariance can be e4pressed as follows: a. A − SBS;"(. b. A;"( − S;"(BS. c. A;"( − S;"(BA. d. A − SBA;"(. e. None of these. ANS: * PTS: 1 DIF: Difficult: !as "#$: %": 11&2 NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: *omprehension N"T: 2 min. 2. The 5ariable o5erhead efficienc 5ariance claims to measure a. changes in spending efficienc. b. producti5e efficienc. c. changes in 5ariable o5erhead costs because of the efficient inefficientB use of the cost dri5er. d. changes in 5ariable o5erhead costs attributable to inefficient purchase of 5ariable inputs. e. None of these. ANS: * PTS: 1 DIF: Difficult: +oderate "#$: %": 11&2 NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: /nowledge N"T: 2 min. 2=. The formula for calculating the 5ariable o5erhead efficienc 5ariance is a. A;"( × AB − S;"( × AB. b. A;"( − S;"(BS. c. A − SBS;"(. d. A − SBA;"(.
e. None of these. ANS: * PTS: 1 DIF: Difficult: !as "#$: %": 11&2 NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: *omprehension N"T: 2 min. ->. The two 5ariances for 5ariable o5erhead are a. spending and efficienc 5ariances. b. spending and budget 5ariances. c. budget and 5olume 5ariances. d. spending and 5olume 5ariances. e. 5olume and efficienc 5ariances. ANS: A PTS: 1 DIF: Difficult: +oderate "#$: %": 11&2 NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: /nowledge N"T: 2 min. -1. Inefficient usage of labor implies anB a. both unfa5orable 5ariable o5erhead efficienc 5ariance and unfa5orable 5ariable o5erhead spending 5ariance. b. fa5orable 5ariable o5erhead efficienc 5ariance. c. unfa5orable 5ariable o5erhead spending 5ariance. d. fa5orable 5ariable o5erhead spending 5ariance. e. unfa5orable 5ariable o5erhead efficienc 5ariance. ANS: ! PTS: 1 DIF: Difficult: +oderate "#$: %": 11&2 NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: *omprehension N"T: 2 min. -2. (esponsibilit for the 5ariable o5erhead spending 5ariance is usuall assigned to a. the purchasing department. b. the production department. c. the engineering department. d. the personnel department. e. None of these. ANS: # PTS: 1 DIF: Difficult: !as "#$: %": 11&2 NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: /nowledge N"T: 2 min. --. A performance report for 5ariable o5erhead re5eals a. the aggregate 5ariable o5erhead spending and efficienc 5ariances. b. the 5olume and spending 5ariances. c. the spending and efficienc 5ariances for each 5ariable o5erhead item. d. both the aggregate 5ariable o5erhead spending and efficienc 5ariances and the spending and efficienc 5ariances for each 5ariable o5erhead item. e. both the 5olume and spending 5ariances and the spending and efficienc 5ariances for each 5ariable o5erhead item. ANS: D "#$: %": 11&2
PTS: 1 DIF: Difficult: *hallenging NAT: #'SP("): Analtic
STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: /nowledge N"T: 2 min. -6. +ar3us9 Inc. produces a speciali@ed machine part used in for3lifts. For last ears operations9 the following data were gathered: 'nits produced: Direct labor: Actual 5ariable o5erhead:
779>>> 2=9>>> hours L G=.>> G1-79>>>
+ar3us emplos a standard costing sstem. During the ear9 a 5ariable o5erhead rate of G7.>> was used. The labor standard re?uires >.7> hours per unit produced. The 5ariable o5erhead spending and efficienc 5ariances are9 respecti5el a. G1>9>>> ' and G<97>> '. b. G1>9>>> F and G<97>> '. c. G<97>> ' and G1>9>>> F. d. G1>9>>> F and G<97>> F. e. None of these. ANS: # Spending 5ariance J G1-79>>> − G7 × 2=9>>>B J G1>9>>> F !fficienc 5ariance J 2=9>>> − 2<97>>BG7 J G<97>> ' PTS: 1 DIF: Difficult: *hallenging "#$: %": 11&2 NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: Application N"T: 7 min. -7. Shorts9 Inc. produces small engines. For last ears operations9 the following data were gathered: 'nits produced: Direct labor: Actual 5ariable o5erhead:
1>>9>>> 1>9>>> hours L G12.>> G19->>9>>>
Shorts9 Inc. emplos a standard costing sstem. During the ear9 a 5ariable o5erhead rate of G.>> was used. The labor standard re?uires 1.7 hours per unit produced. The 5ariable o5erhead spending and efficienc 5ariances are9 respecti5el a. G1>>9>>> ' and G2>9>>> '. b. G1>>9>>> ' and G2>9>>> F. c. G2>9>>> ' and G>9>>> '. d. G2>9>>> ' and G>9>>> F. e. None of these. ANS: * Spending 5ariance J G19->>9>>> − G.>> × 1>9>>>B J G2>9>>> ' !fficienc 5ariance J 1>9>>> − 17>9>>>BG J G>9>>> ' PTS: 1 DIF: Difficult: *hallenging "#$: %": 11&2 NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: Application N"T: 7 min.
-. During the ear9 aw3ings produced 1>9>>> units9 used 2>9>>> direct labor hours9 and incurred 5ariable o5erhead of G=>9>>>. #udgeted 5ariable o5erhead for the ear was G9>>>. The hours allowed per unit are 2.1. The standard 5ariable o5erhead rate is G6.>> per direct labor hour. The 5ariable o5erhead spending 5ariance is a. G29>>> F. b. G9>>> '. c. G1>9>>> '. d. G29>>> '. e. None of these. ANS: * Spending 5ariance J G=>9>>> − G6.>> × 2>9>>>B J G1>9>>> ' PTS: 1 DIF: Difficult: +oderate "#$: %": 11&2 NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: Application N"T: - min. -<. #udgeted 5ariable o5erhead for the ear is G12>9>>>. !4pected acti5it is 2>9>>> standard direct labor hours. The actual hours wor3ed were 19>>> and the standard hours allowed for actual production were 1=97>>. The 5ariable o5erhead efficienc 5ariance is a. G>. b. G129>>> F. c. G-9>>> F. d. G=9>>> F. e. None of these. ANS: D !fficienc 5ariance J 19>>> − 1=97>>BG J G=9>>> F PTS: 1 DIF: Difficult: *hallenging "#$: %": 11&2 NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: Application N"T: - min. -. Folson *ompan is planning to produce 6927>9>>> spea3ers for the coming ear. Actual production was 69>>>9>>> spea3ers. !ach spea3er re?uires >.> direct labor hours per unit. Predetermined o5erhead rates are calculated using e4pected production9 measured in direct labor hours. The budgeted 5ariable o5erhead for the coming ear is G>9>>>. The actual 5ariable o5erhead incurred was G<169>>>. The applied 5ariable o5erhead for the ear is a. G>>9>>>. b. G<169>>>. c. G6>9>>>. d. G>9>>>. e. None of these. ANS: * (ate J G>9>>>H-96>>9>>> J G>.2> Applied 5ariable o5erhead J G>.2> × 69>>>9>>> 4 >.> hrsB J G6>9>>> PTS: 1 DIF: Difficult: +oderate "#$: %": 11&2 NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: Application N"T: - min.
