App 11 A

Appendix 11A, Predetermined Overhead Rates and Overhead Analysis
LO6: Fixed overhead variances (App 11A)
LO4: Variable overhead variances
LO7: Journal entries (App 11B)
LO5: Performance measures
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
Question Type T/F T/F T/F T/F T/F T/F T/F T/F T/F T/F T/F T/F T/F T/F Conceptual M/C Conceptual M/C Conceptual M/C Conceptual
Professional Exam Adapted
LO3: Direct labor variances
LO2: Materials variances
LO1: Setting standards
Difficulty
ID 2/e: 9-6 New,12/6/97H 4/e: 10-597 3/e: 10-6 New,12/6/97N 8/e:ATB11-09 11/27/94,c 3/e: 10-12 2/e: 9-5 3/e: 10-11 4/e: 10-590 11/27/94,d 11/27/94,e New,12/6/97J New,12/5/97A 9eLD:CH11Q1 New,11/5/97B 9eLD:CH11Q3
M M H E M M E M M M E M H M E H M H x
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Origin CMA/CPA origin Authors E.N. Authors Authors E.N. David Keyes E.N. Authors Authors Authors Authors E.N. E.N. E.N. E.N. Larry Deppe E.N. Larry Deppe
11A-1

M/C Conceptual M/C Conceptual M/C Conceptual M/C Conceptual M/C M/C M/C M/C M/C M/C M/C M/C M/C M/C M/C M/C M/C M/C M/C M/C M/C M/C Multipart M/C Multipart M/C Multipart M/C Multipart M/C
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M M E E E H H M E E E M H M M M E H M E E M M M M x x x x x
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9eLD:CH11Q5 2/e: 9-3 New,12/5/97,B CMA,12/95,Part3,Q7 3/e: 10-4 5/e: 10-40 8/e: ATB11-53 4/e: 10-619 9/24/2004 Single MC AF3 9/24/2004 Single MC AG3 9/24/2004 Single MC AH3 3/e: 10-7 4/e: 10-642 3/e: 10-8 5/5/2003 Single MC Q3 5/5/2003 Single MC R3 5/5/2003 Single MC S3 5/5/2003 Single MC T3 5/5/2003 Single MC U3 5/5/2003 Single MC V3 5/5/2003 Single MC W3 New,12/6/97,B5 5/e: 10-34 to 37 8/e: ATB11-35 to 37 8/e: ATB11-41 to 43
Larry Deppe Authors E.N. CMA CMA,12/95,Part3,Q7 Authors Authors David Keyes Authors E.N. E.N. E.N. Authors Authors Authors E.N. E.N. E.N. E.N. E.N. E.N. E.N. E.N. Authors David Keyes David Keyes
11A1 11A2 11A3 11A4
11A-2

11A5 11A6 11A7 11A8 11A9 11A10 11A11 11A12 11A13 11A14 5657 5861 6265 6667 6870 7173 7475 7677 7879 8081 82 83 84 85 86 87 88 Multipart M/C Multipart M/C Multipart M/C Multipart M/C Multipart M/C Multipart M/C Multipart M/C Multipart M/C Multipart M/C Multipart M/C Problem Problem Problem Problem Problem Problem Problem MH M M M E E EM M E E H M E E E E E x x x x x x x x x x x x x x x x x x x x x 5/e: 10-45 to 47 New,12/6/97,D5 New,12/6/97,E5 New,12/6/97,C6 9/24/2004 Multi MC M3 9/24/2004 Multi MC N3 2/e: 9-9 to 10 New,12/6/97,F5 9/24/2004 Multi MC O3 9/24/2004 Multi MC P3 9eLD:CH11P1 3/e: Problem 10-1 9/24/2004 Problem N3 9/24/2004 Problem O3 9/24/2004 Problem P2 9/24/2004 Problem Q3 9/24/2004 Problem R3 Authors E.N. E.N. E.N. E.N. E.N. Authors E.N. E.N. E.N. Larry Deppe Authors E.N. E.N. E.N. E.N. E.N.
11A-3

True / False Questions 1. The fixed manufacturing overhead budget variance and the fixed manufacturing overhead volume variance taken together explain the difference between the actual fixed manufacturing overhead cost incurred and the fixed manufacturing overhead cost applied to production. True False
2. 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 fixed manufacturing overhead volume variance. True False
3. The fixed portion of the predetermined overhead rate is used for product costing purposes and has no significance in terms of cost control. True False
4. The denominator activity represents the actual level of activity recorded for a period. 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 amount of overhead that the company would apply to finished production would ordinarily be the actual direct laborhours times the predetermined overhead rate per direct labor-hour. True False
6. If all four of Argo Corporation's overhead variances are favorable, Argo's overhead will be overapplied. True False
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7. The fixed manufacturing overhead budget variance is more meaningful than the volume variance for cost control purposes. True False
8. If the standard hours allowed for the actual output of the period is greater than the denominator level of activity (in hours), then the overhead budget variance will be unfavorable. True False
9. The volume variance represents the difference between actual fixed manufacturing overhead costs and budgeted fixed manufacturing overhead costs. True False
10. One cause of an unfavorable overhead volume variance would be increases in cost for fixed manufacturing overhead items. True False
11. The volume variance provides a measure of the utilization of plant facilities. True False
12. If the denominator activity used to compute the predetermined overhead rate is equal to the standard activity allowed for the actual output of the period, then there is no volume variance. True False
13. If the denominator activity (in hours) used to compute the predetermined overhead rate is equal to the actual activity (in hours) for the period, then there is no volume variance. True False
11A-5

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. A fixed manufacturing overhead volume variance will NOT necessarily occur in a month in which actual direct labor-hours differ from standard hours allowed. True False
Multiple Choice Questions 15. Which of the following variances would be useful in calling attention to possible problems in the control of spending on overhead items?
A. Choice A B. Choice B C. Choice C D. Choice D
16. The higher the denominator level of activity: A. the higher the unit product cost. B. the lower the unit product cost. C. the less likely is the occurrence of a volume variance. D. the more profitable operations likely will be.
17. A decrease in denominator level of activity will: A. decrease the fixed portion of the predetermined overhead rate. B. increase the fixed portion of the predetermined overhead rate. C. decrease the variable portion of the predetermined overhead rate. D. increase the variable portion of the predetermined overhead rate.
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18. The economic impact of the inability to reach a target denominator level of activity would best be measured by: A. the amount of the volume variance. B. the contribution margin lost by failing to meet the target denominator level of activity. C. the amount of the fixed manufacturing overhead budget variance. D. the amount of the variable overhead efficiency variance.
19. Which of the following is not correct? A. If the denominator level of activity and the standard hours allowed for the output of the period are the same, then there is no volume variance. B. If the denominator level of activity is greater than the standard hours allowed for the output of the period, then the volume variance is unfavorable. C. If the denominator level of activity is greater than the standard hours allowed for the output of the period, then the volume variance is favorable. D. The volume variance is the most appropriate measure of the utilization of plant facilities.
20. An unfavorable fixed manufacturing overhead volume variance would be caused by: A. actual fixed manufacturing overhead costs being greater than budgeted fixed manufacturing overhead costs. B. actual fixed manufacturing overhead costs being greater than applied fixed manufacturing overhead costs. C. fixed manufacturing overhead cost being overapplied for the period. D. the denominator hours exceeding the standard hours allowed for the output of a period.
21. The fixed manufacturing overhead volume variance is due to: A. inefficient or efficient use of whatever the denominator activity is. B. inefficient or efficient use of overhead resources. C. a difference between the denominator activity and the standard hours allowed for the actual output of the period. D. a shift in the amount of hours required to produce the actual output.
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22. Which of the following variances is caused by a difference between the denominator activity in the predetermined overhead rate and the standard hours allowed for the actual production of the period? A. variable overhead rate variance. B. variable overhead efficiency variance. C. fixed manufacturing overhead budget variance. D. fixed manufacturing overhead volume variance.
23. Hart Company's labor standards call for 500 direct labor-hours to produce 250 units of product. During October the company worked 625 direct labor-hours and produced 300 units. The standard hours allowed for October would be: A. 625 hours B. 500 hours C. 600 hours D. 250 hours
24. Web Company uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of standard machine-hours. During February, the company used a denominator activity of 80,000 machine-hours in computing its predetermined overhead rate. However, only 75,000 standard machine-hours were allowed for the month's actual production. If the fixed manufacturing overhead volume variance for February was $6,400 unfavorable, then the total budgeted fixed manufacturing overhead cost for the month was: A. $96,000 B. $102,400 C. $100,000 D. $98,600
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25. Guadalupe Manufacturing Company uses a standard cost system with direct labor-hours as the activity base for overhead. Last year, Guadalupe applied a total of $936,000 of fixed manufacturing overhead cost to the products it produced. The following data relate to production for the year:
What was Guadalupe's fixed manufacturing overhead volume variance? A. $23,400 favorable B. $62,400 unfavorable C. $37,440 unfavorable D. $58,500 favorable
26. The predetermined overhead rate (variable and fixed) is $7.50 per machine-hour and the denominator activity level is 135,000 machine-hours. If the variable portion of the predetermined overhead rate is $3.00 per machine-hour, then the budgeted fixed factory overhead for the year is: A. $30,000 B. $607,500 C. $405,000 D. $1,012,500
27. Glasner Corporation bases its predetermined overhead rate on variable manufacturing overhead cost of $2.70 per machine-hour and fixed manufacturing overhead cost of $289,784 per period. If the denominator level of activity is 8,800 machine-hours, the variable element in the predetermined overhead rate would be: A. $2.70 B. $35.63 C. $35.26 D. $32.93
11A-9

