chapter 10a

App10A -1

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Multiple Choice Questions

15. Sulema, Inc. repairs and refinishes antique furniture. Manufacturing overhead at Sulema is

applied to production on the basis of standard direct labor-hours. Which overhead variance(s)

at Sulema would be unfavorably affected if the cost of solvents used to strip the old paint from

the furniture unexpectedly doubles in price?

A. variable overhead rate variance

B. variable overhead efficiency variance

C. fixed manufacturing overhead budget variance

D. fixed manufacturing overhead volume variance

AACSB: Analytic

AICPA BB: Critical Thinking

AICPA FN: Measurement

Blooms: Apply

Difficulty: 3 Hard

Learning Objective: 10-03 Compute the variable manufacturing overhead rate and efficiency variances and explain their

significance.

Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

App10A -2


16. When computing standard cost variances, the difference between actual and standard price

multiplied by actual quantity yields a(n):

A. combined price and quantity variance.

B. efficiency variance.

C. price or rate variance.

D. quantity variance.

AACSB: Reflective Thinking



Blooms: Remember

Difficulty: 1 Easy

Learning Objective: 10-01 Compute the direct materials price and quantity variances and explain their significance.

Learning Objective: 10-02 Compute the direct labor rate and efficiency variances and explain their significance.


significance.

Source: CMA, adapted

17. The fixed manufacturing overhead budget variance is:

A. the difference between budgeted fixed manufacturing overhead cost and actual fixed

manufacturing overhead cost.

B. the difference between actual fixed manufacturing overhead cost and applied fixed


C. the difference between budgeted fixed manufacturing overhead cost and applied fixed


D. the difference between fixed overhead at the planned level of activity and the flexible

budget for actual activity.




App10A -3


Blooms: Understand

Difficulty: 2 Medium


18. A volume variance is computed for:

A. both variable and fixed manufacturing overhead.

B. variable manufacturing overhead only.

C. fixed manufacturing overhead only.

D. direct labor costs as well as overhead costs.




Blooms: Remember

Difficulty: 1 Easy


19. Which of the following variances is generally the least significant from the standpoint of cost

control?

A. Materials price variance.

B. Labor efficiency variance.

C. Fixed manufacturing overhead volume variance.

D. Variable overhead rate variance.




Blooms: Understand



App10A -4


20. Traveller Corporation sells one product and uses a standard cost system. Last year the

overhead volume variance was zero. Which of the following is correct?

A. Actual variable manufacturing overhead cost was equal to standard variable manufacturing

overhead cost.

B. Total applied overhead was equal to total actual overhead.

C. The denominator activity was equal to actual activity.

D. The budgeted fixed costs were equal to the applied fixed costs.




Blooms: Understand

Difficulty: 3 Hard


21. The Santos Corporation made an error when selecting a denominator level of activity and

chose a much lower level than was realistic. This error would most likely result in a large:

A. favorable variable overhead efficiency variance.

B. favorable fixed manufacturing overhead budget variance.

C. favorable fixed manufacturing overhead volume variance.

D. unfavorable fixed manufacturing overhead budget variance.




Blooms: Understand



App10A -5


22. In a standard cost system, overhead is applied to production on the basis of:

A. the denominator hours chosen for the period.

B. the actual hours required to complete the actual output of the period.

C. the standard hours allowed to complete the actual output of the period.

D. the actual cost of fixed overhead during the period.




Blooms: Understand



23. Dori Castings is a job order shop that uses a standard cost system. Manufacturing overhead

costs are applied on the basis of standard direct labor-hours. A volume variance will exist for

Dori in a month where:

A. production volume differs from sales volume.

B. actual direct labor-hours differ from standard hours allowed.

C. there is a budget variance in fixed manufacturing overhead costs.

D. the fixed manufacturing overhead applied to units of product on the basis of standard hours

allowed differs from the budgeted fixed manufacturing overhead.