-=. arr *ompans standard 5ariable o5erhead rate is G per direct labor hour9 and each unit re?uires 2 standard direct labor hours. During +arch9 arr recorded 9>>> actual direct labor hours9 G-<9>>> actual 5ariable o5erhead costs9 and 29=>> units of product manufactured. 8hat is the total 5ariable o5erhead 5ariance for +arch for arr a. G192>> ' b. G>> ' c. G19>>> ' d. G292>> ' ANS: D S'PP"(TIN) *A%*'%ATI"NS: G-<9>>> − 29=>> × G × 2B J G292>> ' PTS: 1 DIF: Difficult: +oderate "#$: %": 11&2 NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: Application N"T: - min. 6>. An unfa5orable 5ariable o5erhead spending 5ariance ma be caused b a. the use of e4cessi5e ?uantities of 5ariable o5erhead items. b. the pament of lower prices for 5ariable o5erhead items used. c. the use of e4cessi5e ?uantities of the 5ariable o5erhead allocation base. d. both the use of e4cessi5e ?uantities of 5ariable o5erhead items and the pament of lower prices for 5ariable o5erhead items used. ANS: A PTS: 1 DIF: Difficult: +oderate "#$: %": 11&2 NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: *omprehension N"T: - min. 61. )ina Production *ompan uses a standard costing sstem. The following information pertains to 2>11. Actual factor o5erhead costs G197>> is fi4edB Actual direct labor costs 11927> hoursB Standard direct labor for 797>> units: Standard hours allowed %abor rate
G 6>9127 G1-1927 119>>> hours G12.>>
The factor o5erhead rate is based on an acti5it le5el of 1>9>>> hours. Standard cost data for 79>>> units is as follows: ;ariable factor o5erhead Fi4ed factor o5erhead Total factor o5erhead
G2297>> 1-97>> G-9>>>
8hat is the 5ariable o5erhead efficienc 5ariance for )ina Production *ompan a. G72.7> F b. G-9>>>.>> ' c. G72.7> ' d. G19<.7> F ANS: * S'PP"(TIN) *A%*'%ATI"NS:
11927> − 119>>>B × G2297>>H1>9>>>B J G72.7> ' PTS: 1 DIF: Difficult: +oderate "#$: %": 11&2 NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: Application N"T: 6 min. 62. If 5ariable manufacturing o5erhead is applied based on direct labor hours and there is an unfa5orable direct labor efficienc 5ariance a. the direct materials usage 5ariance will be unfa5orable. b. the direct labor rate 5ariance will be fa5orable. c. the 5ariable manufacturing o5erhead efficienc 5ariance will be unfa5orable. d. the 5ariable manufacturing o5erhead spending 5ariance will be unfa5orable. ANS: * PTS: 1 DIF: Difficult: +oderate "#$: %": 11&2 NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: *omprehension N"T: 2 min. 6-. )riffen *orporation uses a standard costing sstem. Information for the month of +a is as follows: Actual manufacturing o5erhead costs G29>>> is fi4edB Direct labor: Actual hours wor3ed Standard hours allowed for actual production A5erage actual labor cost per hour
G>9>>>
129>>> hrs. 1>9>>> hrs. G1
The factor o5erhead rate is based on a normal 5olume of 129>>> direct labor hours. Standard cost data at 129>>> direct labor hours were as follows: ;ariable factor o5erhead Fi4ed factor o5erhead Total factor o5erhead
G69>>> 269>>> G<29>>>
8hat is the 5ariable o5erhead efficienc 5ariance for )riffen a. G29>>> ' b. G9>>> ' c. G69>>> ' d. G2>9>>> ' ANS: # S'PP"(TIN) *A%*'%ATI"NS: 129>>> − 1>9>>>B × G69>>>H129>>>B J G9>>> ' PTS: 1 DIF: Difficult: +oderate "#$: %": 11&2 NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: Application N"T: 6 min. Figure 11'+(
/ris *ompan calculates its predetermined rates using practical 5olume9 which is -279>>> units. The standard cost sstem allows - direct labor hours per unit produced. "5erhead is applied using direct labor hours. The total budgeted o5erhead is G692>9>>>9 of which G==69>>> is fi4ed o5erhead. The actual results for the ear are as follows: 'nits produced: Direct labor: ;ariable o5erhead: Fi4ed o5erhead:
-19>>> =79>>> hours L G12Hhour G-9->29>>> G==9>>>
66. (efer to Figure 11&6. The predetermined 5ariable o5erhead rate is a. G-.>> per direct labor hour. b. G2.7> per direct labor hour. c. G7.7> per direct labor hour. d. G-.-7 per direct labor hour. e. None of these are correct. ANS: D G692>9>>> & G==69>>> J G-929>>> G-929>>>H- 4 -279>>>B J G-.-7 PTS: 1 DIF: Difficult: !as "#$: %": 11&2 NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: Application N"T: - min. 67. (efer to Figure 11&6. *alculate the 5ariable o5erhead spending 5ariance. a. G=927> ' b. G=927> F c. G269>>> ' d. G6>9>>> F e. None of these. ANS: A Spending 5ariance J A;" & S;"( 4 A B J G-9->29>>> & G-.-7 4 =79>>>B J G=927>' PTS: 1 DIF: Difficult: +oderate "#$: %": 11&2 NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: Application N"T: 6 min. 6. (efer to Figure 11&6. *alculate the 5ariable o5erhead efficienc 5ariance. a. G-97> ' b. G>9>>> ' c. G-97> F d. G69>>> ' e. None of these. ANS: A !fficienc 5ariance J A & SBS;"( J =79>>> & =769>>>B 4 G-.-7 J G-97> ' S;"( J G692>9>>> & G==69>>>BH- 4 -279>>>B J G-.-7 PTS: 1
DIF:
Difficult: +oderate
"#$: %": 11&2
NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: Application N"T: 6 min. 6<. (efer to Figure 11&6. The predetermined fi4ed o5erhead rate is a. G-.-7 per direct labor hour. b. G1.>2 per direct labor hour. c. G7.7> per direct labor hour. d. G6 per direct labor hour. e. None of these. ANS: # G==69>>>H- 4 -279>>>B J G1.>2 PTS: 1 DIF: Difficult: !as "#$: %": 11& NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: Application N"T: - min. 6. (efer to Figure 11&6. *alculate the applied fi4ed o5erhead. a. G=<-9>> b. G779>-> c. G=69>>> d. G=1>9>>> e. None of these. ANS: A G1.>2 4 =769>>> J G=<-9>> PTS: 1 DIF: Difficult: +oderate "#$: %": 11& NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: Application N"T: - min. 6=. (efer to Figure 11&6. *alculate the fi4ed o5erhead spending 5ariance. a. G-29>>> F b. G> c. G69>>> ' d. G129>>> ' e. G69>>> F ANS: * AF" & #F" J G==9>>> & G==69>>> J G69>>> ' PTS: 1 DIF: Difficult: +oderate "#$: %": 11& NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: Application N"T: - min. 7>. (efer to Figure 11&6. *alculate the fi4ed o5erhead 5olume 5ariance. a. G-29>>> ' b. G2>9>>> F c. G229>>> F d. G69>>> ' e. None of these.
ANS: ! ;olume 5ariance J #F" & SF"( 4 S J G==69>>> & G=<-9>> J G2>9=2> ' PTS: 1 DIF: Difficult: *hallenging "#$: %": 11& NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: Application N"T: - min. 71. The standard fi4ed o5erhead rate is often calculated as a. budgeted fi4ed o5erhead di5ided b practical capacit measured in standard hours. b. actual fi4ed o5erhead di5ided b practical capacit measured in standard hours. c. budgeted fi4ed o5erhead di5ided b actual hours. d. budgeted fi4ed o5erhead di5ided b practical capacit measured in actual hours. e. None of these. ANS: A PTS: 1 DIF: Difficult: !as "#$: %": 11&NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: *omprehension N"T: 2 min. 72. The total fi4ed o5erhead 5ariance is calculated b the following formula: a. Total actual o5erhead − Total applied o5erhead. b. AF" − Standard o5erhead rate × S. c. AF" − SF"( × S. d. AF" − SF"( × A. e. Total actual o5erhead − SF"( × S. ANS: * PTS: 1 DIF: Difficult: !as "#$: %": 11&NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: *omprehension N"T: 2 min. 7-. The two 5ariances for fi4ed o5erhead are a. budget and 5olume. b. spending and budget. c. 5olume and spending. d. efficienc and 5olume. e. 5olume and efficienc. ANS: * PTS: 1 DIF: Difficult: +oderate "#$: %": 11&NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: /nowledge N"T: 2 min. 76. The formula for the fi4ed o5erhead 5olume 5ariance is a. AF" − SF"(B × S. b. AF" − SF"(B × A. c. AF" − #F". d. AF" − SF"(B × S. e. None of these. ANS: ! "#$: %": 11&-
PTS: 1 DIF: Difficult: +oderate NAT: #'SP("): Analtic
STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: *omprehension N"T: 2 min. 77. The formula for the fi4ed o5erhead spending 5ariance is a. AF" − SF"( × S b. AF" − SF"( × A c. AF" − #F" d. AF" − SF"( × S e. None of these. ANS: * PTS: 1 DIF: Difficult: !as "#$: %": 11&NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: *omprehension N"T: 2 min. 7. The fi4ed o5erhead 5olume 5ariance is a measure of a. the cost of o5erspending on fi4ed o5erhead items. b. the effect of the actual output differing from the output used to calculate the predetermined fi4ed o5erhead rate. c. the cost of unused acti5it capacit ac?uired. d. both the cost of o5erspending on fi4ed o5erhead items and the effect of the actual output differing from the output used to calculate predetermined fi4ed o5erhead rate. e. both the effect of the actual output differing from the output used to calculate the predetermined fi4ed o5erhead rate and the cost of unused acti5it capacit. ANS: ! PTS: 1 DIF: Difficult: +oderate "#$: %": 11&NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: *omprehension N"T: - min. 7<. The fi4ed o5erhead spending 5ariance a. is usuall not significant. b. is made up of man indi5idual items. c. is the difference between actual costs and budgeted costs. d. merits in5estigation onl if the 5ariance is material. e. All of these. ANS: ! PTS: 1 DIF: Difficult: +oderate "#$: %": 11&NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: *omprehension N"T: 2 min. 7. (esponsibilit for the fi4ed o5erhead 5olume 5ariance is a. not assigned because fi4ed o5erhead costs do not change with acti5it changes. b. usuall assigned to the production department. c. usuall assigned to top management. d. usuall assigned to the planning department. e. None of these. ANS: # PTS: 1 DIF: Difficult: +oderate "#$: %": 11&NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: /nowledge N"T: 2 min.
