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Appendix 8A

Predetermined Overhead Rates and Overhead Analysis in a Standard Costing System

True / False Questions

1. A company has a standard cost system in which fixed and variable manufacturing overhead costs are applied to products on the basis of direct labor-hours. A fixed manufacturing overhead volume variance will NOT necessarily occur in a month in which production volume differs from sales volume. True False

2. The fixed manufacturing overhead volume variance is more meaningful than the

budget variance for cost control purposes. True False

3. In a standard costing system, if the actual fixed manufacturing overhead cost

exceeds the budgeted fixed manufacturing overhead cost for the period, then fixed manufacturing overhead cost would be overapplied for the period. True False

4. If all four of Argo Corporation's overhead variances are favorable, Argo's overhead

will be underapplied. True False

5. A company has a standard cost system in which fixed and variable manufacturing

overhead costs are applied to products on the basis of direct labor-hours. The company's choice of the denominator level of activity affects the fixed manufacturing overhead budget variance. True False

App8A-1Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of

McGraw-Hill Education.


6. The higher the denominator activity level used to compute the predetermined overhead rate, the lower the predetermined overhead rate. True False

7. An unfavorable volume variance means that a firm operated at an activity level that

was below the activity level planned for the period. True False


overhead costs are applied to products on the basis of direct labor-hours. A fixed manufacturing overhead volume variance will NOT necessarily occur in a month in which the fixed manufacturing overhead applied to units of product on the basis of standard hours allowed differs from the budgeted fixed manufacturing overhead. True False

9. A fixed manufacturing overhead volume variance occurs as the result of a difference

between the denominator level of activity (in hours) and the standard hours allowed for the actual output of the period. True False


overhead costs are applied to products on the basis of direct labor-hours. A fixed manufacturing overhead volume variance will NOT necessarily occur in a month in which there is a fixed manufacturing overhead budget variance. True False

11. In a standard costing system where the denominator activity for the predetermined

overhead rate is labor-hours, overhead costs are applied to work in process on the basis of the standard labor-hours allowed for the actual output. True False


overhead costs are applied to products on the basis of direct labor-hours. The company's choice of the denominator level of activity has no effect on the variable portion of the predetermined overhead rate. True False

13. A favorable volume variance means that the company operated at an activity level

greater than that planned for the period. True False




14. A company has a standard cost system in which fixed and variable manufacturing overhead costs are applied to products on the basis of direct labor-hours. The company's choice of the denominator level of activity affects the fixed manufacturing overhead volume variance. True False

Multiple Choice Questions

15. Sulema, Inc. repairs and refinishes antique furniture. Manufacturing overhead at Sulema is applied to production on the basis of standard direct labor-hours. Which overhead variance(s) at Sulema would be unfavorably affected if the cost of solvents used to strip the old paint from the furniture unexpectedly doubles in price?

A. variable overhead rate variance

B. variable overhead efficiency variance

C. fixed manufacturing overhead budget variance

D. fixed manufacturing overhead volume variance

16. When computing standard cost variances, the difference between actual and

standard price multiplied by actual quantity yields a(n):

A. combined price and quantity variance.

B. efficiency variance.

C. price or rate variance.

D. quantity variance.




17. The fixed manufacturing overhead budget variance is:

A. the difference between budgeted fixed manufacturing overhead cost and actual fixed manufacturing overhead cost.

B. the difference between actual fixed manufacturing overhead cost and applied fixed manufacturing overhead cost.

C. the difference between budgeted fixed manufacturing overhead cost and applied fixed manufacturing overhead cost.

D. the difference between fixed overhead at the planned level of activity and the flexible budget for actual activity.

18. A volume variance is computed for:

A. both variable and fixed manufacturing overhead.

B. variable manufacturing overhead only.

C. fixed manufacturing overhead only.

D. direct labor costs as well as overhead costs.

19. Which of the following variances is generally the least significant from the standpoint

of cost control?

A. Materials price variance.

B. Labor efficiency variance.

C. Fixed manufacturing overhead volume variance.

D. Variable overhead rate variance.




20. Traveller Corporation sells one product and uses a standard cost system. Last year the overhead volume variance was zero. Which of the following is correct?

A. Actual variable manufacturing overhead cost was equal to standard variable manufacturing overhead cost.

B. Total applied overhead was equal to total actual overhead.

C. The denominator activity was equal to actual activity.

D. The budgeted fixed costs were equal to the applied fixed costs.

21. The Santos Corporation made an error when selecting a denominator level of activity

and chose a much lower level than was realistic. This error would most likely result in a large:

A. favorable variable overhead efficiency variance.

B. favorable fixed manufacturing overhead budget variance.

C. favorable fixed manufacturing overhead volume variance.

D. unfavorable fixed manufacturing overhead budget variance.

22. In a standard cost system, overhead is applied to production on the basis of:

A. the denominator hours chosen for the period.

B. the actual hours required to complete the actual output of the period.

C. the standard hours allowed to complete the actual output of the period.

D. the actual cost of fixed overhead during the period.




23. Dori Castings is a job order shop that uses a standard cost system. Manufacturing overhead costs are applied on the basis of standard direct labor-hours. A volume variance will exist for Dori in a month where:

A. production volume differs from sales volume.

B. actual direct labor-hours differ from standard hours allowed.

C. there is a budget variance in fixed manufacturing overhead costs.

D. the fixed manufacturing overhead applied to units of product on the basis of standard hours allowed differs from the budgeted fixed manufacturing overhead.

24. Alex Corporation has a large underapplied overhead balance in the manufacturing

overhead account. This could be explained by:

A. an unfavorable volume variance, assuming all other variances are zero.

B. a favorable volume variance, assuming all other variances are zero.

C. standard hours allowed for the period's output being greater than denominator hours for the period.

D. favorable total variance for overhead.

25. Coblentz Fabrication Corporation has a standard cost system in which it applies

manufacturing overhead to products on the basis of standard machine-hours (MHs) at $6.20 per MH. The company had budgeted its fixed manufacturing overhead cost at $40,000 for the month. During the month, the actual total variable manufacturing overhead was $48,970 and the actual total fixed manufacturing overhead was $43,000. The actual level of activity for the period was 8,300 MHs. What was the total of the variable overhead rate and fixed manufacturing overhead budget variances for the month?

A. $2,490 Favorable

B. $510 Favorable

C. $510 Unfavorable

D. $2,490 Unfavorable




26. Omary Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company has provided the following data for the most recent month: Budgeted level of activity 3,900 MHsActual level of activity 4,100 MHsStandard variable manufacturing overhead rate $7.60 per

MHBudgeted fixed manufacturing overhead cost

$50,000

Actual total variable manufacturing overhead

$31,980

Actual total fixed manufacturing overhead

$54,000

What was the total of the variable overhead rate and fixed manufacturing overhead budget variances for the month?

A. $1,520 Unfavorable

B. $3,180 Favorable

C. $4,820 Unfavorable





27. Dexter Corporation uses a standard cost system and applies manufacturing overhead cost to units of product on the basis of standard direct labor-hours (DLHs). Information on Dexter Corporation's manufacturing overhead costs for last period is given below: Actual hours worked 40,000 DLHsStandard hours allowed for actual production 38,000 DLHsDenominator hours used in computing the predetermined overhead rate 35,000 DLHs

Predetermined overhead rate $4 per DLH

Actual overhead cost incurred $150,000

Given these data, the underapplied or overapplied overhead cost for the period would be:

A. $10,000 overapplied

B. $2,000 overapplied

C. $10,000 underapplied

D. $8,000 underapplied




28. Steinhagen Corporation applies manufacturing overhead to products on the basis of standard machine-hours. Budgeted and actual overhead costs for the most recent month appear below: Original

BudgetActual Costs

Variable overhead costs:

Supplies $5,460 $6,570 Indirect labor 3,640 4,410Fixed overhead costs: Supervision 9,100 9,450 Utilities 5,980 5,850 Factory depreciation 22,100 22,520 Total overhead cost $46,280 $48,800 The company based its original budget on 2,600 machine-hours. The company actually worked 2,790 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 2,960 machine-hours. What was the overall fixed manufacturing overhead volume variance for the month?

A. $5,148 Favorable

B. $5,148 Unfavorable

C. $2,717 Favorable





29. Semaan Corporation applies manufacturing overhead to products on the basis of standard machine-hours. Budgeted and actual overhead costs for the month appear below: Original

BudgetActual Costs


Supplies $11,340 $12,850 Indirect labor 15,120 17,080Fixed overhead costs:

Supervision 14,900 14,640 Utilities 5,800 6,010 Factory depreciation 9,700 9,410

Total overhead cost $56,860 $59,990 The company based its original budget on 2,700 machine-hours. The company actually worked 2,960 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 3,030 machine-hours. What was the overall fixed manufacturing overhead budget variance for the month?


B. $340 Unfavorable

C. $340 Favorable

D. $3,130 Favorable




30. Hairr Corporation bases its predetermined overhead rate on variable manufacturing overhead cost of $9.50 per machine-hour and fixed manufacturing overhead cost of $947,672 per period. If the denominator level of activity is 8,900 machine-hours, the predetermined overhead rate would be:

A. $9.50

B. $115.98

C. $106.48

D. $950.00

31. The Adlake Corporation makes and sells a single product and uses a standard cost

system. During October, the company budgeted $300,000 in manufacturing overhead cost at a denominator activity of 20,000 machine-hours. At standard, each unit of finished product requires 5 machine-hours. The following cost and activity were recorded during October: Total actual manufacturing overhead cost incurred

$294,000

Units of product completed 3,800Actual machine-hours worked 19,422 The amount of overhead cost that the company applied to work in process for October was:

A. $279,300

B. $291,330

C. $294,000

D. $285,000




32. Reidenbach Corporation applies manufacturing overhead to products on the basis of standard machine-hours. The budgeted fixed manufacturing overhead cost for the most recent month was $17,100 and the actual fixed manufacturing overhead cost for the month was $17,450. The company based its original budget on 4,500 machine-hours. The standard hours allowed for the actual output of the month totaled 4,810 machine-hours. What was the overall fixed manufacturing overhead budget variance for the month?


B. $350 Unfavorable

C. $350 Favorable

D. $1,178 Favorable

33. Diseth Corporation applies manufacturing overhead to products on the basis of

standard machine-hours. The company bases its predetermined overhead rate on 5,300 machine-hours. The company's total budgeted fixed manufacturing overhead is $12,720. In the most recent month, the total actual fixed manufacturing overhead was $12,370. The company actually worked 5,350 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 5,540 machine-hours. What was the overall fixed manufacturing overhead volume variance for the month?

A. $350 Favorable

B. $120 Favorable

C. $120 Unfavorable

D. $576 Favorable




34. Masek Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company has provided the following data for the most recent month: Budgeted level of activity 2,000 MHsActual level of activity 2,400 MHsStandard variable manufacturing overhead rate $5.90 per


$50,000


$14,880


$49,000

What was the fixed manufacturing overhead budget variance for the month?



C. $2,360 Favorable

D. $1,000 Favorable




35. Pizzi, Inc. had the following fixed manufacturing overhead variances last year: Fixed overhead budget variance

$30,000

Unfavorable

Fixed overhead volume variance $6,000 Favorable

Pizzi uses machine-hours as an activity base for overhead and used 48,000 machine-hours as the denominator activity level for the year. Total actual fixed manufacturing overhead was $150,000. The actual number of machine-hours incurred were 50,000. What were Pizzi's standard hours allowed for actual output?

A. 40,000

B. 42,000

C. 50,400

D. 52,500

36. Tropiano Electronics Corporation has a standard cost system in which it applies

manufacturing overhead to products on the basis of standard machine-hours (MHs). The company had budgeted its fixed manufacturing overhead cost at $62,100 for the month and its level of activity at 3,200 MHs. The actual total fixed manufacturing overhead was $61,600 for the month and the actual level of activity was 3,000 MHs. What was the fixed manufacturing overhead budget variance for the month to the nearest dollar?


B. $500 Favorable

C. $500 Unfavorable

D. $3,381 Favorable




37. At the beginning of last year, Tari Corporation budgeted $300,000 of fixed manufacturing overhead and chose a denominator level of activity of 600,000 machine-hours. At the end of the year, Tari's fixed manufacturing overhead budget variance was $9,000 favorable. Its fixed manufacturing overhead volume variance was $15,000 favorable. Actual direct labor-hours for the year were 625,000. What was Tari's total standard machine-hours allowed for last year's output?

A. 570,000

B. 630,000

C. 648,000

D. 656,250

38. Denby Corporation applies manufacturing overhead to products on the basis of

standard machine-hours. Budgeted and actual fixed manufacturing overhead costs for the most recent month appear below: Original Budget Actual CostsFixed overhead costs: Supervision $12,800 $13,190 Utilities 8,320 8,260 Factory depreciation 46,720 46,540 Total fixed manufacturing overhead cost $67,840 $67,990 The company based its original budget on 6,400 machine-hours. The company actually worked 6,710 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 6,540 machine-hours. What was the overall fixed manufacturing overhead volume variance for the month?