AACSB: Analytic



Blooms: Analyze

Difficulty: 3 Hard



App10A -6


24. Alex Corporation has a large underapplied overhead balance in the manufacturing overhead

account. This could be explained by:

A. an unfavorable volume variance, assuming all other variances are zero.

B. a favorable volume variance, assuming all other variances are zero.

C. standard hours allowed for the period's output being greater than denominator hours for

the period.

D. favorable total variance for overhead.

AACSB: Analytic



Blooms: Analyze

Difficulty: 3 Hard


App10A -7


25. Coblentz Fabrication Corporation has a standard cost system in which it applies

manufacturing overhead to products on the basis of standard machine-hours (MHs) at $6.20

per MH. The company had budgeted its fixed manufacturing overhead cost at $40,000 for the

month. During the month, the actual total variable manufacturing overhead was $48,970 and

the actual total fixed manufacturing overhead was $43,000. The actual level of activity for the

period was 8,300 MHs. What was the total of the variable overhead rate and fixed

manufacturing overhead budget variances for the month?

A. $2,490 Favorable

B. $510 Favorable

C. $510 Unfavorable

D. $2,490 Unfavorable

Budget variance = Actual fixed overhead - Budgeted fixed overhead cost

= $43,000 - $40,000

= $3,000 U

Variable overhead rate variance = (AH AR) - (AH SR)

= $48,970 - (8,300 MHs $6.20 per MH)

= $48,970 - $51,460

= $2,490 F

Total variance = $3,000 U + $2,490 F = $510 U

AACSB: Analytic



Blooms: Apply



significance.


App10A -8


26. Omary Corporation has a standard cost system in which it applies manufacturing overhead to

products on the basis of standard machine-hours (MHs). The company has provided the

following data for the most recent month:

What was the total of the variable overhead rate and fixed manufacturing overhead budget

variances for the month?

A. $1,520 Unfavorable

B. $3,180 Favorable

C. $4,820 Unfavorable



= $54,000 - $50,000

= $4,000 U


= $31,980 - (4,100 MHs $7.60 per MH)

= $31,980 - $31,160

= $820 U

Total variance = $4,000 U + $820 U = $4,820 U

AACSB: Analytic



Blooms: Apply


App10A -9



significance.


27. Dexter Corporation uses a standard cost system and applies manufacturing overhead cost to

units of product on the basis of standard direct labor-hours (DLHs). Information on Dexter

Corporation's manufacturing overhead costs for last period is given below:

Given these data, the underapplied or overapplied overhead cost for the period would be:

A. $10,000 overapplied

B. $2,000 overapplied

C. $10,000 underapplied

D. $8,000 underapplied

Overhead applied = Predetermined overhead rate Standard hours allowed for the actual

output

= $4 per DLH 38,000 DLHs = $152,000

Overhead is overapplied by $2,000 because the actual overhead cost incurred was $150,000.

AACSB: Analytic



Blooms: Apply



App10A -10


28. Steinhagen 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 2,600 machine-hours. The company actually

worked 2,790 machine-hours during the month. The standard hours allowed for the actual

output of the month totaled 2,960 machine-hours. What was the overall fixed manufacturing

overhead volume variance for the month?

A. $5,148 Favorable

B. $5,148 Unfavorable

C. $2,717 Favorable


Predetermined overhead rate = Estimated total manufacturing overhead cost Estimated total

amount of the allocation base = $37,180 2,600 machine-hours = $14.30 per machine-hour

Volume variance = Budgeted fixed overhead cost - Fixed overhead applied to work in process

= $37,180 - (2,960 machine-hours $14.30 per machine-hour)

= $37,180 - $42,328

= $5,148 F

App10A -11


AACSB: Analytic



Blooms: Apply



App10A -12


29. Semaan Corporation applies manufacturing overhead to products on the basis of standard

machine-hours. Budgeted and actual overhead costs for the month appear below:




overhead budget variance for the month?


