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| 1 | |
A static budget is prepared and planned for a single level of activity. |
| | A) | True |
| | B) | False |
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| 2 | |
A flexible budget covers a range of activity within which the firm may operate. |
| | A) | True |
| | B) | False |
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| 3 | |
The activity measures shown in flexible budgets are the input standards allowed for given various levels of output. |
| | A) | True |
| | B) | False |
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| 4 | |
In preparing a formula flexible budget, the fixed costs are held constant within the relevant range of various levels of the standard input measure (activity units). |
| | A) | True |
| | B) | False |
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| 5 | |
One of the major differences between a columnar flexible budget for overhead and a formula flexible budget for overhead is that the columnar flexible budget shows a limited number of activity levels, while the formula flexible budget can be applied easily and quickly to any activity level achieved during the accounting period. |
| | A) | True |
| | B) | False |
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| 6 | |
If the standard rate per process hour for manufacturing overhead is $7.00, and fixed costs are $45,000 per month, then at 8,000 hours the budgeted monthly cost of overhead is $101,000. |
| | A) | True |
| | B) | False |
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| 7 | |
While normal-costing systems and standard-costing systems use predetermined overhead rates, the application is based on a different measurement of the activity. |
| | A) | True |
| | B) | False |
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| 8 | |
When choosing the activity measure, the activity measure and variable-overhead cost should move together as overall productivity changes. |
| | A) | True |
| | B) | False |
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| 9 | |
Using dollar measures as cost drivers is preferred over using unit measures in preparing a flexible overhead budget. |
| | A) | True |
| | B) | False |
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| 10 | |
The difference between actual variable overhead costs and variable overhead costs allowed for the actual production output can be separated into two distinct variances: variable-overhead spending variance and variable-overhead efficiency variance. |
| | A) | True |
| | B) | False |
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| 11 | |
When the variable-overhead spending variance is unfavorable, the actual hours must have exceeded the standard hours allowed. |
| | A) | True |
| | B) | False |
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| 12 | |
The formula of Actual Variable Overhead – (AH x SVR) and the formula of (AH x AVR) – (AR x SVR), where AH denotes actual process hours, AVR denotes actual variable-overhead rate, and SVR denotes standard variable-overhead rate, are equivalent formulas. |
| | A) | True |
| | B) | False |
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| 13 | |
When the variable-overhead efficiency variance is unfavorable, the actual hours must have exceeded the standard hours allowed. |
| | A) | True |
| | B) | False |
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| 14 | |
Interpretation of variable-overhead efficiency variances is the same as for direct-labor efficiency variances. |
| | A) | True |
| | B) | False |
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| 15 | |
An unfavorable variable-overhead spending variance could result from paying a higher-than-expected price per unit for variable-overhead items. |
| | A) | True |
| | B) | False |
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| 16 | |
Of the two variable-overhead variances, the spending variance has more significance than the efficiency variance, in terms of controlling variable overhead. |
| | A) | True |
| | B) | False |
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| 17 | |
The variable-overhead efficiency variance is the difference between the actual and standard hours of an activity base multiplied by the standard variable-overhead rate. |
| | A) | True |
| | B) | False |
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| 18 | |
An unfavorable variable-overhead spending variance can result from using more variable-overhead items than expected. |
| | A) | True |
| | B) | False |
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| 19 | |
The variable-overhead efficiency variance can be interpreted in the same way as the direct-labor efficiency variance. |
| | A) | True |
| | B) | False |
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| 20 | |
The difference between actual and budgeted fixed overhead is called the fixed-overhead budget variance. |
| | A) | True |
| | B) | False |
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| 21 | |
The standard fixed overhead rate is computed by dividing the firm's total budgeted fixed costs by the firm's planned activity (as measured in labor hours, machine hours, or some other appropriate activity measure). |
| | A) | True |
| | B) | False |
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| 22 | |
When the fixed-overhead spending variance is unfavorable, the fixed-overhead volume variance will also be unfavorable. |
| | A) | True |
| | B) | False |
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| 23 | |
Budgeted fixed overhead is $63,000 at a planned capacity of 21,000 direct-machine hours. The standard-hours allowed to complete each of the 6,500 units produced during the time period is 3 direct-machine hours. The fixed-overhead volume variance is, therefore, $4,500 unfavorable |
| | A) | True |
| | B) | False |
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| 24 | |
The fixed-overhead volume variance is $100. |
| | A) | True |
| | B) | False |
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| 25 | |
A common interpretation of a positive volume variance is that it measures the cost of underutilizing productive capacity. |
| | A) | True |
| | B) | False |
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| 26 | |
The fixed-overhead volume variance is $100 (= $500 – (8,000 x $0.05)). Some accountants would designate this positive volume variance as unfavorable. |
| | A) | True |
| | B) | False |
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| 27 | |
A report that shows the actual and flexible-budget cost levels for each overhead item, together with variable-overhead spending and efficiency variances and fixed-overhead budget variances, is called the overhead cost evaluation report. |
| | A) | True |
| | B) | False |
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| 28 | |
A major difference between flexible budgeting and activity-based flexible budgeting is in the treatment of fixed costs. |
| | A) | True |
| | B) | False |
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| 29 | |
A budget based on several cost drivers rather than a single, volume-based cost driver is called an activity-based flexible budget. |
| | A) | True |
| | B) | False |
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| 30 | |
Flexible budgeting is of little or no use in service industries. |
| | A) | True |
| | B) | False |
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