A. $3,286 Favorable



D. $1,484 Favorable




39. Bakos Corporation bases its predetermined overhead rate on variable manufacturing overhead cost of $8.80 per machine-hour and fixed manufacturing overhead cost of $100,688 per period. If the denominator level of activity is 2,800 machine-hours, the variable component in the predetermined overhead rate would be:

A. $44.76

B. $35.96

C. $43.52

D. $8.80

40. Acuff Corporation applies manufacturing overhead to products on the basis of

standard machine-hours. Budgeted and actual overhead costs for the most recent month appear below: Original Budget Actual CostsFixed overhead costs: Supervision $15,600 $15,950 Utilities 5,000 5,070 Factory depreciation 6,800 6,700 Total overhead cost $27,400 $27,720 The company based its original budget on 6,200 machine-hours. The company actually worked 6,560 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 6,420 machine-hours. What was the overall fixed manufacturing overhead budget variance for the month?

A. $320 Favorable

B. $320 Unfavorable

C. $972 Favorable

D. $972 Unfavorable




41. Oldham Corporation bases its predetermined overhead rate on variable manufacturing overhead cost of $4.00 per machine-hour and fixed manufacturing overhead cost of $87,822 per period. If the denominator level of activity is 4,100 machine-hours, the fixed component in the predetermined overhead rate would be:

A. $25.42

B. $4.00

C. $21.42

D. $400.00

42. Bruley Corporation applies manufacturing overhead to products on the basis of

standard machine-hours. The company's predetermined overhead rate for fixed manufacturing overhead is $3.30 per machine-hour and the denominator level of activity is 3,500 machine-hours. In the most recent month, the total actual fixed manufacturing overhead was $11,570 and the company actually worked 3,430 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 3,450 machine-hours. What was the overall fixed manufacturing overhead volume variance for the month?

A. $66 Favorable

B. $231 Favorable

C. $231 Unfavorable

D. $165 Unfavorable




43. Nitrol Corporation manufactures brass vases using a standard cost system with standard machine-hours as the activity base for overhead. The following information relates to vase production at Nitrol for last year: Estimated for

yearActual results for

yearVariable overhead $50,000 $53,560

Fixed overhead $250,000 $247,500Machine-hours 100,000 103,000 The standard machine-hours per vase is 1.25. Last year Nitrol produced 84,000 vases. What was Nitrol's variable overhead rate variance for last year?

A. $1,000 Favorable










Fixed overhead $250,000 $247,500Machine-hours 100,000 103,000 The standard machine-hours per vase is 1.25. Last year Nitrol produced 84,000 vases. What was Nitrol's fixed manufacturing overhead volume variance for last year?

A. $2,500 Favorable

B. $7,500 Favorable

C. $12,500 Favorable








Fixed overhead $250,000 $247,500Machine-hours 100,000 103,000

The standard machine-hours per vase is 1.25. Last year Nitrol produced 84,000 vases. What was Nitrol's total underapplied or overapplied overhead cost for last year?


B. $1,060 underapplied

C. $7,940 overapplied

D. $13,940 overapplied




46. The Dillon Corporation makes and sells a single product. Overhead costs are applied on the basis of standard direct labor-hours. The standard cost card shows that 5 direct labor-hours are required per unit. The Dillon Corporation had the following budgeted and actual data for March: Actual Budgete

dUnits produced 33,900 30,800Direct labor-hours 161,800 154,000Variable overhead costs $140,500 $123,200Fixed overhead costs $80,000 $77,000 The variable overhead rate variance for March is:

A. $4,900 U

B. $11,060 U

C. $14,700 U

D. $17,300 U





dUnits produced 33,900 30,800Direct labor-hours 161,800 154,000Variable overhead costs $140,500 $123,200Fixed overhead costs $80,000 $77,000

The variable overhead efficiency variance for March is:

A. $12,400 F

B. $6,160 U

C. $12,400 U

D. $6,160 F






The fixed manufacturing overhead budget variance for March is:

A. $900 F

B. $3,900 F

C. $3,000 U

D. $7,750 F






The fixed manufacturing overhead volume variance for March is:

A. $7,750 F

B. $7,750 U

C. $1,550 F

D. $3,900 U

50. Derf Corporation uses a standard cost system in which it applies manufacturing

overhead on the basis of standard direct labor-hours. Two direct labor-hours are required for each unit produced. The denominator activity was set at 9,000 units. Manufacturing overhead was budgeted at $135,000 for the period; 20 percent of this cost was fixed. The 17,200 hours worked during the period resulted in production of 8,500 units. Variable manufacturing overhead cost incurred was $108,500 and fixed manufacturing overhead cost was $28,000.

The variable overhead rate variance for the period was:








51. Derf Corporation uses a standard cost system in which it applies manufacturing overhead on the basis of standard direct labor-hours. Two direct labor-hours are required for each unit produced. The denominator activity was set at 9,000 units. Manufacturing overhead was budgeted at $135,000 for the period; 20 percent of this cost was fixed. The 17,200 hours worked during the period resulted in production of 8,500 units. Variable manufacturing overhead cost incurred was $108,500 and fixed manufacturing overhead cost was $28,000.

The variable overhead efficiency variance for the period was:





52. Derf Corporation uses a standard cost system in which it applies manufacturing

overhead on the basis of standard direct labor-hours. Two direct labor-hours are required for each unit produced. The denominator activity was set at 9,000 units. Manufacturing overhead was budgeted at $135,000 for the period; 20 percent of this cost was fixed. The 17,200 hours worked during the period resulted in production of 8,500 units. Variable manufacturing overhead cost incurred was $108,500 and fixed manufacturing overhead cost was $28,000.

The fixed manufacturing overhead budget variance for the period was:









The fixed manufacturing overhead volume variance for the period was:

A. $750 Unfavorable







54. Vette Tie Corporation has developed the following manufacturing overhead standards to use in applying overhead to the production of its hand-painted silk ties. Manufacturing overhead at Vette is applied to production on the basis of standard direct labor-hours (DLHs). Standard Cost Per Tie: Variable overhead (1.1 DLHs × $14.00 per DLH)

$15.40

Fixed overhead (1.1 DLHs × $8.00 per DLH) $8.80

The above standards were based on an expected annual volume of 60,000 ties. The actual results for last year were as follows: Number of ties produced 58,000Direct labor-hours worked 64,000Variable overhead cost $880,000Fixed overhead cost $525,000 What was Vette's variable overhead rate variance?


B. $13,200 Favorable







$15.40


The above standards were based on an expected annual volume of 60,000 ties. The actual results for last year were as follows: Number of ties produced 58,000Direct labor-hours worked 64,000Variable overhead cost $880,000Fixed overhead cost $525,000 What was Vette's fixed manufacturing overhead budget variance?


B. $3,000 Favorable







$15.40


The above standards were based on an expected annual volume of 60,000 ties. The actual results for last year were as follows: Number of ties produced 58,000Direct labor-hours worked 64,000Variable overhead cost $880,000Fixed overhead cost $525,000 What total amount of manufacturing overhead cost (variable and fixed) did Vette apply to the 58,000 ties produced during the year?

A. $1,276,000

B. $1,403,600

C. $1,421,200

D. $1,452,000




57. Pohl Corporation uses a standard cost system in which manufacturing overhead is applied on the basis of standard machine-hours. For June, the company's manufacturing overhead flexible budget showed the following total budgeted costs at a denominator activity level of 20,000 machine-hours: Variable overhead costs (total): Maintenance $16,000 Utilities $10,000Fixed overhead costs (total): Supervision $20,500 Depreciation $9,500

During June, 17,000 machine-hours were used to complete 13,000 units of product, and the following actual total overhead costs were incurred: Variable overhead costs (total): Maintenance $14,620 Utilities $10,710Fixed overhead costs (total): Supervision $19,320 Depreciation $9,500 At standard, each unit of finished product requires 1.4 hours of machine time. The total predetermined overhead rate per machine-hour for June was: A. $2.57 per machine-

hour B. $1.30 per machine-

hour C. $2.80 per machine-

hour D. $3.15 per machine-

hour





During June, 17,000 machine-hours were used to complete 13,000 units of product, and the following actual total overhead costs were incurred: Variable overhead costs (total): Maintenance $14,620 Utilities $10,710Fixed overhead costs (total): Supervision $19,320 Depreciation $9,500 At standard, each unit of finished product requires 1.4 hours of machine time. The variable overhead rate variance for maintenance cost for June was: A. $1,020

F B. $1,020

U C. $3,230

F D. $3,230

U




59. Pohl Corporation uses a standard cost system in which manufacturing overhead is applied on the basis of standard machine-hours. For June, the company's manufacturing overhead flexible budget showed the following total budgeted costs at a denominator activity level of 20,000 machine-hours: Variable overhead costs (total): Maintenance $16,000 Utilities $10,000Fixed overhead costs (total): Supervision $20,500 Depreciation $9,500 During June, 17,000 machine-hours were used to complete 13,000 units of product, and the following actual total overhead costs were incurred: Variable overhead costs (total): Maintenance $14,620 Utilities $10,710Fixed overhead costs (total): Supervision $19,320 Depreciation $9,500 At standard, each unit of finished product requires 1.4 hours of machine time. The variable overhead efficiency variance for utilities cost for June was: A. $400

F B. $400

U C. $600

F D. $600

U




60. Pohl Corporation uses a standard cost system in which manufacturing overhead is applied on the basis of standard machine-hours. For June, the company's manufacturing overhead flexible budget showed the following total budgeted costs at a denominator activity level of 20,000 machine-hours: Variable overhead costs (total): Maintenance $16,000 Utilities $10,000Fixed overhead costs (total): Supervision $20,500 Depreciation $9,500 During June, 17,000 machine-hours were used to complete 13,000 units of product, and the following actual total overhead costs were incurred: Variable overhead costs (total): Maintenance $14,620 Utilities $10,710Fixed overhead costs (total): Supervision $19,320 Depreciation $9,500

At standard, each unit of finished product requires 1.4 hours of machine time. The fixed manufacturing overhead budget variance (in total) for June was:

A. $3,230 F

B. $3,230 U

C. $1,180 F

D. $1,180 U




61. A manufacturing company uses a standard costing system in which standard machine-hours (MHs) is the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity 6,100 MH

sOverhead costs at the denominator activity level:

Variable overhead cost $35,075

Fixed overhead cost $77,775

The following data pertain to operations for the most recent period: Actual hours 6,300 MH

sStandard hours allowed for the actual output 5,994 MH

sActual total variable manufacturing overhead cost

$36,540

Actual total fixed manufacturing overhead cost

$76,875

The predetermined overhead rate per MH is closest to:

A. $17.91 per MH

B. $18.59 per MH

C. $18.00 per MH

D. $18.50 per MH











$36,540


$76,875

The overhead applied to products during the period was closest to:

A. $112,850

B. $113,415

C. $116,550

D. $110,889











$36,540


$76,875

The variable overhead rate variance for the period was closest to:

A. $315 U

B. $1,465 F

C. $1,465 U

D. $315 F











$36,540


$76,875

The variable overhead efficiency variance for the period is closest to:

A. $300 F

B. $1,465 U

C. $1,760 U

D. $1,775 U











$36,540


$76,875

The fixed manufacturing overhead budget variance for the period is closest to:

A. $900 F

B. $452 F

C. $3,734 F

D. $3,450 U











$36,540


$76,875

The fixed manufacturing overhead volume variance for the period is closest to:

A. $1,359 U

B. $2,550 F

C. $3,902 U

D. $1,352 U




67. Cuda Manufacturing Corporation uses a standard cost system with machine-hours (MHs) as the activity base for overhead. The following information relates to Cuda's operations last year: Denominator activity level in machine-hours 50,000 MHsStandard machine-hours allowed for actual output 55,000 MHsActual number of machine-hours incurred 52,000 MHsPredetermined overhead rate for variable manufacturing overhead $7.00 per

MHPredetermined overhead rate for fixed manufacturing overhead $12.00 per

MH

Total variable manufacturing overhead incurred $370,000

Total fixed manufacturing overhead incurred $615,000

What was Cuda's variable overhead rate variance?




D. $21,000 Favorable






MH



What was Cuda's fixed manufacturing overhead budget variance?

A. $9,000 Favorable









MH



What total amount of manufacturing overhead cost (variable and fixed) did Cuda apply to production?

A. $950,000

B. $985,000

C. $988,000

D. $1,045,000




70. The Claus Corporation makes and sells a single product and uses standard costing. During January, the company actually used 8,700 direct labor-hours (DLHs) and produced 3,000 units of product. The standard cost card for one unit of product includes the following:

Variable factory overhead: 3.0 DLHs @ $4.00 per DLH.Fixed factory overhead: 3.0 DLHs @ $3.50 per DLH.

For January, the company incurred $22,000 of actual fixed manufacturing overhead costs and recorded a $875 favorable volume variance.

