ACC 350 Week 9 Quiz – Strayer New

ACC 350 Week 9 Quiz – Strayer New

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Quiz 7 Chapter 8  

Flexible Budgets, Overhead Cost Variances, and Management Control

1)

Overhead costs are a major part of costs for most companiesmore than 50% of all costs for some companies.  

2)

At the start of the budget period, management will have made most decisions regarding the level of variable costs to be incurred.  

3)

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

4)

The planning of fixed overhead costs does not differ from the planning of variable overhead costs.  

5)

In a standard costing system, the variable-overhead rate per unit is generally expressed as a standard cost per output unit.  

6)

For calculating the cost of products and services, a standard costing system does not have to track actual costs.  

7)

Standard costing is a cost system that allocates overhead costs on the basis of overhead cost rates based on actual overhead costs times the standard quantities of the allocation bases allowed for the actual outputs produced.  

8)

The budget period for variable-overhead costs is typically less than 3 months.  

9)

A favorable variable overhead spending variance can be the result of paying lower prices than budgeted for variable overhead items such as energy.  

10)

The variable overhead efficiency variance is computed in a different way than the efficiency variance for direct-cost items.  

11)

The variable overhead flexible-budget variance measures the difference between standard variable overhead costs and flexible-budget variable overhead costs.  

12)

The variable overhead efficiency variance measures the efficiency with which the cost-allocation base is used.  

13)

The variable overhead efficiency variance can be interpreted the same way as the efficiency variance for direct-cost items.  

14)

An unfavorable variable overhead efficiency variance indicates that variable overhead costs were wasted and inefficiently used.  

15)

Causes of a favorable variable overhead efficiency variance might include using lower-skilled workers than expected.  

16)

If the production planners set the budgeted machine hours standards too tight, one could anticipate there would be an unfavorable variable overhead efficiency variance.

17)

If the production planners set the budgeted machine hours standards too tight, one could anticipate there would be an unfavorable fixed overhead efficiency variance.

18)

For fixed overhead costs, the flexible-budget amount is always the same as the static-budget amount.  

19)

The fixed overhead flexible-budget variance is the difference between actual fixed overhead costs and the fixed overhead costs in the flexible budget.  

20)

There is never an efficiency variance for fixed costs.  

21)

All unfavorable overhead variances decrease operating income compared to the budget.  

22)

A favorable fixed overhead flexible-budget variance indicates that actual fixed costs exceeded the lump-sum amount budgeted.  

23)

Fixed costs for the period are by definition a lump sum of costs that remain unchanged and therefore the fixed overhead spending variance is always zero.  

24)

Caution is appropriate before interpreting the production-volume variance as a measure of the economic cost of unused capacity.  

25)

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

26)

The lump sum budgeted for fixed overhead will always be the same amount for the static budget and the flexible budget.  

27)

A favorable production-volume variance arises when manufacturing capacity planned for is not used.  

28)

The fixed overhead flexible budget variance is the difference between actual fixed overhead costs and fixed overhead costs in the flexible budget.

29)

An unfavorable production-volume variance always infers that management made a bad planning decision regarding the plant capacity.  

30)

Favorable overhead variances are always recorded with credits in a standard cost system.  

31)

Under activity-based costing, the flexible-budget amount equals the static-budget amount for fixed overhead costs.  

32)

Managers should use unitized fixed manufacturing overhead costs for planning and control.  

33)

For purposes of allocating fixed overhead costs to products, managers may view the fixed overhead costs as if they had a variable-cost behavior pattern.  

34)

Both financial and nonfinancial performance measures are key inputs when evaluating the performance of managers.  

35)

In the journal entry that records overhead variances, the manufacturing overhead allocated accounts are closed.  

36)

Variance analysis of fixed nonmanufacturing costs, such as distribution costs, can also be useful when planning for capacity.  

37)

At the end of the fiscal year, the fixed overhead spending variance is always written off to cost of goods sold.

38)

Variance analysis of fixed overhead costs is also useful when a company uses activity-based costing.  
39)

An unfavorable fixed setup overhead spending variance could be due to higher lease costs of new setup equipment.  

40)

A favorable variable setup overhead efficiency variance could be due to actual setup-hours exceeding the setup-hours planned for the units produced.  

41)

Overhead costs have been increasing due to all of the following EXCEPT:  
A)

increased automation  
B)

more complexity in distribution processes  
C)

tracing more costs as direct costs with the help of technology  
D)

product proliferation  

42)

Effective planning of variable overhead costs means that a company performs those variable overhead costs that primarily add value for:  
A)

the current shareholders  
B)

the customer using the products or services  
C)

plant employees  
D)

major suppliers of component parts  

43)

Variable overhead costs include:  
A)

plant-leasing costs  
B)

the plant manager's salary  
C)

depreciation on plant equipment  
D)

machine maintenance  

44)

Fixed overhead costs include:  
A)

the cost of sales commissions  
B)

property taxes paid on plant facilities  
C)

energy costs  
D)

indirect materials  

45)

Effective planning of fixed overhead costs includes all of the following EXCEPT:  
A)

planning day-to-day operational decisions  
B)

eliminating nonvalue-added costs  
C)

planning to be efficient  
D)

choosing the appropriate level of capacity  

46)

Effective planning of variable overhead includes all of the following EXCEPT:  
A)

choosing the appropriate level of capacity  
B)

eliminating nonvalue-adding costs  
C)

redesigning products to use fewer resources  
D)

redesigning the plant layout for more efficient processing  

47)

Choosing the appropriate level of capacity:  
A)

is a key strategic decision  
B)

may lead to loss of sales if overestimated  
C)

may lead to idle capacity if underestimated  
D)

All of these answers are correct.  

48)

The MAJOR challenge when planning fixed overhead is:  
A)

calculating total costs  
B)

calculating the cost-allocation rate  
C)

choosing the appropriate level of capacity  
D)

choosing the appropriate planning period  

49)

In a standard costing system, a cost-allocation base would MOST likely be:  
A)

actual machine-hours  
B)

normal machine-hours  
C)

standard machine-hours  
D)

Any of these answers is correct.  

50)

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

only requires a simple recording system  
B)

uses standard costs to determine the cost of products  
C)

does not have to keep track of actual costs  
D)

All of these answers are correct.  

51)

The variable overhead flexible-budget variance measures the difference between:  
A)

actual variable overhead costs and the static budget for variable overhead costs  
B)

actual variable overhead costs and the flexible budget for variable overhead costs  
C)

the static budget for variable overhead costs and the flexible budget for variable overhead costs  
D)

None of these answers is correct.  

52)

A $5,000 unfavorable flexible-budget variance indicates that:  
A)

the flexible-budget amount exceeded actual variable manufacturing overhead by $5,000  
B)

the actual variable manufacturing overhead exceeded the flexible-budget amount by $5,000  
C)

the flexible-budget amount exceeded standard variable manufacturing overhead by $5,000  
D)

the standard variable manufacturing overhead exceeded the flexible-budget amount by $5,000  

53)

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

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

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

selecting the cost-allocation bases to use  
D)

choosing the period to be used for the budget  

54)

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

allocated costs  
B)

budgeted costs  
C)

fixed costs  
D)

variable costs  
Answer the following questions using the information below:

Shimon Corporation manufactures industrial-sized water coolers and uses budgeted machine-hours to allocate variable manufacturing overhead. The following information pertains to the company's manufacturing overhead data:

Budgeted output units 15,000 units
Budgeted machine-hours 5,000 hours
Budgeted variable manufacturing overhead costs for 15,000 units $161,250

Actual output units produced 22,000 units
Actual machine-hou