7=. #ecause fi4ed o5erhead is made up of man items a. the fi4ed o5erhead spending 5ariance is not meaningful. b. it is not possible to calculate a fi4ed o5erhead 5olume 5ariance. c. the fi4ed o5erhead 5olume 5ariance will alwas be unfa5orable. d. a line b line comparison of budgeted costs with actual costs pro5ides more information. e. All of these. ANS: D PTS: 1 DIF: Difficult: +oderate "#$: %": 11&NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: /nowledge N"T: 2 min. >. 8hich of the following relationships is 5alid concerning fi4ed o5erhead budgeted at the beginning of the ear a. #F" J SF"( × A b. #F" J SF"( × S for actual production c. #F" J SF"( × S for planned production d. #F" J SF"(HS for actual production e. None of these. ANS: * PTS: 1 DIF: Difficult: +oderate "#$: %": 11&NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: *omprehension N"T: 2 min. 1. The total fi4ed o5erhead 5ariance is a. actual fi4ed o5erhead − applied fi4ed o5erhead. b. the sum of the spending and 5olume 5ariances. c. the sum of the spending and efficienc 5ariances. d. both actual fi4ed o5erhead − applied fi4ed o5erhead and the sum of the spending and efficienc 5ariances. e. both actual fi4ed o5erhead − applied fi4ed o5erhead and the sum of the spending and 5olume 5ariances. ANS: ! PTS: 1 DIF: Difficult: +oderate "#$: %": 11&NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: *omprehension N"T: 2 min. 2. If actual fi4ed o5erhead was G=96>> and there was a G29> fa5orable spending 5ariance and a G>> unfa5orable 5olume 5ariance9 budgeted fi4ed o5erhead must ha5e been a. G1>192>. b. G1>>9>. c. G==9>>>. d. G=<9>>. e. G=7972>. ANS: A G=96>> K G29> J G1>192> PTS: 1 DIF: Difficult: +oderate "#$: %": 11& NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: Application N"T: - min.
-. Fi4ed o5erhead was budgeted at G69>>> and 1>9>>> direct labor hours were budgeted. If the fi4ed o5erhead 5olume 5ariance was G-92>> unfa5orable and the fi4ed o5erhead spending 5ariance was G192>> fa5orable9 fi4ed o5erhead applied must be a. G792>>. b. G>9>>. c. G29>>. d. G29>>>. e. G<92>>. ANS: # Applied F" J G69>>> − G-92>> J G>9>> PTS: 1 DIF: Difficult: +oderate "#$: %": 11& NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: Application N"T: - min. 6. *rawford *ompans standard fi4ed o5erhead cost is G per direct labor hour based on budgeted fi4ed costs of G>>9>>>. The standard allows one direct labor hour per unit. During 2>119 *rawford produced 11>9>>> units of product9 incurred G->9>>> of fi4ed o5erhead costs9 and recorded 2129>>> actual hours of direct labor. 8hat is *rawfords fi4ed o5erhead spending 5ariance for 2>11 a. G>9>>> F b. G269>>> F c. G-9>>> ' d. G->9>>> ' ANS: D S'PP"(TIN) *A%*'%ATI"NS: G->9>>> − G>>9>>> J G->9>>> 'B PTS: 1 DIF: Difficult: +oderate "#$: %": 11& NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: Application N"T: - min. 7. )riffen *orporation uses a standard costing sstem. Information for the month of +a is as follows: Actual manufacturing o5erhead costs G29>>> is fi4edB Direct labor: Actual hours wor3ed Standard hours allowed for actual production A5erage actual labor cost per hour
G>9>>>
129>>> hrs. 1>9>>> hrs. G1
The o5erhead rate is based on a normal 5olume of 129>>> direct labor hours. Standard cost data at 129>>> direct labor hours were as follows: ;ariable o5erhead Fi4ed o5erhead Total o5erhead
G69>>> 269>>> G<29>>>
8hat is the fi4ed o5erhead spending 5ariance for )riffen a. G29>>> ' b. G9>>> ' c. G69>>> ' d. G2>9>>> ' ANS: A S'PP"(TIN) *A%*'%ATI"NS: G29>>> − G269>>> J G29>>> ' PTS: 1 DIF: Difficult: +oderate "#$: %": 11& NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: Application N"T: 6 min. . *rawford *ompans standard fi4ed o5erhead cost is G per direct labor hour based on budgeted fi4ed costs of G>>9>>>. The standard allows 1 direct labor hours per unit. During 2>119 *rawford produced 11>9>>> units of product9 incurred G->9>>> of fi4ed o5erhead costs9 and recorded 2129>>> actual hours of direct labor. 8hat is the acti5it le5el on which *rawford based its fi4ed o5erhead rate a. 11>9>>> direct labor hours b. 1>79>>> direct labor hours c. 1>>9>>> direct labor hours d. 7>9>>> direct labor hours ANS: * S'PP"(TIN) *A%*'%ATI"NS: G>>9>>>HG J 1>>9>>> D% PTS: 1 DIF: Difficult: +oderate "#$: %": 11& NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: Application N"T: - min. <. If actual fi4ed o5erhead was G769>>> and there was a G19->> unfa5orable spending 5ariance and a G19>>> unfa5orable 5olume 5ariance9 budgeted fi4ed o5erhead must ha5e been a. G79->>. b. G7>9->>. c. G7-9>>>. d. G729<>>. ANS: D S'PP"(TIN) *A%*'%ATI"NS: G769>>> − G19->> J G729<>> PTS: 1 DIF: Difficult: +oderate "#$: %": 11& NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: Application N"T: - min. . Fi4ed o5erhead was budgeted at G2>>9>>>9 and 279>>> direct labor hours were budgeted. If the fi4ed o5erhead 5olume 5ariance was G9>>> fa5orable and the fi4ed o5erhead spending 5ariance was G9>>> unfa5orable9 fi4ed o5erhead applied must be
a. b. c. d.
G2>9>>>. G2>9>>>. G2>29>>>. G1=69>>>.
ANS: A S'PP"(TIN) *A%*'%ATI"NS: G2>>9>>> K G9>>> J G2>9>>> PTS: 1 DIF: Difficult: +oderate "#$: %": 11& NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: Application N"T: - min. =. )ina Production *ompan uses a standard costing sstem. The following information pertains to 2>11: Actual o5erhead costs G197>> is fi4edB Actual direct labor costs 11927> hoursB Standard direct labor for 797>> units: Standard hours allowed %abor rate
G 6>9127 G1-1927 119>>> hours G12.>>
The o5erhead rate is based on an acti5it le5el of 1>9>>> hours. Standard cost data for 79>>> units is as follows: ;ariable o5erhead Fi4ed o5erhead Total o5erhead
G2297>> 1-97>> G-9>>>
8hat is the fi4ed o5erhead 5olume 5ariance for )ina Production *ompan a. G19-7> F b. G-9>> F c. G69127 ' d. G19-7> ' ANS: A S'PP"(TIN) *A%*'%ATI"NS: G1-97>> − 119>>> × 1-97>>H1>9>>>BB J G19-7> F PTS: 1 DIF: Difficult: +oderate "#$: %": 11& NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: Application N"T: 6 min. <>. An acti5it&budgetar sstem has the following benefitsB: a. it supports continuous impro5ement. b. it supports process management. c. it emphasi@es cost reduction through elimination of wasteful acti5ities. d. it helps impro5e the efficienc of necessar acti5ities. e. all of these. ANS: ! PTS: 1 DIF: Difficult: !as "#$: %": 11&6 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 2 min.