The denominator level of activity in direct labor-hours (DLHs) used by Claus in setting the predetermined overhead rate for January is:

A. 9,500 DLHs

B. 9,250 DLHs

C. 8,750 DLHs

D. 10,500 DLHs







The fixed manufacturing overhead cost used to compute the predetermined overhead rate was:

A. $31,500

B. $30,625

C. $32,375

D. $33,250




72. A manufacturer of playground equipment uses a standard costing system in which standard machine-hours (MHs) is the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity 3,000 MHsFixed overhead cost $40,650 The following data pertain to operations for the most recent period: Actual hours 3,400 MH


sActual total fixed manufacturing overhead cost

$41,600

The predetermined fixed manufacturing overhead rate is closest to:

A. $12.24 per MH

B. $13.55 per MH

C. $13.87 per MH

D. $11.96 per MH







$41,600

The fixed manufacturing overhead applied to products during the period is closest to:

A. $40,650

B. $42,981

C. $41,600

D. $46,070







$41,600


A. $4,470 U

B. $950 U

C. $2,790 F

D. $1,381 U







$41,600


A. $2,256 F

B. $2,331 F

C. $3,089 U

D. $5,420 F




76. The Murray Corporation uses a standard cost system in which it applies manufacturing overhead on the basis of standard direct labor-hours (DLHs). The company recorded the following activity and cost data for May: Activity: Number of units produced 40,100 units Standard direct labor-hours per unit of product 1.5 DLHs per

unit Denominator activity 64,000 DLHSCost: Actual fixed manufacturing overhead costs incurred

$56,000

Fixed component of the predetermined overhead rate $0.90 per DLH

The amount of fixed manufacturing overhead cost that was used to compute the fixed component of the predetermined overhead rate was:

A. $54,135

B. $60,150

C. $59,465

D. $57,600






$56,000


The amount of fixed manufacturing overhead cost applied during May was:

A. $52,535

B. $54,135

C. $36,090

D. $50,400




78. The Murray Corporation uses a standard cost system in which it applies manufacturing overhead on the basis of standard direct labor-hours (DLHs). The company recorded the following activity and cost data for May: Activity: Number of units produced 40,100 units

Standard direct labor-hours per unit of product 1.5 DLHs per unit

Denominator activity 64,000 DLHSCost: Actual fixed manufacturing overhead costs incurred

$56,000


The fixed manufacturing overhead budget variance for May was:

A. $8,000 F

B. $8,000 U

C. $1,600 F

D. $1,600 U




79. An outdoor barbecue grill manufacturer has a standard costing system based on standard direct labor-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity 3,300 DLHsFixed overhead cost $26,895

The following data pertain to operations for the most recent period: Actual hours 3,400 DLH

sStandard hours allowed for the actual output 3,420 DLH


$28,295


A. $166 U

B. $422 F

C. $585 F

D. $1,400 U




80. An outdoor barbecue grill manufacturer has a standard costing system based on standard direct labor-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity 3,300 DLHsFixed overhead cost $26,895 The following data pertain to operations for the most recent period: Actual hours 3,400 DLH



$28,295


A. $978 F

B. $993 F

C. $163 F

D. $815 F




81. The Forbes Corporation uses a standard cost system in which overhead costs are applied to products on the basis of standard direct labor-hours (DLHs). The following data applied to the company's activities for June: Actual fixed manufacturing overhead cost incurred

$161,450

Denominator activity 50,000 DLHsNumber of units completed 21,000 units

Fixed overhead budget variance $11,450 Unfavorable

Standard direct labor-hours per unit 3 DLHs The fixed component of the predetermined overhead rate for June is:

A. $3.00 per DLH

B. $3.23 per DLH

C. $3.78 per DLH

D. $3.46 per DLH





$161,450



Standard direct labor-hours per unit 3 DLHs The volume variance for June is:








83. The Murray Corporation makes and sells a single product. The company recorded the following activity and cost data for May: Number of units completed 45,000 unitsStandard direct labor-hours allowed per unit of product 1.5 DLH

sBudgeted direct labor-hours (denominator activity) 72,000 DLH

sActual fixed manufacturing overhead costs incurred

$66,000

Volume variance $4,275 U The fixed component of the predetermined overhead rate is $0.95 per direct labor-hour. The fixed manufacturing overhead used to calculate the predetermined overhead rate was:

A. $64,125

B. $67,500

C. $68,400

D. $70,275







$66,000

Volume variance $4,275 U The fixed component of the predetermined overhead rate is $0.95 per direct labor-hour. The amount of fixed manufacturing overhead cost applied to work in process during May was:

A. $61,725

B. $62,700

C. $42,750

D. $64,125







$66,000

Volume variance $4,275 U The fixed component of the predetermined overhead rate is $0.95 per direct labor-hour. The fixed manufacturing overhead budget variance for May was:

A. $2,400 U

B. $2,400 F

C. $6,000 U

D. $6,000 F




86. The following data for February has been provided by Gillard Corporation. Denominator level of activity 3,700 machine-

hours

Budgeted fixed manufacturing overhead costs $68,820

Actual level of activity 4,100 machine-hours

Standard machine-hours allowed for the actual output 4,000 machine-

hours

Actual fixed manufacturing overhead costs $69,960

The budget variance for February is:

A. $7,440 F

B. $7,440 U

C. $1,140 F

D. $1,140 U





hours




hours


The volume variance for February is:

A. $5,580 F

B. $5,580 U

C. $7,440 U

D. $7,440 F

88. Odonell Corporation estimates that its variable manufacturing overhead is $11.20 per

machine-hour and its fixed manufacturing overhead is $563,640 per period.

If the denominator level of activity is 6,000 machine-hours, the variable component in the predetermined overhead rate would be:

A. $93.94 per machine-hour

B. $11.20 per machine-hour

C. $105.14 per machine-hour

D. $103.60 per machine-hour




89. Odonell Corporation estimates that its variable manufacturing overhead is $11.20 per machine-hour and its fixed manufacturing overhead is $563,640 per period.

If the denominator level of activity is 6,000 machine-hours, the fixed component in the predetermined overhead rate would be:

A. $1,120.00 per machine-hour




90. Odonell Corporation estimates that its variable manufacturing overhead is $11.20 per

machine-hour and its fixed manufacturing overhead is $563,640 per period.

If the denominator level of activity is 6,100 machine-hours, the predetermined overhead rate would be:


B. $1,120.00 per machine-hour






91. Tillinghast Corporation estimates that its variable manufacturing overhead is $9.60 per machine-hour and its fixed manufacturing overhead is $14,630 per period.






92. Tillinghast Corporation estimates that its variable manufacturing overhead is $9.60

per machine-hour and its fixed manufacturing overhead is $14,630 per period.















94. Saffold Corporation has provided the following data for December.

Denominator level of activity 8,400 machine-hoursBudgeted fixed manufacturing overhead costs $274,680 Fixed component of the predetermined overhead rate $32.70 per machine-hourActual level of activity 8,600 machine-hoursStandard machine-hours allowed for the actual output 8,900 machine-hoursActual fixed manufacturing overhead costs $284,730 The budget variance for December is:

A. $10,050 U

B. $6,540 U

C. $6,540 F

D. $10,050 F




95. Saffold Corporation has provided the following data for December. Denominator level of activity 8,400 machine-hoursBudgeted fixed manufacturing overhead costs $274,680 Fixed component of the predetermined overhead rate $32.70 per machine-hourActual level of activity 8,600 machine-hoursStandard machine-hours allowed for the actual output 8,900 machine-hoursActual fixed manufacturing overhead costs $284,730 The volume variance for December is:

A. $6,540 F

B. $6,540 U

C. $16,350 F

D. $16,350 U




96. A furniture manufacturer uses a standard costing system in which standard machine-hours (MHs) is the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity 3,300 MH







$32,980


$38,975

The predetermined overhead rate is closest to:

A. $21.90 per hour

B. $21.80 per hour

C. $21.16 per hour

D. $21.26 per hour











$32,980


$38,975


A. $74,460

B. $72,270

C. $67,408

D. $71,955











$32,980


$38,975


A. $2,675 U

B. $1,450 F

C. $3,691 F

D. $1,270 F











$32,980


$38,975


A. $2,720 U

B. $1,225 F

C. $2,811 U

D. $3,945 U




100.

Homer Corporation has a standard cost system in which manufacturing overhead is applied on the basis of standard machine-hours. The company has provided the following data concerning its manufacturing overhead costs for last year: Actual machine-hours 840 hour

sStandard machine-hours allowed for the actual output 900 hour

s

Denominator activity 1,000 hours

Actual fixed manufacturing overhead costs

$3,800

Budgeted fixed manufacturing overhead costs

$4,000

The fixed manufacturing overhead budget variance was:

A. $200 F

B. $400 U

C. $300 F

D. $240 U




101.

Homer Corporation has a standard cost system in which manufacturing overhead is applied on the basis of standard machine-hours. The company has provided the following data concerning its manufacturing overhead costs for last year: Actual machine-hours 840 hour


s



$3,800


$4,000

The volume variance was:

A. $200 F

B. $400 U

C. $300 F

D. $240 U

Essay Questions




102. Cajun Corporation manufactures a labor-intensive product. The cost standards

developed by Cajun appear below. Manufacturing overhead at Cajun is applied to production on the basis of standard direct labor-hours:

Standard

quantity per unit

Standard cost

perounce

or hour

Standard cost

per unit

Direct materials

0.75 ounces

$20.00 $15.00

Direct labor

1.2 hours

$12.00 14.40

Variable overhead

1.2 hours

$3.00 3.60

Fixed overhead

1.2 hours

$5.00 6.00

Total standard cost per unit

$39.00

The standards above were based on an expected annual volume of 8,000 units. The actual results for last year were as follows:

Number of units produced 8,200Direct labor-hours incurred 10,000Ounces of direct materials purchased 7,900Ounces of direct materials used in production

6,070

Total cost of direct materials purchased

$156,815

Total direct labor cost $122,800

Total variable overhead cost $28,600




Total fixed manufacturing overhead cost

$47,500

Required: Compute the following variances for Cajun. a. Materials price variance. b. Materials quantity variance. c. Labor rate variance. d. Variable overhead rate variance. e. Variable overhead efficiency variance. f. Fixed overhead budget variance.




103. Nova Corporation produces a single product and uses a standard cost system to help

control costs. Overhead is applied to production on the basis of standard machine-hours. According to the company's flexible budget, the following overhead costs should be incurred at an activity level of 18,000 machine-hours (the denominator activity level chosen for the current year):

Variable overhead costs $45,000Fixed overhead costs 108,000 Total overhead costs $153,000

During the current year, the following operating results were recorded:

Actual machine-hours worked 15,000Standard machine-hours allowed 16,000Actual variable overhead cost incurred

$38,000

Actual fixed manufacturing overhead cost incurred

$107,100

At the end of the year, the company's Manufacturing Overhead account showed total debits for actual overhead costs of $145,100 and total credits of $136,000 for overhead applied. The difference ($9,100) represents under-applied overhead, the cause of which management would like to know. Required: a. Compute the predetermined overhead rate that would have been used during the year, showing separately the variable and fixed components of the rate. b. Show how the $136,000 of overhead actually applied was computed. c. Analyze the $9,100 under-applied overhead figure in terms of the variable overhead rate and efficiency variances and the fixed manufacturing overhead budget and volume variances.




104. Littleton Manufacturing uses a standard cost system in which manufacturing

overhead is applied to units of product on the basis of standard machine-hours. At standard, each unit of product requires one machine-hour to complete. The standard variable overhead is $1.80 per machine-hour and $432,000 per year. The denominator level of activity is 120,000 machine-hours, or 120,000 units. Actual data for the year were as follows:

Actual variable overhead cost $178,500

Actual fixed manufacturing overhead cost

$248,000

Actual machine-hours 105,000Units produced 100,000

Required: a. What are the predetermined variable and fixed manufacturing overhead rates? b. Compute the variable overhead rate and efficiency variances. c. Compute the fixed manufacturing overhead budget and volume variances.




105. You have just been hired as the new executive assistant to the manager of the

Eastern Division of Global Manufacturing. You have been given the following incomplete records concerning manufacturing overhead for last year:

Variable overhead rate $3.50 per DLHBudgeted fixed manufacturing overhead

$70,000

Total actual overhead cost

$259,400

Fixed overhead budget variance

$10,000 Unfavorable

Variable overhead efficiency variance

$14,000 Unfavorable

Actual direct labor-hours worked

52,000 DLHs

Denominator activity level

50,000 DLHs

Standard hours per unit 2 DLHs

The company uses a standard cost system in which manufacturing overhead costs are applied to products on the basis of standard direct labor-hours (DLHs). Required: a. Compute the variable overhead rate variance and indicate whether it was favorable or unfavorable. b. Compute the fixed overhead volume variance and indicate whether it was favorable or unfavorable.




106.

Aslett Corporation's manufacturing overhead includes $3.80 per machine-hour for supplies; $8.80 per machine-hour for indirect labor; $214,132 per period for salaries; and $546,720 per period for depreciation.

Required:

Determine the predetermined overhead rate if the denominator level of activity is 6,800 machine-hours. Show your work!




107.

Pierce Corporation uses a standard cost system in which it applies manufacturing overhead to its product on the basis of standard direct labor-hours (DLHs). Below is the standard cost card for the product: Direct materials, 4.5 feet × $3.80 per foot

$17.10

Direct labor, 3.0 DLHs × $9.50 per DLH 28.50Variable overhead, 3.0 DLHs × $2.00 per DLH 6.00

Fixed overhead, 3.0 DLHs × $8.00 per DLH

24.0 0

$75.60

Last year, the company produced 6,000 units of product using 17,000 direct labor-hours. The actual total fixed manufacturing overhead cost for the year was $140,000 and the volume variance was $12,000, favorable. Required: a. Determine the budgeted amount of total fixed manufacturing overhead cost. b. Determine the denominator activity figure that the company used in computing predetermined overhead rates.




108.