28. Sheeder Corporation bases its predetermined overhead rate on variable manufacturing overhead cost of $18.70 per machine-hour and fixed manufacturing overhead cost of $1,817,202 per period. If the denominator level of activity is 8,200 machine-hours, the fixed element in the predetermined overhead rate would be: A. $18.70 B. $1,870.00 C. $240.31 D. $221.61
29. Wiley Corporation bases its predetermined overhead rate on variable manufacturing overhead cost of $13.90 per machine-hour and fixed manufacturing overhead cost of $944,300 per period. If the denominator level of activity is 7,100 machine-hours, the predetermined overhead rate would be: A. $1,390.00 B. $146.90 C. $13.90 D. $133.00
30. Mauve Company uses a standard cost system in which it applies manufacturing overhead to units of product on the basis of standard direct labor-hours (DLHs). The following data pertain to last month:
The fixed manufacturing overhead budget variance is: A. $400 U B. $500 F C. $300 F D. $300 U
11A-10

31. Henley Company uses a standard cost system in which it applies manufacturing overhead to units of product on the basis of standard direct labor-hours. For the month of January, the fixed manufacturing overhead volume variance was $2,220 favorable. The company uses a fixed manufacturing overhead rate of $1.85 per direct labor-hour. During January, the standard direct labor-hours allowed for the month's output: A. exceeded denominator hours by 1,000. B. fell short of denominator hours by 1,000. C. exceeded denominator hours by 1,200. D. fell short of denominator hour by 1,200.
32. Harris Company uses a standard cost system in which it applies manufacturing overhead to units of product on the basis of standard direct labor-hours (DLHs). The company has provided the following data:
The volume variance would be: A. $2,500 F B. $1,800 F C. $1,800 U D. $1,500 F
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33. Michetti Corporation applies manufacturing overhead to products on the basis of standard machine-hours. Budgeted and actual overhead costs for the month appear below:
The company based its original budget on 4,300 machine-hours. The company actually worked 4,140 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 4,200 machine-hours. What was the overall fixed manufacturing overhead budget variance for the month? A. $660 favorable B. $660 unfavorable C. $850 unfavorable D. $850 favorable
11A-12

34. Hugh 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:
The company based its original budget on 6,700 machine-hours. The company actually worked 6,810 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 6,940 machine-hours. What was the overall fixed manufacturing overhead budget variance for the month? A. $960 favorable B. $370 unfavorable C. $960 unfavorable D. $370 favorable
35. Desormeaux 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 $21,600 and the actual fixed manufacturing overhead cost for the month was $21,120. The company based its original budget on 5,400 machine-hours. The standard hours allowed for the actual output of the month totaled 5,850 machine-hours. What was the overall fixed manufacturing overhead budget variance for the month? A. $1,800 favorable B. $1,800 unfavorable C. $480 favorable D. $480 unfavorable
11A-13

36. Kuhlman 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:
The company based its original budget on 2,800 machine-hours. The company actually worked 2,730 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 2,860 machine-hours. What was the overall fixed manufacturing overhead volume variance for the month? A. $623 unfavorable B. $534 unfavorable C. $623 favorable D. $534 favorable
11A-14

37. Mattern 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:
The company based its original budget on 6,100 machine-hours. The company actually worked 5,710 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. $4,836 unfavorable B. $4,836 favorable C. $6,944 unfavorable D. $6,944 favorable
38. Gayman Corporation applies manufacturing overhead to products on the basis of standard machine-hours. The company bases its predetermined overhead rate on 7,300 machine-hours. The company's total budgeted fixed manufacturing overhead is $28,470. In the most recent month, the total actual fixed manufacturing overhead was $28,940. The company actually worked 7,510 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 7,670 machine-hours. What was the overall fixed manufacturing overhead volume variance for the month? A. $819 favorable B. $819 unfavorable C. $470 unfavorable D. $1,443 favorable
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39. Hoops Corporation applies manufacturing overhead to products on the basis of standard machine-hours. The company's predetermined overhead rate for fixed manufacturing overhead is $1.30 per machine-hour and the denominator level of activity is 3,700 machinehours. In the most recent month, the total actual fixed manufacturing overhead was $4,450 and the company actually worked 4,000 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 3,880 machine-hours. What was the overall fixed manufacturing overhead volume variance for the month? A. $390 favorable B. $234 favorable C. $156 unfavorable D. $390 unfavorable
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:
The following data pertain to operations for the most recent period:
40. What is the predetermined overhead rate to the nearest cent? A. $25.25 B. $24.97 C. $25.34 D. $25.06
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41. How much overhead was applied to products during the period to the nearest dollar? A. $225,500 B. $227,250 C. $224,725 D. $226,669
42. What was the variable overhead rate variance for the period to the nearest dollar? A. $1,875 U B. $900 F C. $900 U D. $1,875 F
43. What was the variable overhead efficiency variance for the period to the nearest dollar? A. $898 F B. $1,875 U C. $227 U D. $224 U
44. What was the fixed manufacturing overhead budget variance for the period to the nearest dollar? A. $1,100 F B. $350 F C. $2,294 U D. $2,650 U
45. What was the fixed manufacturing overhead volume variance for the period to the nearest dollar? A. $1,174 F B. $1,194 F C. $1,550 F D. $357 U
11A-17