B. $340 Unfavorable

C. $340 Favorable

D. $3,130 Favorable


= $30,060 - $30,400 = $340 F

AACSB: Analytic



Blooms: Apply


App10A -13



30. Hairr Corporation bases its predetermined overhead rate on variable manufacturing overhead

cost of $9.50 per machine-hour and fixed manufacturing overhead cost of $947,672 per

period. If the denominator level of activity is 8,900 machine-hours, the predetermined

overhead rate would be:

A. $9.50

B. $115.98

C. $106.48

D. $950.00

Fixed component of predetermined overhead rate = Estimated total fixed manufacturing

overhead cost Estimated total amount of the allocation base

= $947,672 8,900 machine-hours = $106.48 per machine-hour

Predetermined overhead rate = $9.50 per machine-hour + $106.48 per machine-hour =

$115.98 per machine-hour

AACSB: Analytic



Blooms: Apply

Difficulty: 1 Easy


App10A -14


31. The Adlake Corporation makes and sells a single product and uses a standard cost system.

During October, the company budgeted $300,000 in manufacturing overhead cost at a

denominator activity of 20,000 machine-hours. At standard, each unit of finished product

requires 5 machine-hours. The following cost and activity were recorded during October:

The amount of overhead cost that the company applied to work in process for October was:

A. $279,300

B. $291,330

C. $294,000

D. $285,000

Predetermined overhead rate = Estimated total manufacturing overhead cost Estimated total

amount of the allocation base = $300,000 20,000 machine-hours = $15 per machine-hour

Overhead applied = Predetermined overhead rate Standard hours allowed for the actual

output

= $15 per machine-hour (3,800 units 5 machine-hours per unit)

= $15 per machine-hour (19,000 machine-hours)

= $285,000

AACSB: Analytic



Blooms: Apply



App10A -15


32. Reidenbach 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 $17,100 and the actual fixed manufacturing overhead cost for the month was $17,450.

The company based its original budget on 4,500 machine-hours. The standard hours allowed

for the actual output of the month totaled 4,810 machine-hours. What was the overall fixed

manufacturing overhead budget variance for the month?


B. $350 Unfavorable

C. $350 Favorable

D. $1,178 Favorable


= $17,450 - $17,100 = $350 U

AACSB: Analytic



Blooms: Apply

Difficulty: 1 Easy


App10A -16


33. Diseth Corporation applies manufacturing overhead to products on the basis of standard

machine-hours. The company bases its predetermined overhead rate on 5,300 machine-

hours. The company's total budgeted fixed manufacturing overhead is $12,720. In the most

recent month, the total actual fixed manufacturing overhead was $12,370. The company

actually worked 5,350 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. $350 Favorable

B. $120 Favorable

C. $120 Unfavorable

D. $576 Favorable


overhead cost Estimated total amount of the allocation base = $12,720 5,300 machine-

hours = $2.40 per machine-hour



= $12,720 - $13,296

= $576 F

AACSB: Analytic



Blooms: Apply

Difficulty: 1 Easy


App10A -17


34. Masek Corporation has a standard cost system in which it applies manufacturing overhead to

products on the basis of standard machine-hours (MHs). The company has provided the

following data for the most recent month:

What was the fixed manufacturing overhead budget variance for the month?



C. $2,360 Favorable

D. $1,000 Favorable


= $49,000 - $50,000

= $1,000 F

AACSB: Analytic



Blooms: Apply



App10A -18


35. Pizzi, Inc. had the following fixed manufacturing overhead variances last year:

Pizzi uses machine-hours as an activity base for overhead and used 48,000 machine-hours as

the denominator activity level for the year. Total actual fixed manufacturing overhead was

$150,000. The actual number of machine-hours incurred were 50,000. What were Pizzi's

standard hours allowed for actual output?