Faessler Corporation applies overhead to products based on machine-hours. The denominator level of activity is 6,500 machine-hours. The budgeted fixed manufacturing overhead costs are $242,450. In July, the actual fixed manufacturing overhead costs were $242,490 and the standard machine-hours allowed for the actual output were 7,000 machine-hours.

Required:

a. Compute the budget variance for July. Show your work!b. Compute the volume variance for July. Show your work!




109. Dixie Corporation has provided the following data for June.

Denominator level of activity 2,000 machine-hoursBudgeted fixed manufacturing overhead costs

$39,200

Fixed component of the predetermined overhead rate

$19.60 per machine-hour

Actual level of activity 2,300 machine-hoursStandard machine-hours allowed for the actual output

2,200 machine-hours


$40,550

Required: a. Compute the budget variance for June. Show your work! b. Compute the volume variance for June. Show your work!




110. Stenquist Corporation has provided the following data for January.

Denominator level of activity 7,900 machine-hours


Standard machine-hours allowed for the actual output 8,300 machine-hours


Required: a. Compute the budget variance for January. Show your work! b. Compute the volume variance for January. Show your work!




111.

Kingdon Corporation's manufacturing overhead includes $7.10 per machine-hour for variable manufacturing overhead and $207,000 per period for fixed manufacturing overhead.

Required:

Determine the predetermined overhead rate for the denominator level of activity of 4,600 machine-hours.




Appendix 8A Predetermined Overhead Rates and Overhead Analysis in a Standard Costing System Answer Key

True / False Questions

1. A company has a standard cost system in which fixed and variable manufacturing overhead costs are applied to products on the basis of direct labor-hours. A fixed manufacturing overhead volume variance will NOT necessarily occur in a month in which production volume differs from sales volume. TRUE

AACSB: Reflective ThinkingAICPA: BB Critical Thinking

AICPA: FN MeasurementAccessibility: Keyboard Navigation

Blooms: UnderstandLearning Objective: 08-07 (Appendix 8A) Compute and interpret the fixed overhead budget and volume

variances.Level of Difficulty: 3 Hard

Topic Area: Appendix 8A: Predetermined Overhead Rates and Overhead Analysis in a Standard Costing System

2. The fixed manufacturing overhead volume variance is more meaningful than the budget variance for cost control purposes. FALSE




variances.Level of Difficulty: 2 Medium


3. In a standard costing system, if the actual fixed manufacturing overhead cost exceeds the budgeted fixed manufacturing overhead cost for the period, then fixed manufacturing overhead cost would be overapplied for the period. FALSE









4. If all four of Argo Corporation's overhead variances are favorable, Argo's overhead will be underapplied. FALSE

AACSB: Analytical ThinkingAICPA: BB Critical Thinking


Blooms: AnalyzeLearning Objective: 08-07 (Appendix 8A) Compute and interpret the fixed overhead budget and volume



5. A company has a standard cost system in which fixed and variable manufacturing overhead costs are applied to products on the basis of direct labor-hours. The company's choice of the denominator level of activity affects the fixed manufacturing overhead budget variance. FALSE






6. The higher the denominator activity level used to compute the predetermined overhead rate, the lower the predetermined overhead rate. TRUE









7. An unfavorable volume variance means that a firm operated at an activity level that was below the activity level planned for the period. TRUE






8. A company has a standard cost system in which fixed and variable manufacturing overhead costs are applied to products on the basis of direct labor-hours. A fixed manufacturing overhead volume variance will NOT necessarily occur in a month in which the fixed manufacturing overhead applied to units of product on the basis of standard hours allowed differs from the budgeted fixed manufacturing overhead. FALSE






9. A fixed manufacturing overhead volume variance occurs as the result of a difference between the denominator level of activity (in hours) and the standard hours allowed for the actual output of the period. TRUE









10. A company has a standard cost system in which fixed and variable manufacturing overhead costs are applied to products on the basis of direct labor-hours. A fixed manufacturing overhead volume variance will NOT necessarily occur in a month in which there is a fixed manufacturing overhead budget variance. TRUE






11. In a standard costing system where the denominator activity for the predetermined overhead rate is labor-hours, overhead costs are applied to work in process on the basis of the standard labor-hours allowed for the actual output. TRUE






12. A company has a standard cost system in which fixed and variable manufacturing overhead costs are applied to products on the basis of direct labor-hours. The company's choice of the denominator level of activity has no effect on the variable portion of the predetermined overhead rate. TRUE









13. A favorable volume variance means that the company operated at an activity level greater than that planned for the period. TRUE






14. A company has a standard cost system in which fixed and variable manufacturing overhead costs are applied to products on the basis of direct labor-hours. The company's choice of the denominator level of activity affects the fixed manufacturing overhead volume variance. TRUE






Multiple Choice Questions




15. Sulema, Inc. repairs and refinishes antique furniture. Manufacturing overhead at Sulema is applied to production on the basis of standard direct labor-hours. Which overhead variance(s) at Sulema would be unfavorably affected if the cost of solvents used to strip the old paint from the furniture unexpectedly doubles in price?

A. variable overhead rate variance

B. variable overhead efficiency variance

C. fixed manufacturing overhead budget variance

D. fixed manufacturing overhead volume variance



Blooms: ApplyLearning Objective: 08-03 Prepare a flexible budget with more than one cost driver.

Learning Objective: 08-07 (Appendix 8A) Compute and interpret the fixed overhead budget and volume variances.

Level of Difficulty: 3 HardTopic Area: Appendix 8A: Predetermined Overhead Rates and Overhead Analysis in a Standard Costing System

Topic Area: Flexible Budgets with Multiple Cost Drivers

16. When computing standard cost variances, the difference between actual and standard price multiplied by actual quantity yields a(n):

A. combined price and quantity variance.

B. efficiency variance.

C. price or rate variance.

D. quantity variance.



Blooms: RememberLearning Objective: 08-01 Prepare a flexible budget.

Learning Objective: 08-02 Prepare a report showing revenue and spending variances.Learning Objective: 08-03 Prepare a flexible budget with more than one cost driver.

Level of Difficulty: 1 EasySource: CMA, adapted

Topic Area: Flexible Budget Variances




Topic Area: Flexible BudgetsTopic Area: Flexible Budgets with Multiple Cost Drivers

17. The fixed manufacturing overhead budget variance is:

A. the difference between budgeted fixed manufacturing overhead cost and actual fixed manufacturing overhead cost.

B. the difference between actual fixed manufacturing overhead cost and applied fixed manufacturing overhead cost.

C. the difference between budgeted fixed manufacturing overhead cost and applied fixed manufacturing overhead cost.

D. the difference between fixed overhead at the planned level of activity and the flexible budget for actual activity.






18. A volume variance is computed for:

A. both variable and fixed manufacturing overhead.

B. variable manufacturing overhead only.

C. fixed manufacturing overhead only.

D. direct labor costs as well as overhead costs.



Blooms: RememberLearning Objective: 08-07 (Appendix 8A) Compute and interpret the fixed overhead budget and volume

variances.Level of Difficulty: 1 Easy





19. Which of the following variances is generally the least significant from the standpoint of cost control?

A. Materials price variance.

B. Labor efficiency variance.

C. Fixed manufacturing overhead volume variance.

D. Variable overhead rate variance.






20. Traveller Corporation sells one product and uses a standard cost system. Last year the overhead volume variance was zero. Which of the following is correct?

A. Actual variable manufacturing overhead cost was equal to standard variable manufacturing overhead cost.

B. Total applied overhead was equal to total actual overhead.

C. The denominator activity was equal to actual activity.

D. The budgeted fixed costs were equal to the applied fixed costs.









21. The Santos Corporation made an error when selecting a denominator level of activity and chose a much lower level than was realistic. This error would most likely result in a large:

A. favorable variable overhead efficiency variance.

B. favorable fixed manufacturing overhead budget variance.

C. favorable fixed manufacturing overhead volume variance.

D. unfavorable fixed manufacturing overhead budget variance.






22. In a standard cost system, overhead is applied to production on the basis of:

A. the denominator hours chosen for the period.

B. the actual hours required to complete the actual output of the period.

C. the standard hours allowed to complete the actual output of the period.

D. the actual cost of fixed overhead during the period.









23. Dori Castings is a job order shop that uses a standard cost system. Manufacturing overhead costs are applied on the basis of standard direct labor-hours. A volume variance will exist for Dori in a month where:

A. production volume differs from sales volume.

B. actual direct labor-hours differ from standard hours allowed.

C. there is a budget variance in fixed manufacturing overhead costs.

D. the fixed manufacturing overhead applied to units of product on the basis of standard hours allowed differs from the budgeted fixed manufacturing overhead.





Source: CMA, adaptedTopic Area: Appendix 8A: Predetermined Overhead Rates and Overhead Analysis in a Standard Costing System

24. Alex Corporation has a large underapplied overhead balance in the manufacturing overhead account. This could be explained by:

A. an unfavorable volume variance, assuming all other variances are zero.

B. a favorable volume variance, assuming all other variances are zero.

C. standard hours allowed for the period's output being greater than denominator hours for the period.

D. favorable total variance for overhead.









25. Coblentz Fabrication Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs) at $6.20 per MH. The company had budgeted its fixed manufacturing overhead cost at $40,000 for the month. During the month, the actual total variable manufacturing overhead was $48,970 and the actual total fixed manufacturing overhead was $43,000. The actual level of activity for the period was 8,300 MHs. What was the total of the variable overhead rate and fixed manufacturing overhead budget variances for the month?

A. $2,490 Favorable

B. $510 Favorable

C. $510 Unfavorable


Budget variance = Actual fixed overhead - Budgeted fixed overhead cost= $43,000 - $40,000= $3,000 U

Variable overhead rate variance = (AH × AR) - (AH × SR)= $48,970 - (8,300 MHs × $6.20 per MH)= $48,970 - $51,460= $2,490 F

Total variance = $3,000 U + $2,490 F = $510 U





Level of Difficulty: 2 MediumTopic Area: Appendix 8A: Predetermined Overhead Rates and Overhead Analysis in a Standard Costing System





26. Omary Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company has provided the following data for the most recent month: Budgeted level of activity 3,900 MHsActual level of activity 4,100 MHsStandard variable manufacturing overhead rate $7.60 per


$50,000


$31,980


$54,000

What was the total of the variable overhead rate and fixed manufacturing overhead budget variances for the month?


B. $3,180 Favorable




Variable overhead rate variance = (AH × AR) - (AH × SR)= $31,980 - (4,100 MHs × $7.60 per MH)= $31,980 - $31,160= $820 U

Total variance = $4,000 U + $820 U = $4,820 U


AICPA: FN MeasurementBlooms: Apply

Learning Objective: 08-03 Prepare a flexible budget with more than one cost driver.Learning Objective: 08-07 (Appendix 8A) Compute and interpret the fixed overhead budget and volume





Topic Area: Appendix 8A: Predetermined Overhead Rates and Overhead Analysis in a Standard Costing SystemTopic Area: Flexible Budgets with Multiple Cost Drivers

27. Dexter Corporation uses a standard cost system and applies manufacturing overhead cost to units of product on the basis of standard direct labor-hours (DLHs). Information on Dexter Corporation's manufacturing overhead costs for last period is given below: Actual hours worked 40,000 DLHsStandard hours allowed for actual production 38,000 DLHsDenominator hours used in computing the predetermined overhead rate 35,000 DLHs

Predetermined overhead rate $4 per DLH

Actual overhead cost incurred $150,000

Given these data, the underapplied or overapplied overhead cost for the period would be:


B. $2,000 overapplied

C. $10,000 underapplied

D. $8,000 underapplied

Overhead applied = Predetermined overhead rate × Standard hours allowed for the actual output= $4 per DLH × 38,000 DLHs = $152,000Overhead is overapplied by $2,000 because the actual overhead cost incurred was $150,000.








28. Steinhagen Corporation applies manufacturing overhead to products on the basis of standard machine-hours. Budgeted and actual overhead costs for the most recent month appear below: Original

BudgetActual Costs


Supplies $5,460 $6,570 Indirect labor 3,640 4,410Fixed overhead costs: Supervision 9,100 9,450 Utilities 5,980 5,850 Factory depreciation 22,100 22,520 Total overhead cost $46,280 $48,800 The company based its original budget on 2,600 machine-hours. The company actually worked 2,790 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 2,960 machine-hours. What was the overall fixed manufacturing overhead volume variance for the month?

A. $5,148 Favorable


C. $2,717 Favorable


Original BudgetFixed overhead costs: Supervision 9,100 Utilities 5,980 Factory depreciation 22,100 Total overhead cost $37,180

Predetermined overhead rate = Estimated total manufacturing overhead cost ÷




Estimated total amount of the allocation base = $37,180 ÷ 2,600 machine-hours = $14.30 per machine-hour Volume variance = Budgeted fixed overhead cost - Fixed overhead applied to work in process = $37,180 - (2,960 machine-hours × $14.30 per machine-hour) = $37,180 - $42,328 = $5,148 F








29. Semaan Corporation applies manufacturing overhead to products on the basis of standard machine-hours. Budgeted and actual overhead costs for the month appear below: Original

BudgetActual Costs


Supplies $11,340 $12,850 Indirect labor 15,120 17,080Fixed overhead costs:

Supervision 14,900 14,640 Utilities 5,800 6,010 Factory depreciation 9,700 9,410

Total overhead cost $56,860 $59,990

The company based its original budget on 2,700 machine-hours. The company actually worked 2,960 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 3,030 machine-hours. What was the overall fixed manufacturing overhead budget variance for the month?