The Ferris Company applies manufacturing overhead costs to products on the basis of standard direct labor-hours. The standard cost card shows that 3 direct labor-hours are required per unit of product. For August, the company budgeted to work 90,000 direct laborhours and to incur the following total manufacturing overhead costs:
During August, the company completed 28,000 units of product, worked 86,000 direct laborhours, and incurred the following total manufacturing overhead costs:
The denominator activity in the predetermined overhead rate is 90,000 direct labor-hours.
46. For August, the variable overhead rate variance is: A. $4,300 F B. $4,300 U C. $6,500 F D. $6,500 U
47. For August, the variable overhead efficiency variance is: A. $1,800 F B. $0 C. $2,200 U D. $2,200 F
48. For August, the fixed manufacturing overhead budget variance is: A. $3,500 F B. $3,500 U C. $3,200 F D. $3,200 U
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49. For August, the fixed manufacturing overhead volume variance is: A. $4,300 U B. $7,920 U C. $4,980 F D. $4,980 U
Mzimba Sofa Company has developed the following manufacturing overhead standards for its sofa production.
Manufacturing overhead at Mzimba is applied to production on the basis of standard machinehours. The above standards were based on an expected annual volume of 20,000 sofas. The actual results last year were as follows:
50. What was Mzimba's variable overhead rate variance? A. $8,514 favorable B. $8,766 unfavorable C. $17,280 unfavorable D. $54,846 unfavorable
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51. What was Mzimba's variable overhead efficiency variance? A. $8,766 unfavorable B. $15,552 unfavorable C. $17,280 unfavorable D. $51,200 favorable
52. What was Mzimba's fixed manufacturing overhead volume variance? A. $12,080 favorable B. $42,920 unfavorable C. $61,000 unfavorable D. $73,080 favorable
Wriphoff Company uses a standard cost system to collect costs related to the production of its clay bud vases. Manufacturing overhead at Wriphoff is applied to production on the basis of standard direct labor-hours. The overhead standards used at Wriphoff are as follows:
The standards above were based on an expected annual volume of 40,000 bud vases or 36,000 direct labor-hours. The actual results for last year were as follows:
53. What was Wriphoff's variable overhead rate variance for last year? A. $6,850 favorable B. $7,294 unfavorable C. $14,144 unfavorable D. $15,070 unfavorable
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54. What was Wriphoff's fixed manufacturing overhead budget variance for last year? A. $7,600 favorable B. $9,200 unfavorable C. $30,416 unfavorable D. $38,016 unfavorable
55. What total amount of manufacturing overhead cost (variable and fixed) did Wriphoff apply to the 35,600 vases produced during last year? A. $512,640 B. $548,000 C. $564,800 D. $569,600
The Tate Company uses a standard costing system in which manufacturing overhead is applied on the basis of standard direct labor-hours (DLHs). The company recorded the following costs and activity for September:
56. The amount of fixed manufacturing overhead cost applied to work in process during September was: A. $61,400 B. $57,000 C. $54,150 D. $59,850
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57. The amount of fixed manufacturing overhead cost contained in the company's flexible budget for manufacturing overhead for September was: A. $61,400 B. $57,000 C. $60,000 D. $58,550
A furniture 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:
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60. What was the fixed manufacturing overhead budget variance for the period to the nearest dollar? A. $1,050 F B. $257 F C. $1,657 U D. $1,970 U
61. What was the fixed manufacturing overhead volume variance for the period to the nearest dollar? A. $313 U B. $607 F C. $920 F D. $513 F
A manufacturer of playground equipment 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:
62. What is the predetermined fixed manufacturing overhead rate to the nearest cent? A. $9.25 B. $9.55 C. $9.37 D. $9.08
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63. How much fixed manufacturing overhead was applied to products during the period to the nearest dollar? A. $59,210 B. $59,907 C. $61,120 D. $58,110
64. What was the fixed manufacturing overhead budget variance for the period to the nearest dollar? A. $1,100 F B. $1,153 F C. $1,797 U D. $3,010 U
65. What was the fixed manufacturing overhead volume variance for the period to the nearest dollar? A. $1,910 F B. $697 F C. $676 F D. $1,213 U
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A manufacturer of industrial 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:
11A-25

Wolle Corporation estimates that its variable manufacturing overhead is $11.60 per machinehour and its fixed manufacturing overhead is $298,936 per period.
68. If the denominator level of activity is 4,300 machine-hours, the variable element in the predetermined overhead rate would be: A. $11.60 B. $79.54 C. $69.52 D. $81.12
69. If the denominator level of activity is 4,300 machine-hours, the fixed element in the predetermined overhead rate would be: A. $81.12 B. $11.60 C. $69.52 D. $1,160.00
70. If the denominator level of activity is 4,400 machine-hours, the predetermined overhead rate would be: A. $67.94 B. $79.54 C. $1,160.00 D. $11.60
11A-26

Wintersmith Corporation estimates that its variable manufacturing overhead is $11.60 per machine-hour and its fixed manufacturing overhead is $278,124 per period.
71. If the denominator level of activity is 4,200 machine-hours, the variable element in the predetermined overhead rate would be: A. $11.60 B. $66.22 C. $76.28 D. $77.82
72. If the denominator level of activity is 4,200 machine-hours, the fixed element in the predetermined overhead rate would be: A. $11.60 B. $1,160.00 C. $66.22 D. $77.82
73. If the denominator level of activity is 4,300 machine-hours, the predetermined overhead rate would be: A. $76.28 B. $64.68 C. $1,160.00 D. $11.60
11A-27

Jessep Corporation has a standard cost system in which manufacturing overhead is applied on the basis of standard direct labor-hours. The company has provided the following data concerning its fixed manufacturing overhead costs in March:
74. The fixed manufacturing overhead budget variance is: A. $1,000 U B. $3,000 U C. $2,000 U D. $2,000 F
75. The fixed manufacturing overhead volume variance is: A. $3,000 U B. $3,000 F C. $9,000 U D. $6,000 U
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:
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76. What was the fixed manufacturing overhead budget variance for the period to the nearest dollar? A. $806 U B. $700 U C. $1,970 F D. $1,195 F
77. What was the fixed manufacturing overhead volume variance for the period to the nearest dollar? A. $507 U B. $775 F C. $495 U D. $1,270 U
Labossiere Corporation has provided the following data for November.
78. The budget variance for November is: A. $5,590 U B. $2,920 F C. $5,590 F D. $2,920 U
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79. The volume variance for November is: A. $8,760 U B. $2,920 F C. $2,920 U D. $8,760 F
The following data for August has been provided by Mirabelli Corporation.
80. The budget variance for August is: A. $6,960 F B. $2,240 U C. $2,240 F D. $6,960 U
81. The volume variance for August is: A. $6,960 F B. $6,960 U C. $2,320 F D. $2,320 U
11A-30

Essay Questions 82. The Moore Company produces and sells a single product. A standard cost card for the product follows: Standard Cost Cardper unit of product:
The company manufactured and sold 18,000 units of product during the year. A total of 70,200 yards of material was purchased during the year at cost of $4.20 per yard. All of this material was used to manufacture the 18,000 units. The company records showed no beginning or ending inventories for the year. The company worked 29,250 direct labor-hours during the year at a cost of $9.75 per hour. Overhead cost is applied to products on the basis of standard direct labor-hours. The denominator activity level (direct labor-hours) was 22,500 hours. Budgeted fixed manufacturing overhead costs as shown on the flexible budget were $157,500, while actual fixed manufacturing overhead costs were $156,000. Actual variable overhead costs were $90,000. Required: a. Compute the direct materials price and quantity variances for the year. b. Compute the direct labor rate and efficiency variances for the year. c. Compute the variable overhead rate and efficiency variances for the year. d. Compute the fixed manufacturing overhead budget and volume variances for the year.
11A-31

83. Sucher Company uses a standard cost system in which manufacturing overhead costs are applied to units of product on the basis of standard machine-hours. The company's standards are based on variable manufacturing overhead of $3 per machine-hour and fixed manufacturing overhead of $300,000 per year. The denominator level of activity is 30,000 machine-hours. Standards call for 2.5 machine-hours per unit of output. Actual activity and manufacturing overhead costs for the year are given below:
Required: a. What are the standard hours allowed for the output? b. What was the variable overhead rate variance? c. What was the variable overhead efficiency variance? d. What was the fixed manufacturing overhead budget variance? e. What was the fixed manufacturing overhead volume variance?
11A-32