<1. 8hich of the following is not one of the steps in building an acti5it&based budget a. identifing acti5ities b. classifing acti5ities as 5alue&added or non5alue&added c. estimating the demand for each acti5its output d. estimating the cost of producing the output demanded b each acti5it e. None of these. ANS: # PTS: 1 DIF: Difficult: +oderate "#$: %": 11&6 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 2 min. <2. The maCor differences between acti5it&based budgeting and traditional budgeting are found in a. the materials and labor categories. b. the sales and production budgets. c. the cash budget. d. the o5erhead and selling and administrati5e categories. e. None of these. ANS: D PTS: 1 DIF: Difficult: +oderate "#$: %": 11&6 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: *omprehension N"T: 2 min. <-. In budgeting at the acti5it le5el9 the cost beha5ior of each acti5it is defined with respect to a. direct labor hours. b. machine hours. c. the acti5it output measure. d. the acti5its resource dri5er. e. None of these. ANS: * PTS: 1 DIF: Difficult: +oderate "#$: %": 11&6 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 2 min. <6. In an acti5it framewor3 controlling costs translates into a. managing acti5ities. b. reducing direct labor hours. c. selling more goods. d. careful identification of resource dri5ers. e. All of these. ANS: A PTS: 1 DIF: Difficult: !as "#$: %": 11&6 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 2 min. <7. Acti5it fle4ible budgeting a. impro5es performance reporting. b. allows the prediction of acti5it costs as acti5it output changes. c. enhances the abilit to manage acti5ities. d. impro5es the abilit to plan and monitor acti5it impro5ements. e. does all of these.
ANS: ! PTS: 1 DIF: Difficult: +oderate "#$: %": 11&6 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 2 min. <. Acti5it fle4ible budgeting pro5ides a more accurate prediction of costs than a traditional fle4ible budgeting approach because a. costs often 5ar with more than one dri5er. b. nonunit le5el dri5ers are often not highl correlated with direct labor hours. c. direct labor hours are often not measured correctl. d. costs often 5ar with more than one dri5er and nonunit le5el dri5ers are often not highl correlated with direct labor hours. e. costs often 5ar with more than one dri5er and direct labor hours are not correct. ANS: D PTS: 1 DIF: Difficult: +oderate "#$: %": 11&6 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 2 min. <<. A performance report using acti5it fle4ible budgeting compares a. budgeted costs for actual acti5it usage le5els with the actual acti5it costs. b. actual acti5it costs with budgeted o5erhead costs. c. actual o5erhead costs with the budgeted acti5it costs for actual acti5it usage le5els. d. the static acti5it budget costs with the budgeted acti5it costs for the actual acti5it usage le5els. e. None of these. ANS: A PTS: 1 DIF: Difficult: +oderate "#$: %": 11&6 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 2 min. <. For acti5it fle4ible budgeting9 a cost formula is de5eloped for each a. o5erhead item as a function of direct labor hours. b. acti5it as a function of acti5it dri5ers. c. acti5it as a function of resource dri5ers. d. o5erhead item as a function of resource dri5ers. e. each acti5it as a function of direct labor hours. ANS: # PTS: 1 DIF: Difficult: +oderate "#$: %": 11&6 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 2 min. <=. In an acti5it fle4ible budget9 the 5ariable cost component tpicall corresponds to a. those resources that 5ar with direct labor hours. b. resources ac?uired as needed. c. resources ac?uired in ad5ance of usage. d. resources that do not change as the acti5it output changes. e. None of these. ANS: # PTS: 1 DIF: Difficult: +oderate "#$: %": 11&6 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and
(esponsibilit
/!0: #looms: /nowledge
N"T: 2 min.
>. In an acti5it fle4ible budget9 the fi4ed cost component tpicall corresponds to a. resources that 5ar with direct labor hours. b. resources that 5ar as the acti5it output changes. c. resources ac?uired in ad5ance of usage. d. resources ac?uired as needed. e. None of these. ANS: * PTS: 1 DIF: Difficult: +oderate "#$: %": 11&6 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 2 min. 1. #uilding an acti5it&based budget re?uires a. the acti5ities within an organi@ation to be identified. b. the demand for each acti5its output to be estimated. c. the cost of resources re?uired to produce this acti5it output to be assessed. d. All of these. e. None of these. ANS: D #uilding an acti5it&based budget re?uires three steps: 1B the acti5ities within an organi@ation must be identified9 2B the demand for each acti5its output must be estimated9 and -B the cost of resources re?uired to produce this acti5it output must be assessed. PTS: 1 DIF: Difficult: !as "#$: %": 11&6 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 2 min. 2. If an organi@ation has implemented an A#* or A#+ sstem9 the will alread ha5e accomplished which of the following a. Identified the acti5ities within an organi@ation. b. !stimated the demand for each acti5its output. c. Assessed the cost of resources re?uired to produce this acti5it output. d. All of these. e. None of these. ANS: A Step 1 of building an acti5it&based budget is to identif the acti5ities within an organi@ation. If an organi@ation has implemented an A#* or A#+ sstem9 then step 1 will alread ha5e been accomplished. PTS: 1 DIF: Difficult: !as "#$: %": 11&6 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 2 min. -. The maCor differences between functional and acti5it&based budgeting are found within which of the following categories a. o5erhead b. selling c. administration d. All of these.
e. None of these. ANS: D The maCor differences between functional and acti5it&based budgeting are found within the o5erhead and selling and administration categories. PTS: 1 DIF: Difficult: !as "#$: %": 11&6 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 2 min. 6. Acti5it&based budgeting a. builds a budget for each function. b. identifies onl the o5erhead acti5it. c. classifies costs as 5ariable or fi4ed with respect to the acti5it output measure. d. All of these. e. None of these. ANS: * Acti5it&based budgeting9 unli3e functional&based budgeting9 identifies the o5erhead9 selling9 and administrati5e acti5ities and then builds a budget for each acti5it9 based on the resources needed to pro5ide the re?uired acti5it output le5els. *osts are classified as 5ariable or fi4ed with respect to the acti5it output measure. PTS: 1 DIF: Difficult: +oderate "#$: %": 11&6 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: /nowledge N"T: 2 min. Figure 11',( +erric *ompan uses an acti5it&based costing sstem. Four acti5ities ha5e been identified. The setup acti5it uses the number of setups as its cost dri5er. The following budget information is a5ailable for this acti5it:
Fi4ed costs per month ;ariable cost per setup
G26>9>>> G 796>>
The compan e4pects to perform 27 setups in +a. 7. (efer to Figure 11&7. If the compan e4pects 27 setups in the month of +a9 what would be the total budgeted costs of the setup acti5it a. G26>9>>> b. G-<79>>> c. G1-79>>> d. G-=<97>> e. None of these. ANS: # Fi4ed costs ;ariable costs G796>> × 27B Total PTS: 1 DIF: Difficult: +oderate NAT: #'SP("): Analtic
G26>9>>> 1-79>>> G-<79>>> "#$: %": 11&6
STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: Application N"T: - min. . (efer to Figure 11&7. Actual costs incurred were G269>>> fi4ed and G1669>>> 5ariable. If the actual number of setups in +a was ->9 what is the acti5it&based fle4ible budget 5ariance a. G179>>> ' b. G179>>> F c. G129>>> F d. G129>>> ' ANS: *
Fi4ed costs ;ariable costs Total
Fle4ible #udget -> SetupsB G26>9>>> 129>>> G6>29>>>
Actual *osts G269>>> 1669>>> G-=>9>>>
;ariance G 9>>> ' 19>>> F G129>>> F
PTS: 1 DIF: Difficult: +oderate "#$: %": 11&6 NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: Application N"T: 6 min. Figure 11'-( /le *ompan uses for3lifts to mo5e materials from the storage area to the production floor. There are fi5e for3lifts. The are full used 2> hours per da ma3ing mo5es per hourB. The compan wor3s -2> das per ear9 running two <&hour shifts per da. For3&lift operators wor3 19>> hours per ear and are paid an annual salar of G79>>>.