B. $340 Unfavorable

C. $340 Favorable

D. $3,130 Favorable

Original Budget

Actual Costs

Fixed overhead costs:

Supervision 14,900 14,640 Utilities 5,800 6,010 Factory 9,700 9,410




depreciationTotal fixed overhead cost $30,400 $30,060

Budget variance = Actual fixed overhead - Budgeted fixed overhead cost = $30,060 - $30,400 = $340 F





30. Hairr Corporation bases its predetermined overhead rate on variable manufacturing overhead cost of $9.50 per machine-hour and fixed manufacturing overhead cost of $947,672 per period. If the denominator level of activity is 8,900 machine-hours, the predetermined overhead rate would be:

A. $9.50

B. $115.98

C. $106.48

D. $950.00

Fixed component of predetermined overhead rate = Estimated total fixed manufacturing overhead cost ÷ Estimated total amount of the allocation base= $947,672 ÷ 8,900 machine-hours = $106.48 per machine-hourPredetermined overhead rate = $9.50 per machine-hour + $106.48 per machine-hour = $115.98 per machine-hour



Blooms: ApplyLearning Objective: 08-07 (Appendix 8A) Compute and interpret the fixed overhead budget and volume






31. The Adlake Corporation makes and sells a single product and uses a standard cost system. During October, the company budgeted $300,000 in manufacturing overhead cost at a denominator activity of 20,000 machine-hours. At standard, each unit of finished product requires 5 machine-hours. The following cost and activity were recorded during October: Total actual manufacturing overhead cost incurred

$294,000

Units of product completed 3,800Actual machine-hours worked 19,422 The amount of overhead cost that the company applied to work in process for October was:

A. $279,300

B. $291,330

C. $294,000

D. $285,000

Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $300,000 ÷ 20,000 machine-hours = $15 per machine-hour

Overhead applied = Predetermined overhead rate × Standard hours allowed for the actual output= $15 per machine-hour × (3,800 units × 5 machine-hours per unit)= $15 per machine-hour × (19,000 machine-hours)= $285,000








32. Reidenbach Corporation applies manufacturing overhead to products on the basis of standard machine-hours. The budgeted fixed manufacturing overhead cost for the most recent month was $17,100 and the actual fixed manufacturing overhead cost for the month was $17,450. The company based its original budget on 4,500 machine-hours. The standard hours allowed for the actual output of the month totaled 4,810 machine-hours. What was the overall fixed manufacturing overhead budget variance for the month?


B. $350 Unfavorable

C. $350 Favorable

D. $1,178 Favorable

Budget variance = Actual fixed overhead - Budgeted fixed overhead cost= $17,450 - $17,100 = $350 U









33. Diseth Corporation applies manufacturing overhead to products on the basis of standard machine-hours. The company bases its predetermined overhead rate on 5,300 machine-hours. The company's total budgeted fixed manufacturing overhead is $12,720. In the most recent month, the total actual fixed manufacturing overhead was $12,370. The company actually worked 5,350 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 5,540 machine-hours. What was the overall fixed manufacturing overhead volume variance for the month?

A. $350 Favorable

B. $120 Favorable

C. $120 Unfavorable

D. $576 Favorable

Fixed component of predetermined overhead rate = Estimated total fixed manufacturing overhead cost ÷ Estimated total amount of the allocation base = $12,720 ÷ 5,300 machine-hours = $2.40 per machine-hourVolume variance = Budgeted fixed overhead cost - Fixed overhead applied to work in process= $12,720 - (5,540 machine-hours × $2.40 per machine-hour)= $12,720 - $13,296= $576 F









34. Masek Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company has provided the following data for the most recent month: Budgeted level of activity 2,000 MHsActual level of activity 2,400 MHsStandard variable manufacturing overhead rate $5.90 per


$50,000


$14,880


$49,000

What was the fixed manufacturing overhead budget variance for the month?



C. $2,360 Favorable

D. $1,000 Favorable

Budget variance = Actual fixed overhead - Budgeted fixed overhead cost= $49,000 - $50,000= $1,000 F








35. Pizzi, Inc. had the following fixed manufacturing overhead variances last year: Fixed overhead budget variance

$30,000

Unfavorable

Fixed overhead volume variance $6,000 Favorable

Pizzi uses machine-hours as an activity base for overhead and used 48,000 machine-hours as the denominator activity level for the year. Total actual fixed manufacturing overhead was $150,000. The actual number of machine-hours incurred were 50,000. What were Pizzi's standard hours allowed for actual output?

A. 40,000

B. 42,000

C. 50,400

D. 52,500

Budget variance = Actual fixed overhead - Budgeted fixed overhead$30,000 U = $150,000 - Budgeted fixed overhead$30,000 = $150,000 - Budgeted fixed overheadBudgeted fixed overhead = $150,000 - $30,000Budgeted fixed overhead = $120,000

Fixed component of the predetermined overhead rate = $120,000 ÷ 48,000 MHs = $2.50 per MH

Volume variance = Fixed component of the predetermined overhead rate x (Denominator hours - Standard hours allowed for the actual output)$6,000 F = $2.50 per MH × (48,000 MHs - Standard hours allowed for the actual output)-$6,000 = $2.50 per MH × (48,000 MHs - Standard hours allowed for the actual output)48,000 MHs - Standard hours allowed for the actual output = -$6,000 ÷ $2.50 per MH48,000 MHs - Standard hours allowed for the actual output = -2,400 MHsStandard hours allowed for the actual output = 48,000 MHs + 2,400 MHsStandard hours allowed for the actual output = 50,400 MHs








36. Tropiano Electronics Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company had budgeted its fixed manufacturing overhead cost at $62,100 for the month and its level of activity at 3,200 MHs. The actual total fixed manufacturing overhead was $61,600 for the month and the actual level of activity was 3,000 MHs. What was the fixed manufacturing overhead budget variance for the month to the nearest dollar?


B. $500 Favorable

C. $500 Unfavorable

D. $3,381 Favorable

Budget variance = Actual fixed overhead - Budgeted fixed overhead cost= $61,600 - $62,100= $500 F









37. At the beginning of last year, Tari Corporation budgeted $300,000 of fixed manufacturing overhead and chose a denominator level of activity of 600,000 machine-hours. At the end of the year, Tari's fixed manufacturing overhead budget variance was $9,000 favorable. Its fixed manufacturing overhead volume variance was $15,000 favorable. Actual direct labor-hours for the year were 625,000. What was Tari's total standard machine-hours allowed for last year's output?

A. 570,000

B. 630,000

C. 648,000

D. 656,250

Fixed component of the predetermined overhead rate = $300,000 ÷ 600,000 machine-hours = $0.50 per machine-hour Volume variance = Fixed component of the predetermined overhead rate × (Denominator hours - Standard hours allowed for the actual output) $15,000 F = $0.50 per machine-hour × (600,000 machine-hours - Standard hours allowed for the actual output) -$15,000 = $0.50 per machine-hour × (600,000 machine-hours - Standard hours allowed for the actual output) -$15,000 = $300,000 - ($0.50 per machine-hour × Standard hours allowed for the actual output) $0.50 per machine-hour × Standard hours allowed for the actual output = $300,000 + $15,000 $0.50 per machine-hour × Standard hours allowed for the actual output = $315,000 Standard hours allowed for the actual output = $315,000 ÷ $0.50 per machine-hour Standard hours allowed for the actual output = 630,000 machine-hours









38. Denby Corporation applies manufacturing overhead to products on the basis of standard machine-hours. Budgeted and actual fixed manufacturing overhead costs for the most recent month appear below: Original Budget Actual CostsFixed overhead costs: Supervision $12,800 $13,190 Utilities 8,320 8,260 Factory depreciation 46,720 46,540 Total fixed manufacturing overhead cost $67,840 $67,990 The company based its original budget on 6,400 machine-hours. The company actually worked 6,710 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 6,540 machine-hours. What was the overall fixed manufacturing overhead volume variance for the month?

A. $3,286 Favorable



D. $1,484 Favorable

Volume variance = Budgeted fixed overhead cost - Fixed overhead applied to work in processFixed component of predetermined overhead rate = Estimated total fixed manufacturing overhead cost ÷ Estimated total amount of the allocation base = $67,840 ÷ 6,400 machine-hours = $10.60 per machine-hour= $67,840 - (6,540 machine-hours × $10.60 per machine-hour)= $67,840 - $69,324= $1,484 F








39. Bakos Corporation bases its predetermined overhead rate on variable manufacturing overhead cost of $8.80 per machine-hour and fixed manufacturing overhead cost of $100,688 per period. If the denominator level of activity is 2,800 machine-hours, the variable component in the predetermined overhead rate would be:

A. $44.76

B. $35.96

C. $43.52

D. $8.80

As given $8.80.









40. Acuff Corporation applies manufacturing overhead to products on the basis of standard machine-hours. Budgeted and actual overhead costs for the most recent month appear below: Original Budget Actual CostsFixed overhead costs: Supervision $15,600 $15,950 Utilities 5,000 5,070 Factory depreciation 6,800 6,700 Total overhead cost $27,400 $27,720 The company based its original budget on 6,200 machine-hours. The company actually worked 6,560 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 6,420 machine-hours. What was the overall fixed manufacturing overhead budget variance for the month?

A. $320 Favorable

B. $320 Unfavorable

C. $972 Favorable

D. $972 Unfavorable





Level of Difficulty: 1 EasyTopic Area: Appendix 8A: Predetermined Overhead Rates and Overhead Analysis in a Standard Costing System




41. Oldham Corporation bases its predetermined overhead rate on variable manufacturing overhead cost of $4.00 per machine-hour and fixed manufacturing overhead cost of $87,822 per period. If the denominator level of activity is 4,100 machine-hours, the fixed component in the predetermined overhead rate would be:

A. $25.42

B. $4.00

C. $21.42

D. $400.00

Fixed component of predetermined overhead rate = Estimated total fixed manufacturing overhead cost ÷ Estimated total amount of the allocation base = $87,822 ÷ 4,100 machine-hours = $21.42 per machine-hour









42. Bruley Corporation applies manufacturing overhead to products on the basis of standard machine-hours. The company's predetermined overhead rate for fixed manufacturing overhead is $3.30 per machine-hour and the denominator level of activity is 3,500 machine-hours. In the most recent month, the total actual fixed manufacturing overhead was $11,570 and the company actually worked 3,430 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 3,450 machine-hours. What was the overall fixed manufacturing overhead volume variance for the month?

A. $66 Favorable

B. $231 Favorable

C. $231 Unfavorable

D. $165 Unfavorable

Volume variance = Budgeted fixed overhead cost - Fixed overhead applied to work in process= (3,500 machine-hours × $3.30 per machine-hour) - (3,450 machine-hours × $3.30 per machine-hour)= $11,550 - $11,385= $165 U












Fixed overhead $250,000 $247,500Machine-hours 100,000 103,000 The standard machine-hours per vase is 1.25. Last year Nitrol produced 84,000 vases. What was Nitrol's variable overhead rate variance for last year?

A. $1,000 Favorable




SR = $50,000 ÷ 100,000 hours = $0.50 per hourAH × AR = $53,560Variable overhead rate variance = (AH × AR) - (AH × SR)= ($53,560) - (103,000 hours × $0.50 per hour)= $53,560 - $51,500= $2,060 U



Learning Objective: 08-03 Prepare a flexible budget with more than one cost driver.Level of Difficulty: 3 Hard








Fixed overhead $250,000 $247,500Machine-hours 100,000 103,000 The standard machine-hours per vase is 1.25. Last year Nitrol produced 84,000 vases. What was Nitrol's fixed manufacturing overhead volume variance for last year?

A. $2,500 Favorable

B. $7,500 Favorable



Fixed component of the predetermined overhead rate = $250,000 ÷ 100,000 hours = $2.50 per hourStandard hours allowed for the actual output = 1.25 hours per unit × 84,000 units = 105,000 hoursVolume variance = Fixed component of the predetermined overhead rate x (Denominator hours - Standard hours allowed for the actual output)= $2.50 per hour × (100,000 hours - 105,000 hours)= $2.50 per hour × (-5,000 hours)= $12,500 F











Fixed overhead $250,000 $247,500Machine-hours 100,000 103,000

The standard machine-hours per vase is 1.25. Last year Nitrol produced 84,000 vases. What was Nitrol's total underapplied or overapplied overhead cost for last year?