84. Macdowell Corporation's manufacturing overhead includes $2.50 per machine-hour for supplies; $3.50 per machine-hour for indirect labor; $214,200 per period for salaries; and $307,020 per period for depreciation. Required: Determine the predetermined overhead rate if the denominator level of activity is 8,500 machine-hours. Show your work!
85. Madero Corporation's manufacturing overhead includes $6.20 per machine-hour for variable manufacturing overhead and $711,360 per period for fixed manufacturing overhead. Required: Determine the predetermined overhead rate for the denominator level of activity of 9,600 machine-hours.
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86. Modine Corporation has provided the following data for September.
Required: a. Compute the budget variance for September. Show your work! b. Compute the volume variance for September. Show your work!
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87. Felux Corporation has provided the following data for October.
Required: a. Compute the budget variance for October. Show your work! b. Compute the volume variance for October. Show your work!
88. Shiplett Corporation applies overhead to products based on machine-hours. The denominator level of activity is 8,800 machine-hours. The budgeted fixed manufacturing overhead costs are $317,680. In March, the actual fixed manufacturing overhead costs were $314,300 and the standard machine-hours allowed for the actual output were 8,500 machinehours. Required: a. Compute the budget variance for March. Show your work! b. Compute the volume variance for March. Show your work!
11A-35
Appendix 11A, Predetermined Overhead Rates and Overhead AnalysisKey
True / False Questions 1. The fixed manufacturing overhead budget variance and the fixed manufacturing overhead volume variance taken together explain the difference between the actual fixed manufacturing overhead cost incurred and the fixed manufacturing overhead cost applied to production. TRUE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 6 Level: Medium
2. 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 fixed manufacturing overhead volume variance. FALSE
3. The fixed portion of the predetermined overhead rate is used for product costing purposes and has no significance in terms of cost control. TRUE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 6 Level: Hard
11A-36
4. The denominator activity represents the actual level of activity recorded for a period. FALSE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 6 Level: Easy
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 amount of overhead that the company would apply to finished production would ordinarily be the actual direct laborhours times the predetermined overhead rate per direct labor-hour. FALSE
6. If all four of Argo Corporation's overhead variances are favorable, Argo's overhead will be overapplied. TRUE
7. The fixed manufacturing overhead budget variance is more meaningful than the volume variance for cost control purposes. TRUE
11A-37
8. If the standard hours allowed for the actual output of the period is greater than the denominator level of activity (in hours), then the overhead budget variance will be unfavorable. FALSE
9. The volume variance represents the difference between actual fixed manufacturing overhead costs and budgeted fixed manufacturing overhead costs. FALSE
10. One cause of an unfavorable overhead volume variance would be increases in cost for fixed manufacturing overhead items. FALSE
11. The volume variance provides a measure of the utilization of plant facilities. TRUE
11A-38
12. If the denominator activity used to compute the predetermined overhead rate is equal to the standard activity allowed for the actual output of the period, then there is no volume variance. TRUE
13. If the denominator activity (in hours) used to compute the predetermined overhead rate is equal to the actual activity (in hours) for the period, then there is no volume variance. 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. A fixed manufacturing overhead volume variance will NOT necessarily occur in a month in which actual direct labor-hours differ from standard hours allowed. TRUE
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Multiple Choice Questions 15. Which of the following variances would be useful in calling attention to possible problems in the control of spending on overhead items?
A. Choice A B. Choice B C. Choice C D. Choice D
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 4 Learning Objective: 6 Level: Easy
16. The higher the denominator level of activity: A. the higher the unit product cost. B. the lower the unit product cost. C. the less likely is the occurrence of a volume variance. D. the more profitable operations likely will be.
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17. A decrease in denominator level of activity will: A. decrease the fixed portion of the predetermined overhead rate. B. increase the fixed portion of the predetermined overhead rate. C. decrease the variable portion of the predetermined overhead rate. D. increase the variable portion of the predetermined overhead rate.
18. The economic impact of the inability to reach a target denominator level of activity would best be measured by: A. the amount of the volume variance. B. the contribution margin lost by failing to meet the target denominator level of activity. C. the amount of the fixed manufacturing overhead budget variance. D. the amount of the variable overhead efficiency variance.
19. Which of the following is not correct? A. If the denominator level of activity and the standard hours allowed for the output of the period are the same, then there is no volume variance. B. If the denominator level of activity is greater than the standard hours allowed for the output of the period, then the volume variance is unfavorable. C. If the denominator level of activity is greater than the standard hours allowed for the output of the period, then the volume variance is favorable. D. The volume variance is the most appropriate measure of the utilization of plant facilities.
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20. An unfavorable fixed manufacturing overhead volume variance would be caused by: A. actual fixed manufacturing overhead costs being greater than budgeted fixed manufacturing overhead costs. B. actual fixed manufacturing overhead costs being greater than applied fixed manufacturing overhead costs. C. fixed manufacturing overhead cost being overapplied for the period. D. the denominator hours exceeding the standard hours allowed for the output of a period.
21. The fixed manufacturing overhead volume variance is due to: A. inefficient or efficient use of whatever the denominator activity is. B. inefficient or efficient use of overhead resources. C. a difference between the denominator activity and the standard hours allowed for the actual output of the period. D. a shift in the amount of hours required to produce the actual output.
22. Which of the following variances is caused by a difference between the denominator activity in the predetermined overhead rate and the standard hours allowed for the actual production of the period? A. variable overhead rate variance. B. variable overhead efficiency variance. C. fixed manufacturing overhead budget variance. D. fixed manufacturing overhead volume variance.
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23. Hart Company's labor standards call for 500 direct labor-hours to produce 250 units of product. During October the company worked 625 direct labor-hours and produced 300 units. The standard hours allowed for October would be: A. 625 hours B. 500 hours C. 600 hours D. 250 hours 500 hours 250 units = 2 standard hours per unit 300 units x 2 labor-hours per unit = 600 labor-hours
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 3 Learning Objective: 6 Level: Easy
24. Web Company uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of standard machine-hours. During February, the company used a denominator activity of 80,000 machine-hours in computing its predetermined overhead rate. However, only 75,000 standard machine-hours were allowed for the month's actual production. If the fixed manufacturing overhead volume variance for February was $6,400 unfavorable, then the total budgeted fixed manufacturing overhead cost for the month was: A. $96,000 B. $102,400 C. $100,000 D. $98,600 Volume variance = Fixed portion of the predetermined overhead rate x (Denominator hours Standard hours allowed) $6,400 = Rate x (80,000 - 75,000) Rate = $1.28 Total budgeted fixed manufacturing overhead = $1.28 x 80,000 = $102,400
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 6 Level: Hard
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25. Guadalupe Manufacturing Company uses a standard cost system with direct labor-hours as the activity base for overhead. Last year, Guadalupe applied a total of $936,000 of fixed manufacturing overhead cost to the products it produced. The following data relate to production for the year:
What was Guadalupe's fixed manufacturing overhead volume variance? A. $23,400 favorable B. $62,400 unfavorable C. $37,440 unfavorable D. $58,500 favorable Volume variance = Fixed portion of the predetermined overhead rate x (Denominator hours Standard hours allowed) = $12.48 x (80,000 - 75,000) = $62,400 U
26. The predetermined overhead rate (variable and fixed) is $7.50 per machine-hour and the denominator activity level is 135,000 machine-hours. If the variable portion of the predetermined overhead rate is $3.00 per machine-hour, then the budgeted fixed factory overhead for the year is: A. $30,000 B. $607,500 C. $405,000 D. $1,012,500 Predetermined overhead rate - Variable portion = Fixed overhead rate $7.50 - $3.00 = $4.50 Budgeted fixed factory overhead = $4.50 x 135,000 = $607,500
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 6 Level: Medium