#ased on a recent stud each for3lift uses >.67 gallons of fuel per mo5e. The cost of fuel is G-.> per gallon. <. (efer to Figure 11&. Prepare a salar budget for the acti5it9 mo5ing materials. Assume that the labor mar3et does not permit the hiring of part&time for3lift operators. a. G=>9>>> b. G19>>9>>> c. G=>79>>> d. G191-79>>> e. G<>9>>> ANS: # "perators needed J 7 4 2> 4 -2>BH19>> J 1<.< J 1 operators #udgeted salaries J 1 4 G79>>> J G19>>9>>> PTS: 1 DIF: Difficult: *hallenging "#$: %": 11&6 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: Application N"T: 7 min. . (efer to Figure 11&. *alculate the fuel budget for the ear for mo5ing materials. a. G6-9>=> b. G229->> c. G6=9>7> d. G-1291>>
e. G6-<9<> ANS: ! +o5es J 7 4 2> 4 4 -2> J 279>>> Fuel cost J >.67 4 279>>> 4 G-.> J G6-<9<> PTS: 1 DIF: Difficult: *hallenging "#$: %": 11&6 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: Application N"T: 6 min. =. (efer to Figure 11&. Prepare a fle4ible budget formula for the mo5ing materials acti5it. a. G>9>>> K G1.<1 × mo5es b. G1967>9>>> K G-.> × mo5es c. G=>79>>> K G.67 × mo5es d. G19>>9>>> K G1.<1 × mo5es e. G7>9>>> K G2.>> × mo5es ANS: D "perators needed J 7 4 2> 4 -2>BH19>> J 1<.< J 1 operators Fi4ed costs J 1 4 G79>>> J G19>>9>>> ;ariable cost J >.67 4 G-.> J G1.<1 per mo5e PTS: 1 DIF: Difficult: *hallenging "#$: %": 11&6 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: Application N"T: 6 min. =>. (efer to Figure 11&. Suppose that the actual mo5es made are >M of the for3lifts capacit. 8hat is the after&the&fact budgeted fuel cost a. G669>>> b. G2==9>> c. G6=29>>> d. G-7-9>> e. G-7>92> ANS: ! +o5es J 7 4 2> 4 4 -2> J 279>>> After&the&fact budgeted fuel cost J >.> 4 279>>> 4 >.67 4 G-.> J G-7>92> PTS: 1 DIF: Difficult: *hallenging "#$: %": 11&6 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: Application N"T: 6 min. &ROBLE! Figure 11'.(
%arr +iller9 controller for /ipling *ompan9 has been instructed to de5elop a fle4ible budget for o5erhead costs. The compan produces two tpes of fro@en desserts: Ice and Tast. The two desserts use common raw materials in different proportions. The compan e4pects to produce 2>>9>>> gallons of each product during the coming ear. Ice re?uires >.27 direct labor hour per gallon and Tast re?uires >.->. %arr has de5eloped the following fi4ed and 5ariable costs for each of the four o5erhead items: "5erhead Item +aintenance Power Indirect labor (ent
Fi4ed *ost G729>>> <=97>> 769>>>
;ariable (ate per D% G1.2> 1.7> 6.>
1. (efer to Figure 11&<. Reuired0 A. Prepare an o5erhead budget for the e4pected acti5it le5el for the coming ear. #. Prepare an o5erhead budget that reflects production that is 1>M higher than e4pected for both productsB. *. Prepare an o5erhead budget that reflects production that is 1>M lower than e4pected for both productsB.
ANS: A.
ipling C23pany Overhead Budget F2r the C23ing 4ear
Acti5it %e5el Formula ;ariable costs: +aintenance Power Indirect labor Total 5ariable costs Fi4ed costs: +aintenance Indirect labor (ent Total fi4ed costs Total o5erhead costs Ice: Tast: Total D% #.
11>9>>> hrs G1.2> 1.7> 6.>
G1-29>>> 179>>> 729>>> G279>>> G
729>>> <=97>> 769>>> 1797>> G19>1>97>> >.27 × 2>>9>>>B >.-> × 2>>9>>>B
7>9>>> >9>>> 11>9>>>
10% higher:
"5erhead #udget For the *oming 0ear ;ariable costs: +aintenance Power
Formula
1219>>> hrs
G1.2> 1.7>
G 16792>> 1197>>
Indirect labor Total 5ariable costs Fi4ed costs: +aintenance Indirect labor (ent Total fi4ed costs Total o5erhead costs
6.>
7>9>> G =><97>> G
729>>> <=97>> 769>>> 1797>> G19>=-9>>>
11>9>>> D% × 11>M J 1219>>> *.
10% lower:
"5erhead #udget For the *oming 0ear ;ariable costs: +aintenance Power Indirect labor Total 5ariable costs Fi4ed costs: +aintenance Indirect labor (ent Total fi4ed costs Total o5erhead costs
Formula
==9>>> hrs
G1.2> 1.7> 6.>
G119>> 1697>> 6<792>> G<6297>> G 729>>> <=97>> 769>>> 1797>> G=29>>>
11>9>>> D% × =>M J ==9>>> PTS: 1 DIF: Difficult: +oderate "#$: %": 11&1 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: Application N"T: -> min. 2. (efer to Figure 11&<. Assume that /ipling actuall produced 26>9>>> gallons of Ice and 2>>9>>> of Tast. The actual o5erhead costs incurred were: +aintenance Power Indirect labor (ent
G1=29>>> 119<>> 6=97>> 769>>>
Reuired0 A. Prepare a performance report for the period. #. #ased on the report9 would ou Cudge an of the 5ariances to be significant Discuss some possible reasons for the 5ariances.
ANS: A.
ipling C23pany &er52r3an6e Rep2rt F2r the Current 4ear
Production costs: +aintenance Power Indirect labor (ent Total costs
Actual
#udget
;ariance
G 1=29>>> 119<>> 6=97>> 769>>> G19><<92>>
G 1=9>>> 1>9>>> 7797>> 769>>> G19>797>>
G69>>> F 19<>> ' 9>>> F > G9->> F
Fle4ible budget amounts are based on 12>9>>> D%: >.27 × 26>9>>>B K >.-> × 2>>9>>>B J 12>9>>> D% +aintenance: Power: Indirect labor: #.
G729>>> K G1.2>12>9>>>B G1.7>12>9>>>B G<=97>> K G6.>12>9>>>B
J J J
G1=9>>> G1>9>>> G7797>>
All of the 5ariances are within 7 to 1>M of budgeted amounts. +ost would probabl 5iew the 5ariances as immaterial. There are numerous reasons for 5ariances. For e4ample9 a fa5orable maintenance 5ariance could be caused b less pre5enti5e maintenance or b increased efficienc b indi5idual maintenance wor3ers. Indirect labor could be fa5orable because among other thingsB lower&priced labor was used to carr out higher&s3illed Cobs. Power could be more e4pensi5e than planned because of a rate increase. An in5estigation would be needed to 3now e4actl wh the 5ariances occurred.
PTS: 1 DIF: Difficult: +oderate "#$: %": 11&1 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: Application N"T: 17 min. -. Fa5or *ompan budgeted the following amounts: ;ariable costs of production: Direct materials Direct labor ;ariable o5erhead
pounds L G1.27 per pound >.<7 hours L G1.>> per hour >.<7 hours L G2.7 per hour
Fi4ed o5erhead: +aterials handling Depreciation
G=9>>> G29->>
Reuired0 Prepare a fle4ible budget for 197>> units9 19>> units and 291>> units.
ANS:
Direct materials Direct labor ;ariable o5erhead Fi4ed o5erhead: +aterials handling Depreciation
197>> units G11927> G19>>> G29=1 G=9>>> G29->>
19>> units 291>> units G1-97>> G179<7> G219>> G2792>> G-97< G691<6 G=9>>> G29->>
G=9>>> G29->>
Total
G6-97-1
G6=9=<
G79621
PTS: 1 DIF: Difficult: +oderate "#$: %": 11&1 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: Application N"T: 7 min. 6. ;allo Pharmac operates a home deli5er ser5ice with more than 29>>> housebound clients. ;allo has a fleet of 5ehicles and has in5ested in a sophisticated computeri@ed communications sstem to coordinate its deli5eries. ;allo has gathered the following data on last ears operations: Deli5eries made: Direct labor: Actual 5ariable o5erhead:
219>>> 179>>> deli5er hours at G G1679>>>
;allo uses a standard costing sstem. During the ear9 the following 5ariable o5erhead rate was used: G.1> per deli5er hour. The labor standard re?uires >.<7 hours per deli5er. *ompute the 5ariable o5erhead spending 5ariance and the 5ariable o5erhead efficienc 5ariance. ANS: ;ariable o5erhead analsis: ;" spending 5ariance
J A;" − S;"( × AB J G1679>>> − G.1> × 179>>>B J G1679>>> − G12197>> J G2-97>> '
;" efficienc 5ariance
J A − SBS;"( J 179>>> − 179<7>BG.1> J G9><7 F
where S J >.<7 × 219>>> PTS: 1 DIF: Difficult: +oderate "#$: %": 11&2 NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: Application N"T: 7 min. 7. A compan had the following information for the ear: Standard 5ariable o5erhead rate (SVOR) per direct labor hour Standard hours (SH) allowed per unit Actual production Actual 5ariable o5erhead costs Actual direct labor hours Reuired0 A. *alculate the actual 5ariable o5erhead rate (AVOR) #. *alculate the applied 5ariable o5erhead. *. *alculate the total 5ariable o5erhead 5ariance.