B. $1,060 underapplied

C. $7,940 overapplied

D. $13,940 overapplied

Standard overhead cost per hour = ($50,000 + $250,000) ÷ 100,000 hours = $3 per hourStandard overhead cost applied = $3 per hour × (1.25 hours per vase × 84,000 vases) = $3 per hour × 105,000 hours = $315,000

Total overhead cost incurred = $53,560 + $247,500 = $301,060

Overhead overapplied = $315,000 - $301,060 = $13,940










dUnits produced 33,900 30,800Direct labor-hours 161,800 154,000

Variable overhead costs $140,500 $123,200

Fixed overhead costs $80,000 $77,000 The variable overhead rate variance for March is:

A. $4,900 U

B. $11,060 U

C. $14,700 U

D. $17,300 U

AH × AR = $140,500SR = $123,200 ÷ 154,000 hours = $0.80 per hourVariable overhead rate variance = (AH × AR) - (AH × SR)= ($140,500) - (161,800 hours × $0.80 per hour)= $140,500 - $129,440= $11,060 U











Fixed overhead costs $80,000 $77,000

The variable overhead efficiency variance for March is:

A. $12,400 F

B. $6,160 U

C. $12,400 U

D. $6,160 F

Standard hours per unit = 154,000 hours ÷ 30,800 units = 5 hours pe unitSH = 33,900 units × 5 hours per unit = 169,500 hoursSR = $123,200 ÷ 154,000 hours = $0.80 per hourVariable overhead efficiency variance = (AH - SH) × SR= (161,800 hours - 169,500 hours) × $0.80 per hour= (-7,700 hours) × $0.80 per hour= $6,160 F












The fixed manufacturing overhead budget variance for March is:

A. $900 F

B. $3,900 F

C. $3,000 U

D. $7,750 F

Budget variance = Actual fixed overhead - Budgeted fixed overhead= $80,000 - $77,000= $3,000 U












The fixed manufacturing overhead volume variance for March is:

A. $7,750 F

B. $7,750 U

C. $1,550 F

D. $3,900 U

Fixed component of the predetermined overhead rate = $77,000 ÷ 154,000 hours = $0.50 per hourStandard hours allowed for the actual output = 5.00 hours per unit × 33,900 units = 169,500 hoursFixed overhead applied to work in process = $0.50 per hour × 169,500 hours = $84,750Volume variance = Budgeted fixed overhead - Fixed overhead applied to work in process= $77,000 - $84,750= $7,750 F









The variable overhead rate variance for the period was:





SR = (0.8 × $135,000) ÷ (9,000 units × 2 hours per unit) = $108,000 ÷ 18,000 hours = $6 per hourAH × AR = $108,500Variable overhead rate variance = (AH × AR) - (AH × SR)= ($108,500) - (17,200 hours × $6 per hour)= $108,500 - $103,200= $5,300 U




Level of Difficulty: 3 HardSource: CMA, adapted






The variable overhead efficiency variance for the period was:





SR = (0.8 × $135,000) ÷ (9,000 units × 2 hours per unit) = $108,000 ÷ 18,000 hours = $6 per hourSH = 8,500 units × 2.00 hours per unit = 17,000 hoursVariable overhead efficiency variance = (AH - SH) × SR= (17,200 hours - 17,000 hours) × $6 per hour= (200 hours) × $6 per hour= $1,200 Us




Level of Difficulty: 3 HardSource: CMA, adapted






The fixed manufacturing overhead budget variance for the period was:















The fixed manufacturing overhead volume variance for the period was: A. $750

Unfavorable B. $2,500

Unfavorable C. $1,500

Unfavorable D. $1,000

Unfavorable

Fixed component of the predetermined overhead rate = (0.2 × $135,000) ÷ (9,000 units × 2 hours per unit) = $27,000 ÷ 18,000 hours = $1.50 per hour Standard hours allowed for the actual output = 2.00 hours per unit × 8,500 units = 17,000 hours Volume variance = Fixed component of the predetermined overhead rate × (Denominator hours - Standard hours allowed for the actual output) = $1.50 per hour × (18,000 hours - 17,000 hours) = $1.50 per hour × (1,000 hours) = $1,500 U










$15.40


The above standards were based on an expected annual volume of 60,000 ties. The actual results for last year were as follows: Number of ties produced 58,000Direct labor-hours worked 64,000Variable overhead cost $880,000Fixed overhead cost $525,000 What was Vette's variable overhead rate variance?





AH × AR = $880,000Variable overhead rate variance = (AH × AR) - (AH × SR)= ($880,000) - (64,000 hours × $14.00 per hour)= $880,000 - $896,000= $16,000 F



Learning Objective: 08-03 Prepare a flexible budget with more than one cost driver.Level of Difficulty: 2 Medium






$15.40


The above standards were based on an expected annual volume of 60,000 ties. The actual results for last year were as follows: Number of ties produced 58,000Direct labor-hours worked 64,000Variable overhead cost $880,000Fixed overhead cost $525,000 What was Vette's fixed manufacturing overhead budget variance?


B. $3,000 Favorable



Budget variance = Actual fixed overhead - Budgeted fixed overhead= $525,000 - $528,000= $3,000 F









$15.40


The above standards were based on an expected annual volume of 60,000 ties. The actual results for last year were as follows: Number of ties produced 58,000Direct labor-hours worked 64,000Variable overhead cost $880,000Fixed overhead cost $525,000 What total amount of manufacturing overhead cost (variable and fixed) did Vette apply to the 58,000 ties produced during the year?

A. $1,276,000

B. $1,403,600

C. $1,421,200

D. $1,452,000

Standard overhead cost per unit = $15.40 per unit + $8.80 per unit = $24.20 per unitStandard overhead cost applied = $24.20 per unit × 58,000 units = $1,403,600










During June, 17,000 machine-hours were used to complete 13,000 units of product, and the following actual total overhead costs were incurred: Variable overhead costs (total): Maintenance $14,620 Utilities $10,710Fixed overhead costs (total): Supervision $19,320 Depreciation $9,500 At standard, each unit of finished product requires 1.4 hours of machine time. The total predetermined overhead rate per machine-hour for June was:





Predetermined overhead rate = Estimated total manufacturing overhead ÷ Estimated total amount of the allocation base = ($16,000 + $10,000 + $20,500 + $9,500) ÷ 20,000 machine-hours= $56,000 ÷ 20,000 machine-hours = $2.80 per machine-hour


AICPA: FN Measurement





During June, 17,000 machine-hours were used to complete 13,000 units of product, and the following actual total overhead costs were incurred: Variable overhead costs (total): Maintenance $14,620 Utilities $10,710Fixed overhead costs (total): Supervision $19,320 Depreciation $9,500 At standard, each unit of finished product requires 1.4 hours of machine time. The variable overhead rate variance for maintenance cost for June was:

A. $1,020 F

B. $1,020 U

C. $3,230 F

D. $3,230 U

SR = $16,000 ÷ 20,000 machine-hours = $0.80 per machine-hourVariable overhead rate variance = (AH × AR) - (AH × SR)= $14,620 - (17,000 machine-hours × $0.80 per machine-hour)= $14,620 - $13,600= $1,020 U





59. Pohl Corporation uses a standard cost system in which manufacturing overhead is applied on the basis of standard machine-hours. For June, the company's manufacturing overhead flexible budget showed the following total budgeted costs at a denominator activity level of 20,000 machine-hours: Variable overhead costs (total): Maintenance $16,000 Utilities $10,000Fixed overhead costs (total): Supervision $20,500 Depreciation $9,500 During June, 17,000 machine-hours were used to complete 13,000 units of product, and the following actual total overhead costs were incurred: Variable overhead costs (total): Maintenance $14,620 Utilities $10,710Fixed overhead costs (total): Supervision $19,320 Depreciation $9,500 At standard, each unit of finished product requires 1.4 hours of machine time. The variable overhead efficiency variance for utilities cost for June was:

A. $400 F

B. $400 U

C. $600 F

D. $600 U

SH = 13,000 units × 1.4 machine-hours per unit = 18,200 machine-hoursSR = ($10,000) ÷ 20,000 machine-hours = $0.50 per machine-hourVariable overhead efficiency variance = (AH - SH) × SR= (17,000 machine-hours - 18,200 machine-hours) × $0.50 per machine-hour= (-1,200 machine-hours) × $0.50 per machine-hour= $600 F

AACSB: Analytical Thinking




AICPA: BB Critical ThinkingAICPA: FN Measurement


Level of Difficulty: 3 HardTopic Area: Flexible Budgets with Multiple Cost Drivers




60. Pohl Corporation uses a standard cost system in which manufacturing overhead is applied on the basis of standard machine-hours. For June, the company's manufacturing overhead flexible budget showed the following total budgeted costs at a denominator activity level of 20,000 machine-hours: Variable overhead costs (total): Maintenance $16,000 Utilities $10,000Fixed overhead costs (total): Supervision $20,500 Depreciation $9,500 During June, 17,000 machine-hours were used to complete 13,000 units of product, and the following actual total overhead costs were incurred: Variable overhead costs (total): Maintenance $14,620 Utilities $10,710Fixed overhead costs (total): Supervision $19,320 Depreciation $9,500

At standard, each unit of finished product requires 1.4 hours of machine time. The fixed manufacturing overhead budget variance (in total) for June was:

A. $3,230 F

B. $3,230 U

C. $1,180 F

D. $1,180 U

Budget variance = Actual fixed overhead - Budgeted fixed overhead cost= ($19,320 + $9,500) - ($20,500 + $9,500)= $28,820 - $30,000= $1,180 Fs













$36,540


$76,875

The predetermined overhead rate per MH is closest to:

A. $17.91 per MH

B. $18.59 per MH

C. $18.00 per MH

D. $18.50 per MH

Variable overhead + Fixed overhead = $35,075+ $77,775Predetermined overhead rate = Estimated total manufacturing overhead ÷ Estimated total amount of the allocation base = $112,850 ÷ 6,100 MHs = $18.50 per MH














$36,540


$76,875


A. $112,850

B. $113,415

C. $116,550

D. $110,889

Variable overhead + Fixed overhead = $35,075+ $77,775Predetermined overhead rate = Estimated total manufacturing overhead ÷ Estimated total amount of the allocation base = $112,850 ÷ 6,100 MHs = $18.50 per MHOverhead applied = Predetermined overheard rate × Standard hours allowed for the actual output= $18.50 per MH × 5,994 MHs = $110,889












$36,540


$76,875

The variable overhead rate variance for the period was closest to:

A. $315 U

B. $1,465 F

C. $1,465 U

D. $315 F

SR = $35,075 ÷ 6,100 MHs = $5.75 per MHAH × AR = $36,540Labor rate variance = (AH × AR) - (AH × SR)= $36,540 - (6,300 MHs × $5.75 per MH)= $36,540 - $36,225= $315 U







Level of Difficulty: 2 MediumTopic Area: Flexible Budgets with Multiple Cost Drivers








$36,540


$76,875

The variable overhead efficiency variance for the period is closest to:

A. $300 F

B. $1,465 U

C. $1,760 U

D. $1,775 U

Variable overhead efficiency variance = (AH- SH) × SR= (6,300 MHs - 5,994 MHs) × $5.75 per MH= (306 MHs) × $5.75 per MH= $1,759.50 U







Level of Difficulty: 2 MediumTopic Area: Flexible Budgets with Multiple Cost Drivers








$36,540


$76,875


A. $900 F

B. $452 F

C. $3,734 F

D. $3,450 U

Budget variance = Actual fixed overhead - Budgeted fixed overhead cost= $76,875 - $77,775 = $900 F












$36,540


$76,875


A. $1,359 U

B. $2,550 F

C. $3,902 U

D. $1,352 U

Fixed component of predetermined overhead rate = Estimated total fixed manufacturing overhead cost ÷ Estimated total amount of the allocation base = $77,775 ÷ 6,100 MHs = $12.75 per MHVolume variance = Budgeted fixed overhead cost - Fixed overhead applied to work in process= $77,775 - (5,994 MH × $12.75 per MH)= $77,775 - $76,423.50= $1,351.50 U











MH



What was Cuda's variable overhead rate variance?





AH × AR = $370,000Variable overhead rate variance = (AH × AR) - (AH × SR)= ($370,000) - (52,000 MHs × $7 per MH)= $370,000 - $364,000= $6,000 U










MH



What was Cuda's fixed manufacturing overhead budget variance?

A. $9,000 Favorable




Budget variance = Actual fixed overhead - Budgeted fixed overhead= $615,000 - (50,000 MHs × $12 per MH)= $615,000 - $600,000= $15,000 U










MH



What total amount of manufacturing overhead cost (variable and fixed) did Cuda apply to production?

