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Managerial Accounting
Introduction to Managerial Accounting
Jeannie M. Folk
Ray H. Garrison
Eric Noreen
Flexible Budgets and Overhead Analysis

Multiple Choice Quiz



1

A major weakness of static budgets is that:
A)they are geared only to a single level of activity.
B)they cannot be used to assess whether variable costs are under control.
C)they force the manager to compare actual costs at one level of activity to budgeted costs at a different level of activity.
D)all of the above.
2

Roma Restauranta compares monthly operating results with a static budget prepared at the beginning of the year. When actual sales are less than budget, would the restaurant usually report favorable variances on fixed supervisory salaries and variable food costs?
  Supervisory Salaries Food Costs
A) Yes Yes
B) Yes No
C) No Yes
D) No No
A)Answer A
B)Answer B
C)Answer C
D)Answer D
3

Which of the following variances would be useful in calling attention to possible problems in the control of spending on overhead items?
  Variable Fixed Fixed
  Overhead Overhead Overhead
  Spending Budget Volume
  Variance Variance Variance
A) No No No
B) No Yes Yes
C) Yes No No
D) Yes Yes Yes
A)Answer A
B)Answer B
C)Answer C
D)Answer D
4

The higher the denominator level of activity:
A)the more profitable operations likely will be.
B)the less likely is the occurrence of a volume variance.
C)the lower the unit product cost.
D)the higher the unit product cost.
5

An increase 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.
6

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)fixed overhead budget variance.
B)fixed overhead volume variance.
C)variable overhead efficiency variance.
D)variable overhead spending variance.
7

The Firenze Company applies manufacturing overhead costs to products on the basis of direct labor-hours. The standard cost card shows that 6 direct labor-hours are required per unit of product. For August, the company budgeted to work 180,000 direct labor-hours and to incur the following total manufacturing overhead costs:
Total variable overhead costs $198,000
Total fixed overhead costs $237,600
During August, the company completed 28,000 units of product, worked 172,000 direct labor-hours, and incurred the following total manufacturing overhead costs:
Total variable overhead costs $197,800
Total fixed overhead costs $230,600
The denominator activity in the predetermined overhead rate is 180,000 direct labor-hours. The variable overhead spending variance for August is:
A)$8,600 F.
B)$8,600 U.
C)$13,000 F.
D)$13,000 U.
8

The Firenze Company applies manufacturing overhead costs to products on the basis of direct labor-hours. The standard cost card shows that 6 direct labor-hours are required per unit of product. For August, the company budgeted to work 180,000 direct labor-hours and to incur the following total manufacturing overhead costs:
Total variable overhead costs $198,000
Total fixed overhead costs $237,600
During August, the company completed 28,000 units of product, worked 172,000 direct labor-hours, and incurred the following total manufacturing overhead costs:
Total variable overhead costs $197,800
Total fixed overhead costs $230,600
The denominator activity in the predetermined overhead rate is 180,000 direct labor-hours. (Note that this is the same data that was provided for the previous question.) The variable overhead efficiency variance for August is:
A)$0.
B)$3,600 F.
C)$4,400 F.
D)$4,400 U.
9

The Firenze Company applies manufacturing overhead costs to products on the basis of direct labor-hours. The standard cost card shows that 6 direct labor-hours are required per unit of product. For August, the company budgeted to work 180,000 direct labor-hours and to incur the following total manufacturing overhead costs:
Total variable overhead costs $198,000
Total fixed overhead costs $237,600
During August, the company completed 28,000 units of product, worked 172,000 direct labor-hours, and incurred the following total manufacturing overhead costs:
Total variable overhead costs $197,800
Total fixed overhead costs $230,600
The denominator activity in the predetermined overhead rate is 180,000 direct labor-hours. (Note that this is the same data that was provided for the previous question.) The fixed overhead budget variance for August is:
A)$7,000 F.
B)$7,000 U.
C)$6,400 F.
D)$6,400 U.
10

The Firenze Company applies manufacturing overhead costs to products on the basis of direct labor-hours. The standard cost card shows that 6 direct labor-hours are required per unit of product. For August, the company budgeted to work 180,000 direct labor-hours and to incur the following total manufacturing overhead costs:
Total variable overhead costs $198,000
Total fixed overhead costs $237,600
During August, the company completed 28,000 units of product, worked 172,000 direct labor-hours, and incurred the following total manufacturing overhead costs:
Total variable overhead costs $197,800
Total fixed overhead costs $230,600
The denominator activity in the predetermined overhead rate is 180,000 direct labor-hours. (Note that this is the same data that was provided for the previous question.) The fixed overhead volume variance for August is:
A)$8,600 U.
B)$9,960 F.
C)$9,960 U.
D)$15,840 U.




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