G.<7 6 1<96>> G6<9>>> =9>>
ANS: A. A;"( J Actual 5ariable o5erhead Actual direct labor hours 6<9>>> J G.7 =9>> #. Applied 5ariable o5erhead J actual units 4 S 4 S;"( 1<96>> 4 6 4 G.<7 J G6=9>> *. Actual 5ariable o5erhead Applied 5ariable o5erhead Total 5ariable o5erhead 5ariance
G6<9>>> G6=9>> G92>>'
PTS: 1 DIF: Difficult: +oderate "#$: %": 11&2 NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: Application N"T: 7 min. . )allant *ompan uses standard costing. "5erhead is applied to products on the basis of standard direct labor hours for actual production. Data for )allant follows: Standard direct labor hours allowed for actual output Actual direct labor hours Direct labor hours budgeted in the master budget #udgeted total 5ariable o5erhead cost Actual 5ariable o5erhead cost A. #. *. D. !.
11>9>>> 1179>>> 12>9>>> G->9>>> G-29>>>
*alculate the 5ariable o5erhead rate. *alculate the total 5ariable o5erhead applied to production. *alculate the 5ariable o5erhead spending 5ariance. *alculate the 5ariable o5erhead efficienc 5ariance. *alculate the total 5ariable o5erhead 5ariance.
ANS: A.
;ariable o5erhead rate J G->9>>>H12>9>>> J G-.>> per direct labor hour
#.
;ariable o5erhead applied to production J G-
*.
;ariable o5erhead spending 5ariance J G-29>>> − G- × 1179>>>B J G1<9>>> F
D.
;ariable o5erhead efficienc 5ariance
!.
Total 5ariable o5erhead 5ariance J G1<9>>> F K G179>>> ' J G29>>> F
PTS: 1
DIF:
Difficult: +oderate
×
11>9>>> J G-->9>>>
J G- × 1179>>>B − G- × 11>9>>>B J G179>>> '
"#$: %": 11&2
NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: Application N"T: 7 min. <. A compan pro5ided the following data: Standard fi4ed o5erhead rate (S!OR) Actual fi4ed o5erhead costs Standard hours allowed per unit Actual production
G1- per direct labor hour G-79>> 2 179>>> units
Reuired0 A. *alculate the standard hours allowed for actual production. #. *alculate the applied fi4ed o5erhead *. *alculate the total fi4ed o5erhead 5ariance
ANS: A. Standard hours for actual units J S per unit 4 actual units produced 2 4 179>>> J ->9>>> #. Applied fi4ed o5erhead J Standard hours for actual units 4 SF"( ->9>>> 4 G1- J G-=>9>>> *. Actual fi4ed o5erhead Applied fi4ed o5erhead Total fi4ed o5erhead 5ariance
G-79>> G-=>9>>> G692>>BF
PTS: 1 DIF: Difficult: +oderate "#$: %": 11& NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: Application N"T: 7 min. . %ittleton *ompan uses a standard costing sstem. The following monthl cost functions appl to its manufacturing o5erhead items: "5erhead Item Indirect materials Indirect labor 'tilities Insurance Depreciation
*ost Function G>.> per D% G1.>> per D% G>.6> per D% G9>>> G-29>>>
Information for the month of "ctober is as follows: Actual o5erhead costs incurred: Indirect materials Indirect labor 'tilities
G2>9>> 269>>> =9>>
Insurance Depreciation Total Actual direct labor hours wor3ed Standard direct labor hours allowed for production achie5ed
9>> -29>>> G=792>> 269>>> 2<9>>>
%ittleton uses e4pected capacit to calculate standard o5erhead rates. The monthl e4pected capacit is 279>>> hours. A.
*alculate the following standard o5erhead rates based upon e4pected capacit: ;ariable o5erhead rate Fi4ed o5erhead rate Total o5erhead rate
#.
*alculate the following 5ariances: ;ariable o5erhead spending 5ariance ;ariable o5erhead efficienc 5ariance Fi4ed o5erhead spending 5ariance Fi4ed o5erhead 5olume 5ariance
ANS: A.
;ariable o5erhead rate J G>.> K G1.>> K G>.6> J G2.2> per D% Fi4ed o5erhead rate J G9>>> K G-29>>>BH279>>> J G1.> per D% Total o5erhead rate J G2.2> K G1.> J G-.> per D%
#.
;ariable o5erhead spending 5ariance: A;" − S;"( × A J G2>9>> K G269>>> K G=9>>B 269>>> hours × G2.2>B J G7696>> − G729>> J G19>> '
−
;ariable o5erhead efficienc 5ariance: A − SBS;"( J 269>>> − 2<9>>>BG2.2> J G9>> F Fi4ed o5erhead spending 5ariance: AF" − #F" J G6>9>> − G6>9>>>B J G>> ' Fi4ed o5erhead 5olume 5ariance: #F" − S × SF"( J OG6>9>>> − 2<9>>> hours × G1.>B J G-92>> F PTS: 1 DIF: Difficult: +oderate "#$: %": 11&2 , %": 11& NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: Application N"T: 1> min. =. The following standard o5erhead costs were de5eloped for one of the products of +ilde *ompan:
;ariable o5erhead: 7 hours × G6 per hour Fi4ed o5erhead: 7 hours × G17 per hour Total standard o5erhead cost per unit
2>.>> <7.>> G=7.>>
The following information is a5ailable regarding the compans operations for the period: 'nits produced Direct labor "5erhead incurred: ;ariable Fi4ed
2>9>>> 1179>>> hours G6-<97>> G19-2>9>>>
#udgeted fi4ed o5erhead for the period is G19-7>9>>>9 and the standard fi4ed o5erhead rate is based on e4pected capacit of =>9>>> direct labor hours. Reuired0 A. *alculate the 5ariable o5erhead spending 5ariance and indicate whether it is fa5orable or unfa5orable. #. *alculate the 5ariable o5erhead efficienc 5ariance and indicate whether it is fa5orable or unfa5orable. *. *alculate the fi4ed o5erhead spending 5ariance and indicate whether it is fa5orable or unfa5orable. D. *alculate the fi4ed o5erhead 5olume 5ariance and indicate whether it is fa5orable or unfa5orable.
ANS: A. #. *. D.
G 2297>> G >9>>> G ->9>>> G17>9>>>
F ' F F
G6-<97>> − 1179>>> × G6B O1179>>>B − 2>9>>> units × 7 hours B × G6 G19-2>9>>> − G19-7>9>>> G19-7>9>>> − 2>9>>> units × 7 hours × G17B
PTS: 1 DIF: Difficult: +oderate "#$: %": 11&2 , %": 11& NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: Application N"T: 7 min. 1>. At the beginning of the ear9 Folsom *ompan had the following standard cost sheet for one of its food products: Direct materials 1> lb L -.2>B Direct labor 6 hr L G=.>>B Fi4ed o5erhead 6 hr L G6.>>B ;ariable o5erhead 6 hr L G>.<7B Standard cost per unit
G-2.>> -.>> 1.>> -.>> G<.>>
Folsom computes its o5erhead rates using practical capacit9 which is <29>>> units. The actual results for the ear are: 'nits produced Direct labor hours Actual wage per hour Fi4ed o5erhead
<>9>>> 2=>9>>> G=.>7 G191>9>>>
;ariable o5erhead A. #.
G 219>>>
*ompute the fi4ed o5erhead spending and 5olume 5ariances. *ompute the 5ariable o5erhead spending and efficienc 5ariances.
ANS: A.
Actual F" G191>9>>>
#udgeted F" G6 × 29>>> G9>>> ' F" Spending
#.
;" Spending 5ariance
J A;" − S;"( × A J G219>>> − G>.<7 × 2=>9>>>B J G7>> '
;" efficienc 5ariance
J A − SBS;"( J 2=>9>>> − 2>9>>>BG>.<7 J G<97>> '
Applied F" G6 × 2>9>>> G-29>>> ' F" ;olume
PTS: 1 DIF: Difficult: +oderate "#$: %": 11&2 , %": 11& NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: Application N"T: 1> min. 11. #ushman *ompan is planning to produce -92>>9>>> carburetors for the coming ear. !ach carburetor re?uires >.-<7 standard hours of labor for completion. The compan uses direct labor hours to assign o5erhead to products. The total fi4ed o5erhead budgeted for the coming ear is G19=>9>>>. Total budgeted o5erhead is G69>7>9>>>. Predetermined o5erhead rates are calculated using e4pected production9 measured in direct labor hours. Actual results for the ear follow: Actual production unitsB Actual direct labor hours Actual fi4ed o5erhead Actual 5ariable o5erhead
-976>9>>> 191=>9>>> G19=2>9>>> G2917>9>>>
Reuired0 A. *ompute the applied fi4ed o5erhead. #. *ompute the fi4ed o5erhead spending and 5olume 5ariances. *. *ompute the applied 5ariable o5erhead. D. *ompute the 5ariable o5erhead spending and efficienc 5ariances. *arr per hour computations out to - decimals.
ANS: A.