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27. Glasner Corporation bases its predetermined overhead rate on variable manufacturing overhead cost of $2.70 per machine-hour and fixed manufacturing overhead cost of $289,784 per period. If the denominator level of activity is 8,800 machine-hours, the variable element in the predetermined overhead rate would be: A. $2.70 B. $35.63 C. $35.26 D. $32.93
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 6 Level: Easy
28. Sheeder Corporation bases its predetermined overhead rate on variable manufacturing overhead cost of $18.70 per machine-hour and fixed manufacturing overhead cost of $1,817,202 per period. If the denominator level of activity is 8,200 machine-hours, the fixed element in the predetermined overhead rate would be: A. $18.70 B. $1,870.00 C. $240.31 D. $221.61 Fixed element of predetermined overhead rate = $1,817,202 / 8,200 machine-hours = $221.61
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29. Wiley Corporation bases its predetermined overhead rate on variable manufacturing overhead cost of $13.90 per machine-hour and fixed manufacturing overhead cost of $944,300 per period. If the denominator level of activity is 7,100 machine-hours, the predetermined overhead rate would be: A. $1,390.00 B. $146.90 C. $13.90 D. $133.00 Fixed portion of the predetermined overhead rate = $944,300 $133.00 per machine-hour Predetermined overhead rate = $133.00 + $13.90 = $146.90 7,100 machine-hours =
30. Mauve Company uses a standard cost system in which it applies manufacturing overhead to units of product on the basis of standard direct labor-hours (DLHs). The following data pertain to last month:
The fixed manufacturing overhead budget variance is: A. $400 U B. $500 F C. $300 F D. $300 U Budget variance = Actual fixed manufacturing overhead cost - Budgeted fixed manufacturing overhead cost = $10,400 - $10,000 = $400 U
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31. Henley Company uses a standard cost system in which it applies manufacturing overhead to units of product on the basis of standard direct labor-hours. For the month of January, the fixed manufacturing overhead volume variance was $2,220 favorable. The company uses a fixed manufacturing overhead rate of $1.85 per direct labor-hour. During January, the standard direct labor-hours allowed for the month's output: A. exceeded denominator hours by 1,000. B. fell short of denominator hours by 1,000. C. exceeded denominator hours by 1,200. D. fell short of denominator hour by 1,200. Volume variance = Fixed portion of the predetermined overhead rate x (Denominator hours Standard hours allowed) $2,220 = $1.85 x Difference in hours Difference = 1,200 hours; since volume variance is favorable, standard hours allowed exceeded denominator hours
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32. Harris Company uses a standard cost system in which it applies manufacturing overhead to units of product on the basis of standard direct labor-hours (DLHs). The company has provided the following data:
The volume variance would be: A. $2,500 F B. $1,800 F C. $1,800 U D. $1,500 F Volume variance = Fixed portion of the predetermined overhead rate x (Denominator hours Standard hours allowed) = $3 x (5,000 - 5,500) = $1,500 F
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33. Michetti Corporation applies manufacturing overhead to products on the basis of standard machine-hours. Budgeted and actual overhead costs for the month appear below:
The company based its original budget on 4,300 machine-hours. The company actually worked 4,140 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 4,200 machine-hours. What was the overall fixed manufacturing overhead budget variance for the month? A. $660 favorable B. $660 unfavorable C. $850 unfavorable D. $850 favorable Budget variance = Actual fixed manufacturing overhead cost - Budgeted fixed manufacturing overhead cost = ($13,420 + $5,520 + $7,710) - ($13,000 + $5,100 + $7,700) = $26,650 $25,800 = $850 U
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34. Hugh 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:
The company based its original budget on 6,700 machine-hours. The company actually worked 6,810 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 6,940 machine-hours. What was the overall fixed manufacturing overhead budget variance for the month? A. $960 favorable B. $370 unfavorable C. $960 unfavorable D. $370 favorable Budget variance = Actual fixed manufacturing overhead cost - Budgeted fixed manufacturing overhead cost = $27,170 - $26,800 = $370 U
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35. Desormeaux 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 $21,600 and the actual fixed manufacturing overhead cost for the month was $21,120. The company based its original budget on 5,400 machine-hours. The standard hours allowed for the actual output of the month totaled 5,850 machine-hours. What was the overall fixed manufacturing overhead budget variance for the month? A. $1,800 favorable B. $1,800 unfavorable C. $480 favorable D. $480 unfavorable Budget variance = Actual fixed manufacturing overhead cost - Budgeted fixed manufacturing overhead cost = $21,120 - $21,600 = $480 F
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36. Kuhlman 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:
The company based its original budget on 2,800 machine-hours. The company actually worked 2,730 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 2,860 machine-hours. What was the overall fixed manufacturing overhead volume variance for the month? A. $623 unfavorable B. $534 unfavorable C. $623 favorable D. $534 favorable Fixed portion of the predetermined overhead rate = ($2,800 + $7,840 + $14,280) 2,800 machine-hours = $8.90 per machine-hour Volume variance = Fixed portion of the predetermined overhead rate x (Denominator hours Standard hours allowed) = $8.90 x (2,800 - 2,860) = $534 F
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37. Mattern 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:
The company based its original budget on 6,100 machine-hours. The company actually worked 5,710 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. $4,836 unfavorable B. $4,836 favorable C. $6,944 unfavorable D. $6,944 favorable Fixed portion of the predetermined overhead rate = $75,640 6,100 machine-hours = $12.40 per machine-hour Volume variance = Fixed portion of the predetermined overhead rate x (Denominator hours Standard hours allowed) = $12.40 x (6,100 - 5,540) = $6,944 U
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38. Gayman Corporation applies manufacturing overhead to products on the basis of standard machine-hours. The company bases its predetermined overhead rate on 7,300 machine-hours. The company's total budgeted fixed manufacturing overhead is $28,470. In the most recent month, the total actual fixed manufacturing overhead was $28,940. The company actually worked 7,510 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 7,670 machine-hours. What was the overall fixed manufacturing overhead volume variance for the month? A. $819 favorable B. $819 unfavorable C. $470 unfavorable D. $1,443 favorable Fixed portion of the predetermined overhead rate = $28,470 7,300 machine-hours = $3.90 per machine-hour Volume variance = Fixed portion of the predetermined overhead rate x (Denominator hours Standard hours allowed) = $3.90 x (7,300 - 7,670) = $1,443 F
39. Hoops Corporation applies manufacturing overhead to products on the basis of standard machine-hours. The company's predetermined overhead rate for fixed manufacturing overhead is $1.30 per machine-hour and the denominator level of activity is 3,700 machinehours. In the most recent month, the total actual fixed manufacturing overhead was $4,450 and the company actually worked 4,000 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 3,880 machine-hours. What was the overall fixed manufacturing overhead volume variance for the month? A. $390 favorable B. $234 favorable C. $156 unfavorable D. $390 unfavorable Volume variance = Fixed portion of the predetermined overhead rate x (Denominator hours Standard hours allowed) = $1.30 x (3,700 - 3,880) = $234 F
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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:
40. What is the predetermined overhead rate to the nearest cent? A. $25.25 B. $24.97 C. $25.34 D. $25.06 Predetermined overhead rate = ($86,775 + $137,950) machine-hour 8,900 machine-hours = $25.25 per
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41. How much overhead was applied to products during the period to the nearest dollar? A. $225,500 B. $227,250 C. $224,725 D. $226,669 Predetermined overhead rate = ($86,775 + $137,950) machine-hour Applied overhead = $25.25 x 8,977 hours = $226,669 8,900 machine-hours = $25.25 per
42. What was the variable overhead rate variance for the period to the nearest dollar? A. $1,875 U B. $900 F C. $900 U D. $1,875 F Variable overhead rate variance:
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43. What was the variable overhead efficiency variance for the period to the nearest dollar? A. $898 F B. $1,875 U C. $227 U D. $224 U Standard variable rate = $86,775 8,900 = $9.75 per hour Variable overhead efficiency variance:
44. What was the fixed manufacturing overhead budget variance for the period to the nearest dollar? A. $1,100 F B. $350 F C. $2,294 U D. $2,650 U Budget variance = Actual fixed manufacturing overhead cost - Budgeted fixed manufacturing overhead cost = $136,850 - $137,950 = $1,100 F
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45. What was the fixed manufacturing overhead volume variance for the period to the nearest dollar? A. $1,174 F B. $1,194 F C. $1,550 F D. $357 U Fixed portion of the predetermined overhead rate = $137,950 8,900 machine-hours = $15.50 per machine-hour Volume variance = Fixed portion of the predetermined overhead rate x (Denominator hours Standard hours allowed) = $15.50 x (8,900 - 8,977) = $1,194 F