A. $950,000

B. $985,000

C. $988,000

D. $1,045,000

Manufacturing overhead cost applied = 55,000 MHs × ($7 per MH + $12 per MH)= 55,000 MHs × ($19 per MH) = $1,045,000












The denominator level of activity in direct labor-hours (DLHs) used by Claus in setting the predetermined overhead rate for January is:

A. 9,500 DLHs

B. 9,250 DLHs

C. 8,750 DLHs

D. 10,500 DLHs

Volume variance = Fixed component of the predetermined overhead rate × (Denominator hours - Standard hours allowed for the actual output) $875 F = $3.50 per DLH × [Denominator hours - (3.0 DLHs per unit × 3,000 units)] -$875 = $3.50 per DLH × [Denominator hours - (3.0 DLHs per unit × 3,000 units)] -$875 = $3.50 per DLH × [Denominator hours - (9,000 DLHs)] -$875 = ($3.50 per DLH × Denominator hours) - $31,500 $3.50 per DLH × Denominator hours = $31,500 - $875 $3.50 per DLH × Denominator hours = $30,625 Denominator hours = $30,625 ÷ $3.50 per DLH = 8,750 DLHs












The fixed manufacturing overhead cost used to compute the predetermined overhead rate was:

A. $31,500

B. $30,625

C. $32,375

D. $33,250

Fixed overhead applied to work in process = $3.50 per DLH × 3.0 DLHs per unit × 3,000 units = $31,500Volume variance = Budgeted fixed overhead - Fixed overhead applied to work in process$875 F = Budgeted fixed overhead - $31,500-$875 = Budgeted fixed overhead - $31,500Budgeted fixed overhead = $31,500 - $875 = $30,625












$41,600

The predetermined fixed manufacturing overhead rate is closest to:

A. $12.24 per MH

B. $13.55 per MH

C. $13.87 per MH

D. $11.96 per MH

Predetermined overhead rate = Budgeted total overhead ÷ Denominator level of activity= $40,650 ÷ 3,000 MHs = $13.55 per MH











$41,600

The fixed manufacturing overhead applied to products during the period is closest to:

A. $40,650

B. $42,981

C. $41,600

D. $46,070


Fixed manufacturing overhead applied = Predetermined overheard rate × Standard hours allowed for the actual output = $13.55 per MH × 3,172 MHs = $42,980.60











$41,600


A. $4,470 U

B. $950 U

C. $2,790 F

D. $1,381 U












$41,600


A. $2,256 F

B. $2,331 F

C. $3,089 U

D. $5,420 F


Volume variance = Budgeted fixed overhead cost - Fixed overhead applied to work in process= $40,650 - (3,172 MHs × $13.55 per MH)= $40,650 - $42,980.60= $2,330.60 F










$56,000


The amount of fixed manufacturing overhead cost that was used to compute the fixed component of the predetermined overhead rate was:

A. $54,135

B. $60,150

C. $59,465

D. $57,600

Fixed component of the predetermined overhead rate = Budgeted fixed overhead ÷ Denominator level of activity$0.90 per DLH = Budgeted fixed overhead cost ÷ 64,000 DLHsBudgeted fixed overhead cost = $0.90 per DLH × 64,000 DLHs = $57,600










$56,000


The amount of fixed manufacturing overhead cost applied during May was:

A. $52,535

B. $54,135

C. $36,090

D. $50,400

Fixed manufacturing overhead cost applied to work in process = 40,100 units × 1.5 DLHs per unit × $0.90 per DLH = $54,135








78. The Murray Corporation uses a standard cost system in which it applies manufacturing overhead on the basis of standard direct labor-hours (DLHs). The company recorded the following activity and cost data for May: Activity: Number of units produced 40,100 units

Standard direct labor-hours per unit of product 1.5 DLHs per unit

Denominator activity 64,000 DLHSCost: Actual fixed manufacturing overhead costs incurred

$56,000


The fixed manufacturing overhead budget variance for May was:

A. $8,000 F

B. $8,000 U

C. $1,600 F

D. $1,600 U

Fixed component of the predetermined overhead rate = Budgeted fixed overhead ÷ Denominator level of activity$0.90 per DLH = Budgeted fixed overhead cost ÷ 64,000 DLHsBudgeted fixed overhead cost = $0.90 per DLH × 64,000 DLHs = $57,600

Budget variance = Actual fixed overhead - Budgeted fixed overhead cost= $56,000 - $57,600 = $1,600 F








79. An outdoor barbecue grill manufacturer has a standard costing system based on standard direct labor-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity 3,300 DLHsFixed overhead cost $26,895

The following data pertain to operations for the most recent period: Actual hours 3,400 DLH



$28,295


A. $166 U

B. $422 F

C. $585 F

D. $1,400 U









80. An outdoor barbecue grill manufacturer has a standard costing system based on standard direct labor-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity 3,300 DLHsFixed overhead cost $26,895 The following data pertain to operations for the most recent period: Actual hours 3,400 DLH



$28,295


A. $978 F

B. $993 F

C. $163 F

D. $815 F

Fixed component of the predetermined overhead rate = $26,895 ÷ 3,300 hours = $8.15 per DLHVolume variance = Budgeted fixed overhead cost - Fixed overhead applied to work in process= $26,895 - (3,420 DLHs × $8.15 per DLH)= $26,895 - $27,873= $978 F









$161,450



Standard direct labor-hours per unit 3 DLHs The fixed component of the predetermined overhead rate for June is:

A. $3.00 per DLH

B. $3.23 per DLH

C. $3.78 per DLH

D. $3.46 per DLH


Fixed component of the predetermined overhead rate = Estimated fixed overhead cost ÷ Estimated total amount of the allocation base = $150,000 ÷ 50,000 DLHs = $3 per DLH









$161,450



Standard direct labor-hours per unit 3 DLHs The volume variance for June is:






Fixed component of the predetermined overhead rate = Estimated fixed overhead cost ÷ Estimated total amount of the allocation base = $150,000 ÷ 50,000 DLHs = $3 per DLH

Volume variance = Fixed component of the predetermined overhead rate x (Denominator hours - Standard hours allowed for the actual output)= $3 per DLH x [50,000 DLHs - (21,000 units x 3 DLHs per unit)]= $3 per DLH x [50,000 DLHs - (63,000 DLHs)]= $3 per DLH x [-13,000 DLHs]= $39,000 F











$66,000

Volume variance $4,275 U The fixed component of the predetermined overhead rate is $0.95 per direct labor-hour. The fixed manufacturing overhead used to calculate the predetermined overhead rate was:

A. $64,125

B. $67,500

C. $68,400

D. $70,275

$0.95 per DLH = Fixed manufacturing overhead ÷ 72,000 DLHsFixed manufacturing overhead = $0.95 per DLH × 72,000 DLHsFixed manufacturing overhead = $68,400











$66,000

Volume variance $4,275 U The fixed component of the predetermined overhead rate is $0.95 per direct labor-hour. The amount of fixed manufacturing overhead cost applied to work in process during May was:

A. $61,725

B. $62,700

C. $42,750

D. $64,125

Fixed manufacturing overhead cost applied to work in process = $0.95 per DLH × 1.5 DLHs per unit × 45,000 units = $64,125











$66,000

Volume variance $4,275 U The fixed component of the predetermined overhead rate is $0.95 per direct labor-hour. The fixed manufacturing overhead budget variance for May was:

A. $2,400 U

B. $2,400 F

C. $6,000 U

D. $6,000 F

$0.95 per DLH = Fixed manufacturing overhead ÷ 72,000 DLHsFixed manufacturing overhead = $0.95 per DLH × 72,000 DLHsFixed manufacturing overhead = $68,400

Budget variance = Actual fixed overhead - Budgeted fixed overhead= $66,000 - $68,400 = $2,400 F









hours




hours


The budget variance for February is:

A. $7,440 F

B. $7,440 U

C. $1,140 F

D. $1,140 U










hours




hours


The volume variance for February is:

A. $5,580 F

B. $5,580 U

C. $7,440 U

D. $7,440 F

Fixed component of the predetermined overhead rate = $68,820 ÷ 3,700 hours = $18.60 per hourVolume variance = Fixed component of the predetermined overhead rate x (Denominator hours - Standard hours allowed for the actual output)= $18.60 per hour × (3,700 hours - 4,000 hours)= $18.60 per hour × (-300 hours)= $5,580 F





















A. $1,120.00 per machine-hour




Fixed component of the predetermined overhead rate = Estimated total fixed manufacturing overhead ÷ Denominator level of activity = $563,640 ÷ 6,000 machine-hours = $93.94 per machine-hour






Accessibility: Keyboard NavigationBlooms: Apply






B. $1,120.00 per machine-hour



Predetermined overhead rate = Estimated total manufacturing overhead ÷ Denominator level of activity= [$563,640 + ($11.20 per machine-hour × 6,100 machine-hours)] ÷ 6,100 machine-hours= [$563,640 + $68,320] ÷ 6,100 machine-hours= $631,960 ÷ 6,100 machine-hours= $103.60 per machine-hour


























Fixed component of the predetermined overhead rate = Estimated fixed overhead ÷ Denominator level of activity = $14,630 ÷ 1,000 machine-hours = $14.63 per machine-hour






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Predetermined overhead rate = Estimated total manufacturing overhead ÷ Denominator level of activity= [$14,630 + ($9.60 per machine-hour × 1,100 machine-hours] ÷ 1,100 machine-hours= [$14,630 + $10,560] ÷ 1,100 machine-hours= $25,190 ÷ 1,100 machine-hours= $22.90 per machine-hour









94. Saffold Corporation has provided the following data for December. Denominator level of activity 8,400 machine-hoursBudgeted fixed manufacturing overhead costs $274,680 Fixed component of the predetermined overhead rate $32.70 per machine-hourActual level of activity 8,600 machine-hoursStandard machine-hours allowed for the actual output 8,900 machine-hoursActual fixed manufacturing overhead costs $284,730 The budget variance for December is:

A. $10,050 U

B. $6,540 U

C. $6,540 F

D. $10,050 F









95. Saffold Corporation has provided the following data for December. Denominator level of activity 8,400 machine-hoursBudgeted fixed manufacturing overhead costs $274,680 Fixed component of the predetermined overhead rate $32.70 per machine-hourActual level of activity 8,600 machine-hoursStandard machine-hours allowed for the actual output 8,900 machine-hoursActual fixed manufacturing overhead costs $284,730 The volume variance for December is:

A. $6,540 F

B. $6,540 U

C. $16,350 F

D. $16,350 U

Volume variance = Fixed component of the predetermined overhead rate x (Denominator hours - Standard hours allowed for the actual output)= $32.70 per hour × (8,400 hours - 8,900 hours)= $32.70 per hour × (-500 hours)= $16,350 F















$32,980


$38,975

The predetermined overhead rate is closest to:

A. $21.90 per hour

B. $21.80 per hour

C. $21.16 per hour

D. $21.26 per hour

Predetermined overhead rate = Budgeted total overhead ÷ Denominator level of activity















$32,980


$38,975


A. $74,460

B. $72,270

C. $67,408

D. $71,955

Predetermined overhead rate = Budgeted total overhead ÷ Denominator level of activity= ($31,845 + $40,425) ÷ 3,300 hours= $72,270 ÷ 3,300 hours= $21.90 per hourOverhead applied = Predetermined overhead rate × Standards hours allowed for the actual output= $21.90 per hour × 3,078 hours




= $67,408.20















$32,980


$38,975


A. $2,675 U

B. $1,450 F

C. $3,691 F

D. $1,270 F

Budget variance = Actual fixed overhead - Budgeted fixed overhead cost= $38,975 - $40,425= $1,450 F














$32,980


$38,975


A. $2,720 U

B. $1,225 F

C. $2,811 U

D. $3,945 U

Fixed component of the predetermined overhead rate = $40,425 ÷ 3,300 hours = $12.25 per hourVolume variance = Budgeted fixed overhead cost - Fixed overhead applied to work in process= $40,425 - (3,078 hours × $12.25 per hour)= $40,425 - $37,705.50= $2,719.50 U








100. Homer Corporation has a standard cost system in which manufacturing overhead is applied on the basis of standard machine-hours. The company has provided the following data concerning its manufacturing overhead costs for last year: Actual machine-hours 840 hour


s



$3,800


$4,000

The fixed manufacturing overhead budget variance was:

A. $200 F

B. $400 U

C. $300 F

D. $240 U

Budget variance = Actual fixed overhead - Budgeted fixed overhead= $3,800 - $4,000= $200 F








101. Homer Corporation has a standard cost system in which manufacturing overhead is applied on the basis of standard machine-hours. The company has provided the following data concerning its manufacturing overhead costs for last year: Actual machine-hours 840 hour


s



$3,800


$4,000

The volume variance was:

A. $200 F

B. $400 U

C. $300 F

D. $240 U

Fixed component of the predetermined overhead rate = Estimated total fixed manufacturing overhead cost ÷ Estimated total amount of the allocation base = $4,000 ÷ 1,000 hours = $4 per hour

Volume variance = Fixed component of the predetermined overhead rate x (Denominator hours - Standard hours allowed for the actual output)= $4 per hour × (1,000 hours - 900 hours)= $4 per hour × (100 hours)= $400 U








Essay Questions




102.Cajun Corporation manufactures a labor-intensive product. The cost standards developed by Cajun appear below. Manufacturing overhead at Cajun is applied to production on the basis of standard direct labor-hours:

Standard

quantity per unit

Standard cost

perounce

or hour

Standard cost

per unit

Direct materials

0.75 ounces

$20.00 $15.00

Direct labor

1.2 hours

$12.00 14.40

Variable overhead

1.2 hours

$3.00 3.60

Fixed overhead

1.2 hours

$5.00 6.00

Total standard cost per unit

$39.00

The standards above were based on an expected annual volume of 8,000 units. The actual results for last year were as follows:

Number of units produced 8,200Direct labor-hours incurred 10,000Ounces of direct materials purchased

7,900

Ounces of direct materials used in production

6,070

Total cost of direct materials purchased

$156,815

Total direct labor cost $122,800

Total variable overhead cost $28,600Total fixed manufacturing overhead $47,500




cost

Required: Compute the following variances for Cajun. a. Materials price variance. b. Materials quantity variance. c. Labor rate variance. d. Variable overhead rate variance. e. Variable overhead efficiency variance. f. Fixed overhead budget variance.

a. Materials price variance = (AQ × AP) - (AQ × SP) = $156,815 - (7,900 ounces × $20.00 per ounce) = $156,815 - $158,000 = $1,185 F b. Materials quantity variance = (AQ - SQ) × SP = [6,070 ounces - (8,200 units × 0.75 ounce per unit)] × $20.00 per ounce = [6,070 ounces - 6.150 ounces] × $20.00 per ounce = -80 ounces × $20.00 per ounce = $1,600 F c. Labor rate variance = (AH × AR) - (AH × SR) = $122,800 - (10,000 hours × $12.00 per hour) = $122,800 - $120,000 = $2,800 U d. Variable overhead rate variance = (AH × AR) - (AH × SR) = $28,600 - (10,000 hours × $3.00 per hour) = $28,600 - $30,000 = $1,400 F e. Variable overhead efficiency variance = (AH - SH) × SR = [(10,000 hours - (8,200 units × 1.2 hours per unit)] × $3.00 per hour = [(10,000 hours - 9,840 hours] × $3.00 per hour = 160 hours × $3.00 per hour = $480 U f. Fixed manufacturing overhead budget variance = Actual fixed overhead - Budgeted fixed overhead = $47,500 - (8,000 units × $6.00 per unit) = $47,500 - $48,000




= $500 F



Learning Objective: 08-01 Prepare a flexible budget.Learning Objective: 08-02 Prepare a report showing revenue and spending variances.