Fi4ed o5erhead rate SF"(B J G19=>9>>>H>.-<7 × -92>>9>>>B J G1.7 per D% S J >.-<7 × -976>9>>> J 19-2<97>> Applied F" J G1.7 × 19-2<97>> J G291=>9-<7
#.
F" spending 5ariance
J AF" − #F" J G19=2>9>>> − G19=>9>>> J G>9>>> F
F" 5olume 5ariance
J #F" − SF"( × S J G19=>9>>> − G291=>9-<7 J G21>9-<7 F
*.
S;"( J G69>7>9>>> − G19=>9>>>BH192>>9>>> J G1.<27 per D% Applied ;" J G1.<27 × 19-2<97>> J G292=9=- roundedB
D.
;" spending 5ariance
J A;" − S;"( × A J G2917>9>>> − G1.<27 × 191=>9>>>B J G=<927> '
;" efficienc 5ariance
J A − SBS;"( J 191=>9>>> − 19-2<97>>BG1.<27 J G2-<91 F roundedB
PTS: 1 DIF: Difficult: +oderate "#$: %": 11&2 , %": 11& NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: Application N"T: 1> min. 12. )allant *ompan uses standard costing. "5erhead is applied to products on the basis of standard direct labor hours for actual production. Data for )allant follows: Standard direct labor hours allowed for actual output Actual direct labor hours Direct labor hours budgeted in the master budget #udgeted total fi4ed o5erhead cost Actual fi4ed o5erhead cost A. #. *. D. !.
11>9>>> 1179>>> 12>9>>> G21>9>>> G2>9>>>
*alculate the fi4ed o5erhead rate. *alculate the total fi4ed o5erhead applied to production. *alculate the fi4ed o5erhead spending 5ariance. *alculate the fi4ed o5erhead 5olume 5ariance. *alculate the total fi4ed o5erhead 5ariance.
ANS: A. #. *. D. !.
Fi4ed o5erhead rate J G21>9>>>H12>9>>> J G1.<7 Fi4ed o5erhead applied to production J G1.<7 × 11>9>>> J G1=297>> Fi4ed o5erhead spending 5ariance J G2>9>>> − G21>9>>> J G29>>> F Fi4ed o5erhead 5olume 5ariance J G21>9>>> − G1=297>> J G1<97>> ' Total fi4ed o5erhead 5ariance J G29>>> F K G1<97>> ' J G1797>> '
PTS: 1 DIF: Difficult: +oderate "#$: %": 11&2 , %": 11& NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: Application N"T: 1> min. 1-. The following costs were de5eloped for one of the products of %arr *orporation:
6.>> =.>>
;ariable o5erhead: hours × G per hour Fi4ed o5erhead: hours × G12 per hour
The following information is a5ailable regarding the compans operations for the period: 'nits produced: Direct labor:
119>>> 69>>> hours costing G6>9>>>
"5erhead incurred: ;ariable Fi4ed
G<79>>> G19>>>9>>>
#udgeted fi4ed o5erhead for the period is G=>9>>>9 and the standard fi4ed o5erhead rate is based on e4pected capacit of >9>>> direct labor hours. Reuired0 A. *alculate the 5ariable o5erhead spending 5ariance. #. *alculate the 5ariable o5erhead efficienc 5ariance. *. *alculate the fi4ed o5erhead spending 5ariance. D. *alculate the fi4ed o5erhead 5olume 5ariance.
ANS: A. #. *. D.
G69>>> ' G-29>>> F G6>9>>> ' G=9>>> F
G<79>>> − 69>>> × GB 69>>> × GB − 119>>> × × GB G19>>>9>>> − G=>9>>>B G=>9>>> − 119>>> × × G12B
PTS: 1 DIF: Difficult: +oderate "#$: %": 11&2 , %": 11& NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: Application N"T: 1> min. 16. +ills *ompan uses standard costing for direct materials and direct labor. +anagement would li3e to use standard costing for 5ariable and fi4ed o5erhead. The following monthl cost functions were de5eloped for o5erhead items: "5erhead Item Indirect materials Indirect labor 'tilities Insurance Depreciation
*ost Function G1.>> per D% G1.27 per D% G>.7> per D% G1>9>>> G6>9>>>
The cost functions are considered reliable within a rele5ant range of 2>9>>> to 6>9>>> direct labor hours. The compan e4pects to operate at 279>>> direct labor hours per month. Information for the month of $une is as follows: Actual o5erhead costs incurred: Indirect materials
G 2>9>>>
Indirect labor 'tilities Insurance Depreciation Total
->9>>> 129>>> 119>>> 6>9>>> G11-9>>>
Actual direct labor hours wor3ed: Standard direct labor hours allowed for production achie5ed:
269>>> 2<9>>>
Reuired0 A. *alculate the following o5erhead rates based upon e4pected capacit:
1. 2. -. #.
;ariable o5erhead Fi4ed o5erhead rate Total o5erhead rate
*alculate the following 5ariances: 1. 2. -. 6.
;ariable o5erhead spending 5ariance ;ariable o5erhead efficienc 5ariance Fi4ed o5erhead spending 5ariance Fi4ed o5erhead 5olume 5ariance
A.
1. 2. -.
S;"(: SF"(: Total mfg. oh. rate:
#.
1.
;ariable o5erhead spending 5ariance G2>9>>> K G->9>>> K G129>>>B − 269>>> × G2.<7B J G69>>> F
2.
;ariable o5erhead efficienc 5ariance 269>>> × G2.<7B − 2<9>>> × G2.<7B J G927> F
-.
Fi4ed o5erhead spending 5ariance G719>>> − G7>9>>>B J G19>>> '
6.
Fi4ed o5erhead 5olume 5ariance OG7>9>>> − 2<9>>> × G2.>>B J G69>>> F
ANS: G2.<7HD% G2.>>HD% G6.<7HD%
G1.>> K G1.27 K G>.7>B G1>9>>> K G6>9>>>BH279>>> G2.<7 K G2.>>B
PTS: 1 DIF: Difficult: *hallenging "#$: %": 11&2 , %": 11& NAT: #'SP("): Analtic STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: Application N"T: 1> min. Figure 11'7(
#ooth Inc. uses three deli5er truc3s to transport finished parts from its plant to the plants of its customers. The deli5er truc3s are obtained through a 7&ear operating lease that costs G129>>> per ear per truc3. #ooth emplos dri5ers who recei5e an a5erage salar of G-9>>> per ear9 including benefits. Parts are placed in bo4es and placed in the truc3s. !ach truc3 holds 2> bo4es. The a5erage round&trip distance for a deli5er is 6> miles. The bo4es are retained b the customers. !ach bo4 costs G2.>>. Fuel for the truc3s costs G1.> per gallon. A gallon of gas is used e5er 2> miles. A dri5er can tra5el 1> miles in an eight&hour shift. !ach dri5er wor3s 6> hours per wee3 and 7> wee3s per ear. 17. (efer to Figure 11&. Prepare an annual budget for the acti5it9 assuming that all of the capacit of the acti5it is used use miles as the acti5it dri5erB. Identif which resources ou would treat as fi4ed costs and which would be 5iewed as 5ariable costs. ANS: (esource Salaries %ease #o4es Fuel Total
Formula Fi4ed G219>>> -9>>>
;ariable − −
G1.>> >.>= G1.>=
− −
G2729>>>
Acti5it le5el 26>9>>> miles G219>>> -9>>> 26>9>>> 219>> G71-9>>
*apacit is determined b dri5ers: × 1> × 7 × 7> J 26>9>>> miles. 2>H6>B × G2.>> G1.>H2> PTS: 1 DIF: Difficult: *hallenging "#$: %": 11&6 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: Application N"T: 17 min. 1. (efer to Figure 11&. Assume that the compan uses onl =>M of the acti5it capacit. The actual costs incurred at this le5el were: Salaries %ease #o4es Fuel A. #.
G2729>>> -9>>> 2>>9>>> 2>96>>
8hat is the budget for this le5el of acti5it Prepare a performance report.
ANS: A.
(esource Salaries %ease #o4es Fuel Total
Formula Fi4ed G219>>> -9>>> − −
G2729>>>
;ariable − −
G1.>> >.>= G1.>=
Acti5it le5el 219>>> miles G219>>> -9>>> 219>>> 1=966> G6<966>
#.