The Ferris Company applies manufacturing overhead costs to products on the basis of standard direct labor-hours. The standard cost card shows that 3 direct labor-hours are required per unit of product. For August, the company budgeted to work 90,000 direct laborhours and to incur the following total manufacturing overhead costs:
During August, the company completed 28,000 units of product, worked 86,000 direct laborhours, and incurred the following total manufacturing overhead costs:
The denominator activity in the predetermined overhead rate is 90,000 direct labor-hours.
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46. For August, the variable overhead rate variance is: A. $4,300 F B. $4,300 U C. $6,500 F D. $6,500 U Variable overhead rate variance:
47. For August, the variable overhead efficiency variance is: A. $1,800 F B. $0 C. $2,200 U D. $2,200 F Variable overhead efficiency variance:
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48. For August, the fixed manufacturing overhead budget variance is: A. $3,500 F B. $3,500 U C. $3,200 F D. $3,200 U Budget variance = Actual fixed manufacturing overhead cost - Budgeted fixed manufacturing overhead cost = $115,300 - $118,800 = $3,500 F
49. For August, the fixed manufacturing overhead volume variance is: A. $4,300 U B. $7,920 U C. $4,980 F D. $4,980 U Fixed portion of the predetermined overhead rate = $118,800 90,000 machine-hours = $1.32 per machine-hour Volume variance = Fixed portion of the predetermined overhead rate x (Denominator hours Standard hours allowed) = $1.32 x [90,000 - (3 x 28,000)] = $7,920 U
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Mzimba Sofa Company has developed the following manufacturing overhead standards for its sofa production.
Manufacturing overhead at Mzimba is applied to production on the basis of standard machinehours. The above standards were based on an expected annual volume of 20,000 sofas. The actual results last year were as follows:
50. What was Mzimba's variable overhead rate variance? A. $8,514 favorable B. $8,766 unfavorable C. $17,280 unfavorable D. $54,846 unfavorable Variable overhead rate variance:
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51. What was Mzimba's variable overhead efficiency variance? A. $8,766 unfavorable B. $15,552 unfavorable C. $17,280 unfavorable D. $51,200 favorable Variable overhead efficiency variance:
52. What was Mzimba's fixed manufacturing overhead volume variance? A. $12,080 favorable B. $42,920 unfavorable C. $61,000 unfavorable D. $73,080 favorable Volume variance = Fixed portion of the predetermined overhead rate x (Denominator hours Standard hours allowed) = $58.00 x [18,000 - (21,400 x 0.9)] = $73,080 F
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Wriphoff Company uses a standard cost system to collect costs related to the production of its clay bud vases. Manufacturing overhead at Wriphoff is applied to production on the basis of standard direct labor-hours. The overhead standards used at Wriphoff are as follows:
The standards above were based on an expected annual volume of 40,000 bud vases or 36,000 direct labor-hours. The actual results for last year were as follows:
53. What was Wriphoff's variable overhead rate variance for last year? A. $6,850 favorable B. $7,294 unfavorable C. $14,144 unfavorable D. $15,070 unfavorable Variable overhead rate variance:
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54. What was Wriphoff's fixed manufacturing overhead budget variance for last year? A. $7,600 favorable B. $9,200 unfavorable C. $30,416 unfavorable D. $38,016 unfavorable Budget variance = Actual fixed manufacturing overhead cost - Budgeted fixed manufacturing overhead cost = $338,000 - ($9.60 x 36,000) = $7,600 F
55. What total amount of manufacturing overhead cost (variable and fixed) did Wriphoff apply to the 35,600 vases produced during last year? A. $512,640 B. $548,000 C. $564,800 D. $569,600 Applied overhead = ($5.76 + $8.64) x 35,600 = $512,640
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The Tate Company uses a standard costing system in which manufacturing overhead is applied on the basis of standard direct labor-hours (DLHs). The company recorded the following costs and activity for September:
56. The amount of fixed manufacturing overhead cost applied to work in process during September was: A. $61,400 B. $57,000 C. $54,150 D. $59,850 Total standard direct labor-hours = 2.5 x 22,800 = 57,000 direct labor-hours Applied overhead = 57,000 x $0.95 = $54,150
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57. The amount of fixed manufacturing overhead cost contained in the company's flexible budget for manufacturing overhead for September was: A. $61,400 B. $57,000 C. $60,000 D. $58,550 Budgeted fixed overhead = 60,000 direct labor-hours x $0.95 = $57,000
A furniture 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:
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58. What is the predetermined overhead rate to the nearest cent? A. $15.94 B. $16.40 C. $14.61 D. $15.03 Predetermined overhead rate = ($7,920 + $10,120) = $16.40 per direct labor-hour 1,100 direct labor-hours
59. How much overhead was applied to products during the period to the nearest dollar? A. $19,680 B. $17,530 C. $18,040 D. $19,122 Predetermined overhead rate = ($7,920 + $10,120) = $16.40 per direct labor-hour Applied overhead = $16.40 x 1,166 = $19,122 1,100 direct labor-hours
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60. What was the fixed manufacturing overhead budget variance for the period to the nearest dollar? A. $1,050 F B. $257 F C. $1,657 U D. $1,970 U Budget variance = Actual fixed manufacturing overhead cost - Budgeted fixed manufacturing overhead cost = $9,070 - $10,120 = $1,050 F
61. What was the fixed manufacturing overhead volume variance for the period to the nearest dollar? A. $313 U B. $607 F C. $920 F D. $513 F Fixed portion of the predetermined overhead rate = $10,120 1,100 machine-hours = $9.20 per machine-hour Volume variance = Fixed portion of the predetermined overhead rate x (Denominator hours Standard hours allowed) = $9.20 x (1,100 - 1,166) = $607 F
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A manufacturer of playground equipment 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:
62. What is the predetermined fixed manufacturing overhead rate to the nearest cent? A. $9.25 B. $9.55 C. $9.37 D. $9.08 Predetermined overhead rate = $59,210 hour 6,200 direct labor-hours = $9.55 per direct labor-
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63. How much fixed manufacturing overhead was applied to products during the period to the nearest dollar? A. $59,210 B. $59,907 C. $61,120 D. $58,110 Predetermined overhead rate = $59,210 6,200 direct labor-hours = $9.55 per direct laborhour Applied overhead = 6,273 x $9.55 = $59,907
64. What was the fixed manufacturing overhead budget variance for the period to the nearest dollar? A. $1,100 F B. $1,153 F C. $1,797 U D. $3,010 U Budget variance = Actual fixed manufacturing overhead cost - Budgeted fixed manufacturing overhead cost = $58,110 - $59,210 = $1,100 F
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65. What was the fixed manufacturing overhead volume variance for the period to the nearest dollar? A. $1,910 F B. $697 F C. $676 F D. $1,213 U Fixed portion of the predetermined overhead rate = $59,210 6,200 direct labor-hours = $9.55 per direct labor-hour Volume variance = Fixed portion of the predetermined overhead rate x (Denominator hours Standard hours allowed) = $9.55 x (6,200 - 6,273) = $697 F
A manufacturer of industrial 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:
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66. What is the predetermined overhead rate to the nearest cent? A. $14.10 B. $13.82 C. $14.65 D. $14.36 Predetermined overhead rate = ($12,495 + $62,220) 5,100 = $14.65 per machine-hour
67. How much overhead was applied to products during the period to the nearest dollar? A. $77,645 B. $73,255 C. $74,715 D. $75,594 Predetermined overhead rate = ($12,495 + $62,220) Applied overhead = $14.65 x 5,160 = $75,594 5,100 = $14.65 per machine-hour
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Wolle Corporation estimates that its variable manufacturing overhead is $11.60 per machinehour and its fixed manufacturing overhead is $298,936 per period.
68. If the denominator level of activity is 4,300 machine-hours, the variable element in the predetermined overhead rate would be: A. $11.60 B. $79.54 C. $69.52 D. $81.12 By definition.
69. If the denominator level of activity is 4,300 machine-hours, the fixed element in the predetermined overhead rate would be: A. $81.12 B. $11.60 C. $69.52 D. $1,160.00 Fixed portion of predetermined overhead rate = $298,936 per machine-hour 4,300 machine-hours = $69.52
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70. If the denominator level of activity is 4,400 machine-hours, the predetermined overhead rate would be: A. $67.94 B. $79.54 C. $1,160.00 D. $11.60 Fixed portion of predetermined overhead rate = $298,936 Predetermined overhead rate = $67.94 + $11.60 = $79.54 4,400 = $67.94
Wintersmith Corporation estimates that its variable manufacturing overhead is $11.60 per machine-hour and its fixed manufacturing overhead is $278,124 per period.
71. If the denominator level of activity is 4,200 machine-hours, the variable element in the predetermined overhead rate would be: A. $11.60 B. $66.22 C. $76.28 D. $77.82 By definition.
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72. If the denominator level of activity is 4,200 machine-hours, the fixed element in the predetermined overhead rate would be: A. $11.60 B. $1,160.00 C. $66.22 D. $77.82 Fixed portion of predetermined overhead rate = $278,124 4,200 machine-hours = $66.22
73. If the denominator level of activity is 4,300 machine-hours, the predetermined overhead rate would be: A. $76.28 B. $64.68 C. $1,160.00 D. $11.60 Fixed portion of predetermined overhead rate = $278,124 Predetermined overhead rate = $64.68 + $11.60 = $76.28 4,300 machine-hours = $64.68