Topic Area: Appendix 8A: Predetermined Overhead Rates and Overhead Analysis in a Standard Costing SystemTopic Area: Flexible Budget Variances

Topic Area: Flexible BudgetsTopic Area: Flexible Budgets with Multiple Cost Drivers




103.Nova Corporation produces a single product and uses a standard cost system to help control costs. Overhead is applied to production on the basis of standard machine-hours. According to the company's flexible budget, the following overhead costs should be incurred at an activity level of 18,000 machine-hours (the denominator activity level chosen for the current year):

Variable overhead costs $45,000Fixed overhead costs 108,000 Total overhead costs $153,000

During the current year, the following operating results were recorded:

Actual machine-hours worked 15,000Standard machine-hours allowed 16,000Actual variable overhead cost incurred

$38,000

Actual fixed manufacturing overhead cost incurred

$107,100

At the end of the year, the company's Manufacturing Overhead account showed total debits for actual overhead costs of $145,100 and total credits of $136,000 for overhead applied. The difference ($9,100) represents under-applied overhead, the cause of which management would like to know. Required: a. Compute the predetermined overhead rate that would have been used during the year, showing separately the variable and fixed components of the rate. b. Show how the $136,000 of overhead actually applied was computed. c. Analyze the $9,100 under-applied overhead figure in terms of the variable overhead rate and efficiency variances and the fixed manufacturing overhead budget and volume variances.

a. Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base




Variable

Fixed Total

Estimated manufacturing overhead cost (a)

$45,000

$108,000

Estimated total amount of the allocation base (b)

18,000 18,000

Predetermined overhead rate (a) ÷ (b)

$2.50 $6.00 $8.50

b. Overhead applied = Predetermined overhead rate × Standard hours allowed = $8.50 per hour × 16,000 machine-hours = $136,000 c. Variable overhead rate variance = (AH × AR) - (AH × SR) = $38,000 - (15,000 machine-hours × $2.50 per machine-hour) = $38,000 - $37,500 = $500 U Variable overhead efficiency variance = (AH - SH) × SR = (15,000 machine-hours - 16,000 machine-hours) × $2.50 per machine-hour = -1,000 machine-hours × $2.50 per machine-hour = $2,500 F Fixed overhead variances: Budget variance = Actual fixed overhead - Budgeted fixed overhead = $107,100 - $108,000 = $900 F Volume variance = Budgeted fixed overhead - Fixed overhead applied to work in process = $108,000 - (16,000 machine-hours × $6.00 per machine-hour) = $108,000 - $96,000 = $12,000 U




Variable overhead rate variance $500 UVariable overhead efficiency variance

2,500 F

Fixed overhead budget variance 900 FFixed overhead volume variance 12,000 UUnderapplied overhead $9,100 U









104.Littleton Manufacturing uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of standard machine-hours. At standard, each unit of product requires one machine-hour to complete. The standard variable overhead is $1.80 per machine-hour and $432,000 per year. The denominator level of activity is 120,000 machine-hours, or 120,000 units. Actual data for the year were as follows:

Actual variable overhead cost $178,500

Actual fixed manufacturing overhead cost

$248,000

Actual machine-hours 105,000Units produced 100,000

Required: a. What are the predetermined variable and fixed manufacturing overhead rates? b. Compute the variable overhead rate and efficiency variances. c. Compute the fixed manufacturing overhead budget and volume variances.

a. Standard variable overhead rate = $216,000 ÷ 120,000 MHs = $1.80 per MH Standard fixed manufacturing overhead rate = $240,000 ÷ 120,000 MHs = $2.00 per MH b. Variable overhead variances: Variable overhead rate variance = (AH × AR) - (AH × SR) = $178,500 - (105,000 MHs × $1.80 per MH) = $178,500 - $189,000 = $10,500 F Variable overhead efficiency variance = (AH - SH) × SR = (105,000 MHs - 100,000 MHs*) × $1.80 per MH = 5,000 MHs × $1.80 per MH = $9,000 U




*100,000 units × 1 MH per unit = 100,000 MHs c. Fixed overhead variances: Budget variance = Actual fixed manufacturing overhead - Budgeted fixed manufacturing overhead = $248,000 - ($2.00 per MH × 120,000 MHs) = $248,000 - $240,000 = $8,000 U Volume variance = Fixed component of the predetermined overhead rate × (Denominator hours - Standard hours allowed for the actual output) = $2.00 per MH × (120,000 MHs - 100,000 MHs) = $2.00 per MH × 20,000 MHs = $40,000 U









105.You have just been hired as the new executive assistant to the manager of the Eastern Division of Global Manufacturing. You have been given the following incomplete records concerning manufacturing overhead for last year:

Variable overhead rate $3.50 per DLHBudgeted fixed manufacturing overhead

$70,000

Total actual overhead cost

$259,400

Fixed overhead budget variance

$10,000 Unfavorable

Variable overhead efficiency variance

$14,000 Unfavorable

Actual direct labor-hours worked

52,000 DLHs

Denominator activity level

50,000 DLHs

Standard hours per unit 2 DLHs

The company uses a standard cost system in which manufacturing overhead costs are applied to products on the basis of standard direct labor-hours (DLHs). Required: a. Compute the variable overhead rate variance and indicate whether it was favorable or unfavorable. b. Compute the fixed overhead volume variance and indicate whether it was favorable or unfavorable.

a. Budget variance = Actual fixed overhead - Budgeted fixed overhead $10,000 U = Actual fixed overhead - $70,000 $10,000 = Actual fixed overhead - $70,000 Actual fixed overhead = $70,000 + $10,000 Actual fixed overhead = $80,000




Actual variable overhead = Total actual overhead - Actual fixed manufacturing overhead = $259,400 - $80,000 = $179,400 Variable overhead rate variance = (AH × AR) - (AH × SR) = $179,400 - (52,000 DLHs × $3.50 per DLH) = $179,400 - $182,000 = $2,600 F b. Budgeted fixed overhead rate = Fixed overhead ÷ Denominator activity level = $70,000 ÷ 50,000 DLHs = $1.40 per DLH Variable overhead efficiency variance = (AH - SH) × SR $14,000 U = (52,000 DLHs - SH) × $3.50 per DLH $14,000 = (52,000 DLHs - SH) × $3.50 per DLH 52,000 DLHs - SH = $14,000 ÷ $3.50 per DLH 52,000 DLHs - SH = 4,000 DLHs SH = 52,000 DLHs - 4,000 DLHs = 48,000 DLHs Volume variance = Budgeted fixed overhead - Fixed overhead applied to work in process = $70,000 - (48,000 DLHs × $1.40 per DLH) = $70,000 - $67,200 = $2,800 U









106. Aslett Corporation's manufacturing overhead includes $3.80 per machine-hour for supplies; $8.80 per machine-hour for indirect labor; $214,132 per period for salaries; and $546,720 per period for depreciation.

Required:

Determine the predetermined overhead rate if the denominator level of activity is 6,800 machine-hours. Show your work!

Estimated total manufacturing overhead cost = [($3.80 per MH + $8.80 per MH) × 6,800 MHs] + ($214,132 + $546,720) = $85,680 + $760,852 = $846,532

Predetermined overhead rate = Estimated total manufacturing overhead cost/Estimated total amount of the allocation base = $846,532 ÷ 6,800 machine-hours = $124.49 per machine-hour








107. Pierce Corporation uses a standard cost system in which it applies manufacturing overhead to its product on the basis of standard direct labor-hours (DLHs). Below is the standard cost card for the product: Direct materials, 4.5 feet × $3.80 per foot

$17.10

Direct labor, 3.0 DLHs × $9.50 per DLH 28.50

Variable overhead, 3.0 DLHs × $2.00 per DLH 6.00

Fixed overhead, 3.0 DLHs × $8.00 per DLH

24.0 0

$75.60

Last year, the company produced 6,000 units of product using 17,000 direct labor-hours. The actual total fixed manufacturing overhead cost for the year was $140,000 and the volume variance was $12,000, favorable. Required: a. Determine the budgeted amount of total fixed manufacturing overhead cost. b. Determine the denominator activity figure that the company used in computing predetermined overhead rates.

a. Fixed overhead cost applied to work in process = $24 per unit × 6,000 units = $144,000 Volume variance = Budgeted fixed overhead - Fixed overhead applied to work in process $12,000 F = Budgeted fixed overhead - $144,000 - $12,000 = Budgeted fixed overhead - $144,000 Budgeted fixed overhead = $144,000 - $12,000 = $132,000 b. Volume variance = Fixed component of the predetermined overhead rate × (Denominator hours - Standard hours allowed for the actual output) $12,000 F = $8 per DLH × [Denominator hours - (3 DLHs per unit × 6,000 units)] -$12,000 = $8 per DLH × [Denominator hours - 18,000 DLHs] [Denominator hours - 18,000 DLHs] = -$12,000 ÷ $8 per DLH [Denominator hours - 18,000 DLHs] = -1,500 DLHs Denominator hours = 18,000 DLHs - 1,500 DLHs = 16,500 DLHs








108. Faessler Corporation applies overhead to products based on machine-hours. The denominator level of activity is 6,500 machine-hours. The budgeted fixed manufacturing overhead costs are $242,450. In July, the actual fixed manufacturing overhead costs were $242,490 and the standard machine-hours allowed for the actual output were 7,000 machine-hours.

Required:

a. Compute the budget variance for July. Show your work!b. Compute the volume variance for July. Show your work!

a. Budget variance = Actual fixed manufacturing overhead cost - Budgeted fixed manufacturing overhead cost = $242,490 - $242,450 = $40 U

b. Fixed component of the predetermined overhead rate = $242,450 ÷ 6,500 machine-hours = $37.30 per machine-hourVolume variance = Fixed component of the predetermined overhead rate × (Denominator hours - Standard hours allowed)= $37.30 per machine-hour × (6,500 machine-hours - 7,000 machine-hours)= $37.30 per machine-hour × (-500 machine-hours)= $18,650 F








109.Dixie Corporation has provided the following data for June.

Denominator level of activity 2,000 machine-hoursBudgeted fixed manufacturing overhead costs

$39,200

Fixed component of the predetermined overhead rate

$19.60 per machine-hour

Actual level of activity 2,300 machine-hoursStandard machine-hours allowed for the actual output

2,200 machine-hours


$40,550

Required: a. Compute the budget variance for June. Show your work! b. Compute the volume variance for June. Show your work!

a. Budget variance = Actual fixed manufacturing overhead cost − Budgeted fixed manufacturing overhead cost = $40,550 − $39,200 = $1,350 U

b. Volume variance = Fixed component of the predetermined overhead rate × (Denominator hours − Standard hours allowed)= $19.60 per machine-hour × (2,000 machine-hours − 2,200 machine-hours)= $19.60 per machine-hour × (−200 machine-hours)= $3,920 F








110.Stenquist Corporation has provided the following data for January.

Denominator level of activity 7,900 machine-hours


Standard machine-hours allowed for the actual output 8,300 machine-hours


Required: a. Compute the budget variance for January. Show your work! b. Compute the volume variance for January. Show your work!

a. Budget variance = Actual fixed manufacturing overhead cost − Budgeted fixed manufacturing overhead cost = $98,710 − $95,590 = $3,120 U

b. Fixed component of the predetermined overhead rate = $95,590 ÷ 7,900 machine-hours = $12.10 per machine-hourVolume variance = Fixed component of the predetermined overhead rate × (Denominator hours − Standard hours allowed)= $12.10 per machine-hour × (7,900 machine-hours − 8,300 machine-hours)= $12.10 per machine-hour × (−400 machine-hours)= $4,840 F








111. Kingdon Corporation's manufacturing overhead includes $7.10 per machine-hour for variable manufacturing overhead and $207,000 per period for fixed manufacturing overhead.

Required:

Determine the predetermined overhead rate for the denominator level of activity of 4,600 machine-hours.

Predetermined overhead rate = Estimated total manufacturing overhead/Denominator level of activity= [($7.10 per machine-hour × 8,100 machine-hours) + $207,000] ÷ 4,600 machine-hours= $239,660 ÷ 4,600 machine-hours= $52.10 per machine-hour


sssAICPA: BB Critical ThinkingAICPA: FN Measurement






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