Performance (eport Actual #udget G2729>>> G219>>> -9>>> -9>>> 2>>9>>> 219>>> 2>96>> 1=966> G7>96>> G6<966>
(esource Salaries %ease #o4es Fuel Total
;ariance G-9>>> ' > 19>>> F => ' G2>9=> '
*apacit is determined b dri5ers: × 1> × 7 × 7> J 26>9>>> miles. =>M J 219>>> miles PTS: 1 DIF: Difficult: +oderate "#$: %": 11&6 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: Application N"T: 17 min. 1<. +c*ord *ompan pro5ided information on the following three o5erhead acti5ities: A6tivity
+aintenance Power Setting up
8river
Fixed C2st
+achine hours +achine hours Setups
G<79>>> 2>9>>> &
9ariable Rate
G1.7> G2.>7 G197>>
+c*ord has found that the following dri5er le5els are associated with two different le5els of production: 8river +achine hours Setups
*:;::: units 7>9>>> 27
.:;::: units =79>>> 7
Reuired0 Prepare an acti5it&based fle4ible budget.
ANS:
+aintenance Power
Fixed C2st 9ariable Rate G<79>>> G1.7> G2>9>>> G2.>7
G=79>>> Fixed C2st
Setting up
&
Reuired 52r *:;::: units .:;::: units ,:;::: 3hrs( <,;::: 3hrs( 17>9>>> 21<97>> 12297>> 2169<7>
G-.77
2<297>>
6-2927>
9ariable Rate G197>>
), setups G-<97>>
-, setups G=<97>>
Total PTS: 1 DIF: Difficult: +oderate NAT: #'SP("): Analtic
G-1>9>>> "#$: %": 11&6
G72=9<7>
STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: Application N"T: 1> min. 1. Allen *ompan produced 669>>> units last ear. The information on the actual costs and budgeted costs at actual production of three acti5ities is pro5ided below. Acti5it +achining
Actual *ost
#udgeted *ost for Actual Production
G2179>>>
G2279> >>
+aintenance
G1<9>>>
G1<9>>
Purchasing
G1229>>>
G119> >>
Reuired0 Prepare an acti5it&based performance report for the three acti5ities for the past ear.
ANS:
'nits produced +achining +aintenance Purchasing
Actual 669>>> G 2179>>> G1<9>>> G1229>>>
Performance (eport #udgeted 669>>> G2279>>> G1<9->> G119>>>
;ariance & G1>9>>>BF G->>BF G69>>> '
;ariances e?ual actual amounts less budgeted amounts. If actual cost is less than budgeted cost9 the 5ariance is ! fa5orableB. If actual cost is more than budgeted cost9 the 5ariance is " unfa5orableB. PTS: 1 DIF: Difficult: +oderate "#$: %": 11&6 NAT: #'SP("): Analtic STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: Application N"T: 7 min. EA4
1. Define static budget and fle4ible budget. 8hat is each tpe used for ANS: A static budget is a budget for a particular le5el of acti5it. The master budget is an e4ample of a static budget. It is de5eloped in ad5ance and is based on a single le5el of acti5it9 embodied in the sales budget. The master budget is useful in planning so that the firm can determine its sales9 production needs9 costs9 and potential financial statements. The static budget is less useful for control because the le5el of acti5it set in the master budget rarel matches the actual le5el achie5ed.
A fle4ible budget can be based on 5arious le5els of acti5it9 or it can be based on the actual le5el of acti5it. The before&the&fact the budget gi5es e4pected outcomes for a range of acti5it le5els. A before&the&fact fle4ible budget allows managers to generate financial results for a number of potential scenarios. The after&the&fact the budget is based on the actual le5el of acti5it. An after&the&fact fle4ible budget is used to compute what costs should ha5e been for the actual le5el of acti5it. As a result9 the cost comparisons between the fle4ible budget amounts and the actual amounts are more meaningful. PTS: 1 DIF: Difficult: +oderate "#$: %": 11&1 NAT: #'SP("): *ommunication STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: *omprehension N"T: 1> min. 42u de6ide
2. Describe fle4ible budgeting9 including the two tpes of fle4ible budgets. ANS: A fle4ible budget enables a firm to compute e4pected costs for a range of acti5it le5els. The 3e to fle4ible budgeting is 3nowledge of fi4ed and 5ariable costs. There are two tpes of fle4ible budgets: before&the&fact and after&the&fact. The before&the&fact the budget gi5es e4pected outcomes for a range of acti5it le5els. A before&the& fact fle4ible budget allows managers to generate financial results for a number of potential scenarios. The after&the&fact the budget is based on the actual le5el of acti5it. An after&the&fact fle4ible budget is used to compute what costs should ha5e been for the actual le5el of acti5it. Those e4pected costs are then compared with actual costs in order to assess performance. Fle4ible budgeting is the 3e to pro5iding the fre?uent feedbac3 that managers need to e4ercise control and effecti5el carr out the plans of an organi@ation. PTS: 1 DIF: Difficult: +oderate "#$: %": 11&1 NAT: #'SP("): *ommunication STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: *omprehension N"T: 7 min. -. Discuss the following statement: QAs long as the total 5ariable o5erhead 5ariance is small9 the managers can be assured that actual acti5it is proceeding as planned. No further action is necessar.Q ANS: 8hile it ma be reassuring for managers to see that the total 5ariable o5erhead 5ariance is small9 it should not be the end of their efforts. The o5erall 5ariable o5erhead 5ariance is composed of man Rsub&5ariances. These can be ?uite large9 but if the are a mi4 of fa5orable and unfa5orable 5ariances9 the will cancel each other out. This mas3s significant cost de5iations within the firm. +anagers should insist on a detailed listing of the Rsub&5ariances so that outliers can be identified and dealt with. PTS: 1 DIF: Difficult: +oderate "#$: %": 11&2 NAT: #'SP("): *ommunication STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: *omprehension N"T: 7 min. 6. Discuss the following statement: QSince fi4ed o5erhead is9 b definition9 not related to changes in acti5it le5el9 then the fi4ed o5erhead spending 5ariance is @ero.Q
ANS: It is true that fi4ed o5erhead costs do not 5ar with output acti5it le5elB. +an fi4ed o5erhead items&&long&run in5estment in propert9 plant9 and e?uipment9 for e4ample&&are not subCect to change in the short run. As a rule9 fi4ed o5erhead costs are beond the immediate control of management. This means that the fi4ed o5erhead spending 5ariance is tpicall small. owe5er9 there can be changes in the cost of fi4ed o5erhead items. For e4ample9 propert ta4es can increase during the ear. In addition9 some fi4ed o5erhead items are fi4ed with respect to output or direct labor hours9 but the are not fi4ed with respect to other dri5ers. For e4ample9 purchasing ma 5ar on the basis of number of purchase orders processed. These changes will result in a fi4ed o5erhead spending 5ariance. PTS: 1 DIF: Difficult: *hallenging "#$: %": 11& NAT: #'SP("): *ommunication STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: *omprehension N"T: 7 min. 7. 8hat is the fi4ed o5erhead 5olume 5ariance Suppose that the fi4ed o5erhead 5olume 5ariance is unfa5orable what does that mean ANS: The fi4ed o5erhead 5olume 5ariance is the difference between budgeted fi4ed o5erhead and applied fi4ed o5erhead. Since the same fi4ed o5erhead rate applies to both the budgeted and applied amounts9 the onl difference must be between the budgeted direct labor hours and the standard direct labor hours for actual production. If the fi4ed o5erhead 5olume 5ariance is unfa5orable9 then less was actuall produced than was budgeted. There is e4cess capacit in the compan. +anagers can use that information in strategic planning to9 possibl9 ta3e space and resources awa from one area and gi5e them to a growing area instead. PTS: 1 DIF: Difficult: +oderate "#$: %": 11& NAT: #'SP("): *ommunication STA: AI*PA: FN&+easurement , I+A: Performance +easurement , A*#SP: AP*&2&;ariable and Fi4ed *osts /!0: #looms: *omprehension N"T: 7 min. . ow does acti5it fle4ible budgeting differ from traditional&based fle4ible budgeting ANS: Acti5it fle4ible budgeting is the prediction of what acti5it costs will be as acti5it output changes. In traditional&based fle4ible budgeting9 onl one dri5er is tpicall used. That dri5er is 5olume based9 for e4ample9 direct labor hours. Acti5it fle4ible budgeting uses a large 5ariet of dri5ers. As a result there is finer control of changes in costs due to the fluctuations of numerous dri5ers. The budgeted costs should be more meaningful and realistic. PTS: 1 DIF: Difficult: +oderate "#$: %": 11&6 NAT: #'SP("): *ommunication STA: AI*PA: FN&Decision +odeling , I+A: #udget Preparation , A*#SP: AP*&-&#udgeting and (esponsibilit /!0: #looms: *omprehension N"T: 7 min. <. Discuss wh acti5it fle4ible budgeting pro5ides a more accurate prediction of costs than a traditional fle4ible budget. ANS: Acti5it&based fle4ible budgeting is more accurate if costs 5ar with more than one dri5er and the dri5ers are not highl correlated with direct labor hours which is often the caseB.