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Jessep Corporation has a standard cost system in which manufacturing overhead is applied on the basis of standard direct labor-hours. The company has provided the following data concerning its fixed manufacturing overhead costs in March:
74. The fixed manufacturing overhead budget variance is: A. $1,000 U B. $3,000 U C. $2,000 U D. $2,000 F Budget variance = Actual fixed manufacturing overhead cost - Budgeted fixed manufacturing overhead cost = $48,000 - $45,000 = $3,000 U
75. The fixed manufacturing overhead volume variance is: A. $3,000 U B. $3,000 F C. $9,000 U D. $6,000 U Fixed portion of the predetermined overhead rate = $45,000 15,000 machine-hours = $3 per machine-hour Volume variance = Fixed portion of the predetermined overhead rate x (Denominator hours Standard hours allowed) = $3 x (15,000 - 12,000) = $9,000 U
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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:
76. What was the fixed manufacturing overhead budget variance for the period to the nearest dollar? A. $806 U B. $700 U C. $1,970 F D. $1,195 F Budget variance = Actual fixed manufacturing overhead cost - Budgeted fixed manufacturing overhead cost = $50,230 - $49,530 = $700 U
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77. What was the fixed manufacturing overhead volume variance for the period to the nearest dollar? A. $507 U B. $775 F C. $495 U D. $1,270 U Fixed portion of the predetermined overhead rate = $49,530 3,900 direct labor-hours = $12.70 per direct labor-hour Volume variance = Fixed portion of the predetermined overhead rate x (Denominator hours Standard hours allowed) = $12.70 x (3,900 - 3,861) = $495 U
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Labossiere Corporation has provided the following data for November.
78. The budget variance for November is: A. $5,590 U B. $2,920 F C. $5,590 F D. $2,920 U Budget variance = Actual fixed manufacturing overhead cost - Budgeted fixed manufacturing overhead cost = $209,990 - $204,400 = $5,590 U
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79. The volume variance for November is: A. $8,760 U B. $2,920 F C. $2,920 U D. $8,760 F Fixed portion of the predetermined overhead rate = $204,400 7,000 machine-hours = $29.20 per machine-hour Volume variance = Fixed portion of the predetermined overhead rate x (Denominator hours Standard hours allowed) = $29.20 x (7,000 - 6,700) = $8,760 U
The following data for August has been provided by Mirabelli Corporation.
80. The budget variance for August is: A. $6,960 F B. $2,240 U C. $2,240 F D. $6,960 U Budget variance = Actual fixed manufacturing overhead cost - Budgeted fixed manufacturing overhead cost = $88,080 - $85,840 = $2,240 U
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81. The volume variance for August is: A. $6,960 F B. $6,960 U C. $2,320 F D. $2,320 U Fixed portion of the predetermined overhead rate = $85,840 3,700 machine-hours = $23.20 per machine-hour Volume variance = Fixed portion of the predetermined overhead rate x (Denominator hours Standard hours allowed) = $23.20 x (3,700 - 3,800) = $2,320 F
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Essay Questions 82. The Moore Company produces and sells a single product. A standard cost card for the product follows: Standard Cost Cardper unit of product:
The company manufactured and sold 18,000 units of product during the year. A total of 70,200 yards of material was purchased during the year at cost of $4.20 per yard. All of this material was used to manufacture the 18,000 units. The company records showed no beginning or ending inventories for the year. The company worked 29,250 direct labor-hours during the year at a cost of $9.75 per hour. Overhead cost is applied to products on the basis of standard direct labor-hours. The denominator activity level (direct labor-hours) was 22,500 hours. Budgeted fixed manufacturing overhead costs as shown on the flexible budget were $157,500, while actual fixed manufacturing overhead costs were $156,000. Actual variable overhead costs were $90,000. Required: a. Compute the direct materials price and quantity variances for the year. b. Compute the direct labor rate and efficiency variances for the year. c. Compute the variable overhead rate and efficiency variances for the year. d. Compute the fixed manufacturing overhead budget and volume variances for the year.
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a. Direct materials price and quantity variances: Direct Materials Price Variance = AQ(AP - SP) = 70,200($4.20 - $4.00) = $14,040 U Direct Materials Quantity Variance = SP(AQ - SQ) = $4.00(70,200 - 72,000*) = $7,200 F *18,000 units x 4 yards per unit = 72,000 yards b. Direct labor rate and efficiency variances: Direct Labor Rate Variance = AH(AR - SR) = 29,250($9.75 - $10.00) = $7,312.50 F Direct Labor Efficiency Variance = SR(AH - SH) = $10.00(29,250 - 27,000*) = $22,500 U *18,000 units x 1.5 hours per unit = 27,000 hours
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 2 Learning Objective: 3 Learning Objective: 4 Learning Objective: 6 Level: Hard
11A-83
83. Sucher Company uses a standard cost system in which manufacturing overhead costs are applied to units of product on the basis of standard machine-hours. The company's standards are based on variable manufacturing overhead of $3 per machine-hour and fixed manufacturing overhead of $300,000 per year. The denominator level of activity is 30,000 machine-hours. Standards call for 2.5 machine-hours per unit of output. Actual activity and manufacturing overhead costs for the year are given below:
Required: a. What are the standard hours allowed for the output? b. What was the variable overhead rate variance? c. What was the variable overhead efficiency variance? d. What was the fixed manufacturing overhead budget variance? e. What was the fixed manufacturing overhead volume variance? a. 12,800 units x 2.5 machine hours per unit = 32,000 machine hours b. Computation of variable overhead rate variance: Rate variance = (AH x AR) - (AH x SR) = ($96,000) - (31,600 x $3) = $1,200 U c. Computation of variable overhead efficiency variance: Rate variance = (AH x SR) - (SH x SR) = (31,600 x $3) - (32,000 x $3) = $1,200 F d. Computation of the fixed manufacturing overhead budget variance: Budget variance = Actual fixed manufacturing overhead - Budgeted Fixed overhead = $297,000 - $300,000 = $3,000 F e. Computation of the fixed manufacturing overhead volume variance: Volume variance = Fixed portion of predetermined overhead rate x (Denominator hours - Standard hours allowed) = $10* x (30,000 - 32,000) = $20,000 F *$300,000 30,000 MH = $10 per MH
11A-84
AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Learning Objective: 4 Learning Objective: 6 Level: Medium
84. Macdowell Corporation's manufacturing overhead includes $2.50 per machine-hour for supplies; $3.50 per machine-hour for indirect labor; $214,200 per period for salaries; and $307,020 per period for depreciation. Required: Determine the predetermined overhead rate if the denominator level of activity is 8,500 machine-hours. Show your work! Estimated total manufacturing overhead cost = ($2.50 + $3.50) x 8,500 + ($214,200 + $307,020) = $572,220 Predetermined overhead rate = Estimated total manufacturing overhead cost/Estimated total amount of the allocation base = $572,220/8,500 machine-hours = $67.32 per machine-hour
11A-85
85. Madero Corporation's manufacturing overhead includes $6.20 per machine-hour for variable manufacturing overhead and $711,360 per period for fixed manufacturing overhead. Required: Determine the predetermined overhead rate for the denominator level of activity of 9,600 machine-hours. Predetermined overhead rate = Estimated total manufacturing overhead/Denominator level of activity = ($6.20 x 9,600 + $711,360)/9,600 machine-hours = $770,880/9,600 machine-hours = $80.30 per machine-hour
11A-86
86. Modine Corporation has provided the following data for September.
Required: a. Compute the budget variance for September. Show your work! b. Compute the volume variance for September. Show your work! a. Budget variance = Actual fixed manufacturing overhead cost - Budgeted fixed manufacturing overhead cost = $41,740 - $42,400 = $660 F b. Volume variance = Fixed portion of the predetermined overhead rate x (Denominator hours - Standard hours allowed) = $26.50 x (1,600 - 2,000) = $10,600 F
11A-87
87. Felux Corporation has provided the following data for October.
Required: a. Compute the budget variance for October. Show your work! b. Compute the volume variance for October. Show your work! a. Budget variance = Actual fixed manufacturing overhead cost - Budgeted fixed manufacturing overhead cost = $49,050 - $49,790 = $740 F b. Fixed portion of the predetermined overhead rate = $49,790/1,300 machine-hours = $38.30 per machine-hour Volume variance = Fixed portion of the predetermined overhead rate x (Denominator hours Standard hours allowed) = $38.30 x (1,300 - 1,600) = $11,490 F
11A-88
88. Shiplett Corporation applies overhead to products based on machine-hours. The denominator level of activity is 8,800 machine-hours. The budgeted fixed manufacturing overhead costs are $317,680. In March, the actual fixed manufacturing overhead costs were $314,300 and the standard machine-hours allowed for the actual output were 8,500 machinehours. Required: a. Compute the budget variance for March. Show your work! b. Compute the volume variance for March. Show your work! a. Budget variance = Actual fixed manufacturing overhead cost - Budgeted fixed manufacturing overhead cost = $314,300 - $317,680 = $3,380 F b. Fixed portion of the predetermined overhead rate = $317,680/8,800 machine-hours = $36.10 per machine-hour Volume variance = Fixed portion of the predetermined overhead rate x (Denominator hours Standard hours allowed) = $36.10 x (8,800 - 8,500) = $10,830 U
11A-89

