FLEXIBLE BUDGET

J Company uses a standard cost system in which it applies manufacturing overhead to units of product on the
basis of direct labor hours (DLHs). The following data pertain to last month's operations:

Budgeted fixed overhead costs ....... $5,000

Actual fixed overhead costs ......... $5,500
Standard hours allowed for output ... 2,400 DLHs
Predetermined overhead
rate ($2 variable + $3 fixed) .... $5 per DLH

The fixed overhead budget variance is:

a. $500 U.
b. $500 F.
c. $2,200 U.
d. $1,700 U.

HCompany uses a standard cost system in which it applies manufacturing overhead to units of product on the
basis of 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.

P Company uses a standard cost system in which it applies manufacturing overhead to units of product on the
basis of direct labor hours. The information below is taken from the company's flexible budget for
manufacturing overhead:

Percent of capacity ......... 70% 80% 90%

Direct labor hours .......... 21,000 24,000 27,000
Variable overhead ........... $ 42,000 $ 48,000 $ 54,000
Fixed overhead .............. 108,000 108,000 108,000
Total overhead ............ $150,000 $156,000 $162,000
During the year, the company operated at exactly 80% of capacity, but applied manufacturing overhead to
products based on the 90% level. The company's fixed overhead volume variance for the year was:
a. $6,000 unfavorable.
b. $6,000 favorable.
c. $12,000 unfavorable.
d. $12,000 favorable.

U Company uses a standard cost accounting system. The following overhead costs and production data are
available for August:

Standard fixed overhead rate ....... $1.00 per hour

Standard variable overhead rate .... $4.00 per hour
Denominator activity ............... 40,000 hours
Actual hours ....................... 39,500 hours
Standard hours allowed for output .. 39,000 hours
Overapplied overhead ............... $2,000

The total amount of overhead applied to work in process for August would be:
a. $195,000.
b. $197,000.
c. $197,500.
d. $199,500.
FLEXIBLE BUDGET

The M Company makes and sells a single product. The company recorded the following activity and cost data for May:

Number of units completed ............................... 45,000 units

Standard direct labor-hours allowed per unit of product . 1.5 DLHS
Budgeted direct labor-hours (denominator activity) ...... 72,000 DLHS
Actual fixed overhead costs incurred .................... $66,000
Volume variance ......................................... $4,275 U

The fixed portion of the predetermined overhead rate is $0.95 per direct labor-hour.

The amount of fixed overhead contained in the company's overhead flexible budget for May was:
a. $64,125.
b. $67,500.
c. $68,400.
d. $70,275.

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.

The fixed overhead budget variance for May was:

a. $2,400 U.
b. $2,400 F.
c. $6,000 U.
d. $6,000 F.

Pollitt has a flexible budget for manufacturing overhead that is based on direct labor hours. The following overhead costs appear on
the flexible budget at the 200,000 hour level of activity:

Variable overhead costs (total):

Packing supplies .......... $120,000
Indirect labor ............ $180,000
Fixed overhead costs (total):
Utilities ................. $100,000
Insurance ................. $ 40,000
Rent ...................... $ 20,000

At an activity level of 180,000 direct labor hours, the flexible budget would show indirect labor cost of:
a. $180,000.
b. $108,000.
c. $144,000.
d. $162,000.

The flexible budget would show total variable overhead cost in dollars per direct labor hour as:
a. $0.60.
b. $0.90.
c. $1.50.
d. $1.80.
FLEXIBLE BUDGET

45. At an activity level of 180,000 direct labor hours, the flexible budget would show total budgeted fixed costs to
D be:
Easy a. $100,000.
Refer To: 11-2 b. $144,000.
c. $150,000.
d. $160,000.

46. At an activity level of 160,000 direct labor hours, the flexible budget would show the budgeted amount for
B utilities to be:
Easy a. $80,000.
Refer To: 11-2 b. $100,000.
c. $120,000.
d. $160,000.

K Company estimated that it would operate its manufacturing facilities at 800,000 direct labor hours for the year and this served as
the denominator activity in the predetermined overhead rate. The total budgeted manufacturing overhead for the year was $2,000,000,
of which $1,600,000 was variable and $400,000 was fixed. The standard variable overhead rate was $2 per direct labor hour. The
standard direct labor time was 3 direct labor hours per unit. The actual results for the year are presented below:

Actual finished units .................... 250,000

Actual direct labor hours ................ 764,000
Actual variable overhead ................. $1,610,000
Actual fixed overhead .................... $ 392,000

The variable overhead spending variance for the year is:

a. $2,000 F.
b. $10,000 U.
c. $82,000 U.
d. $110,000 U.
The variable overhead efficiency variance for the year is:
a. $28,000 U.
b. $100,000 U.
c. $100,000 F.
d. $28,000 F.
$8,000 F.
b. $10,000 U.
c. $17,000 U.
d. $74,000 F.
The fixed overhead volume variance for the year is:
a. $7,000 U.
b. $25,000 U.
c. $41,667 U.
d. $18,000 F.
FLEXIBLE BUDGET

A manufacturing company that has only one product has established the following standards for its variable manufacturing overhead.
The company uses machine-hours as its measure of activity.

Standard hours per unit of output ...... 8.1 machine-hours

Standard variable overhead rate ........ $14.30 per machine-hour

The following data pertain to operations for the last month:

Actual hours ........................... 1,700 machine-hours

Actual total variable overhead cost .... $24,905
Actual output .......................... 200 units

What is the variable overhead spending variance for the month?

a. $1,739 U
b. $595 F
c. $595 U
d. $1,739 F
What is the variable overhead efficiency variance for the month?
a. $1,172 F
b. $567 F
c. $1,172 U
d. $1,144 U

A manufacturing company that has only one product has established the following standards for its variable manufacturing overhead.
The company uses direct labor-hours (DLHs) as its measure of activity.

Standard hours per unit of output ...... 7.2 DLHs

Standard variable overhead rate ........ $14.20 per DLH

The following data pertain to operations for the last month:

Actual direct labor-hours .............. 5,100 DLHs

Actual total variable overhead cost .... $72,165
Actual output .......................... 600 units

What is the variable overhead spending variance for the month?

a. $10,821 U
b. $255 U
c. $10,821 F
d. $255 F