App 11 A

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Appendix 11A, Predetermined Overhead Rates and Overhead Analysis

LO6: Fixed overhead variances (App 11A)

LO4: Variable overhead variances

LO7: Journal entries (App 11B)

LO5: Performance measures

Professional Exam Adapted

LO3: Direct labor variances

LO2: Materials variances

LO1: Setting standards

Appendix 11A, Predetermined Overhead Rates and Overhead Analysis

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11A1 11A2 11A3 11A4

Appendix 11A, Predetermined Overhead Rates and Overhead Analysis

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A. Choice A B. Choice B C. Choice C D. Choice D

Appendix 11A, Predetermined Overhead Rates and Overhead Analysis

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Appendix 11A, Predetermined Overhead Rates and Overhead Analysis

Appendix 11A, Predetermined Overhead Rates and Overhead Analysis

The volume variance would be: A. $2,500 F B. $1,800 F C. $1,800 U D. $1,500 F

Appendix 11A, Predetermined Overhead Rates and Overhead Analysis

Appendix 11A, Predetermined Overhead Rates and Overhead Analysis

Appendix 11A, Predetermined Overhead Rates and Overhead Analysis

Appendix 11A, Predetermined Overhead Rates and Overhead Analysis

Appendix 11A, Predetermined Overhead Rates and Overhead Analysis

Appendix 11A, Predetermined Overhead Rates and Overhead Analysis

Appendix 11A, Predetermined Overhead Rates and Overhead Analysis

Appendix 11A, Predetermined Overhead Rates and Overhead Analysis

Appendix 11A, Predetermined Overhead Rates and Overhead Analysis

Appendix 11A, Predetermined Overhead Rates and Overhead Analysis

Appendix 11A, Predetermined Overhead Rates and Overhead Analysis

Appendix 11A, Predetermined Overhead Rates and Overhead Analysis

Appendix 11A, Predetermined Overhead Rates and Overhead Analysis

Appendix 11A, Predetermined Overhead Rates and Overhead Analysis

Appendix 11A, Predetermined Overhead Rates and Overhead Analysis

Appendix 11A, Predetermined Overhead Rates and Overhead Analysis

Appendix 11A, Predetermined Overhead Rates and Overhead Analysis

Appendix 11A, Predetermined Overhead Rates and Overhead Analysis

Labossiere Corporation has provided the following data for November.

Appendix 11A, Predetermined Overhead Rates and Overhead Analysis

Appendix 11A, Predetermined Overhead Rates and Overhead Analysis

Appendix 11A, Predetermined Overhead Rates and Overhead Analysis

Appendix 11A, Predetermined Overhead Rates and Overhead Analysis

Appendix 11A, Predetermined Overhead Rates and Overhead Analysis

Appendix 11A, Predetermined Overhead Rates and Overhead Analysis

Appendix 11A, Predetermined Overhead Rates and Overhead AnalysisKey

Appendix 11A, Predetermined Overhead Rates and Overhead AnalysisKey

Appendix 11A, Predetermined Overhead Rates and Overhead AnalysisKey

Appendix 11A, Predetermined Overhead Rates and Overhead AnalysisKey

Appendix 11A, Predetermined Overhead Rates and Overhead AnalysisKey

A. Choice A B. Choice B C. Choice C D. Choice D

Appendix 11A, Predetermined Overhead Rates and Overhead AnalysisKey

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Appendix 11A, Predetermined Overhead Rates and Overhead AnalysisKey

Appendix 11A, Predetermined Overhead Rates and Overhead AnalysisKey

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Appendix 11A, Predetermined Overhead Rates and Overhead AnalysisKey