A. 40,000

B. 42,000

C. 50,400

D. 52,500

Budget variance = Actual fixed overhead - Budgeted fixed overhead

$30,000 U = $150,000 - Budgeted fixed overhead

$30,000 = $150,000 - Budgeted fixed overhead

Budgeted fixed overhead = $150,000 - $30,000

Budgeted fixed overhead = $120,000

Fixed component of the predetermined overhead rate = $120,000 48,000 MHs = $2.50 per

MH

Volume variance = Fixed component of the predetermined overhead rate (Denominator

hours - Standard hours allowed for the actual output)

$6,000 F = $2.50 per MH (48,000 MHs - Standard hours allowed for the actual output)

-$6,000 = $2.50 per MH (48,000 MHs - Standard hours allowed for the actual output)

48,000 MHs - Standard hours allowed for the actual output = -$6,000 $2.50 per MH

48,000 MHs - Standard hours allowed for the actual output = -2,400 MHs

Standard hours allowed for the actual output = 48,000 MHs + 2,400 MHs

Standard hours allowed for the actual output = 50,400 MHs

App10A -19


AACSB: Analytic



Blooms: Apply

Difficulty: 3 Hard


36. Tropiano Electronics Corporation has a standard cost system in which it applies manufacturing

overhead to products on the basis of standard machine-hours (MHs). The company had

budgeted its fixed manufacturing overhead cost at $62,100 for the month and its level of

activity at 3,200 MHs. The actual total fixed manufacturing overhead was $61,600 for the

month and the actual level of activity was 3,000 MHs. What was the fixed manufacturing

overhead budget variance for the month to the nearest dollar?


B. $500 Favorable

C. $500 Unfavorable

D. $3,381 Favorable


= $61,600 - $62,100

= $500 F

AACSB: Analytic



Blooms: Apply



App10A -20


37. At the beginning of last year, Tari Corporation budgeted $300,000 of fixed manufacturing

overhead and chose a denominator level of activity of 600,000 machine-hours. At the end of

the year, Tari's fixed manufacturing overhead budget variance was $9,000 favorable. Its fixed

manufacturing overhead volume variance was $15,000 favorable. Actual direct labor-hours for

the year were 625,000. What was Tari's total standard machine-hours allowed for last year's

output?

A. 570,000

B. 630,000

C. 648,000

D. 656,250

Fixed component of the predetermined overhead rate = $300,000 600,000 machine-hours =

$0.50 per machine-hour



$15,000 F = $0.50 per machine-hour (600,000 machine-hours - Standard hours allowed for

the actual output)

-$15,000 = $0.50 per machine-hour (600,000 machine-hours - Standard hours allowed for

the actual output)

-$15,000 = $300,000 - ($0.50 per machine-hour Standard hours allowed for the actual

output)

$0.50 per machine-hour Standard hours allowed for the actual output = $300,000 + $15,000

$0.50 per machine-hour Standard hours allowed for the actual output = $315,000

Standard hours allowed for the actual output = $315,000 $0.50 per machine-hour

Standard hours allowed for the actual output = 630,000 machine-hours

AACSB: Analytic



Blooms: Apply

App10A -21


Difficulty: 3 Hard


38. Denby 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:




overhead volume variance for the month?

A. $3,286 Favorable



D. $1,484 Favorable






= $67,840 - $69,324

= $1,484 F

AACSB: Analytic


App10A -22



Blooms: Apply



39. Bakos Corporation bases its predetermined overhead rate on variable manufacturing

overhead cost of $8.80 per machine-hour and fixed manufacturing overhead cost of $100,688

per period. If the denominator level of activity is 2,800 machine-hours, the variable component

in the predetermined overhead rate would be:

A. $44.76

B. $35.96

C. $43.52

D. $8.80

As given $8.80.

AACSB: Analytic



Blooms: Apply

Difficulty: 1 Easy


App10A -23


40. Acuff 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:




overhead budget variance for the month?

A. $320 Favorable

B. $320 Unfavorable

C. $972 Favorable

D. $972 Unfavorable


= $27,720 - $27,400 = $320 U

AACSB: Analytic



Blooms: Apply

Difficulty: 1 Easy


App10A -24


41. Oldham Corporation bases its predetermined overhead rate on variable manufacturing

overhead cost of $4.00 per machine-hour and fixed manufacturing overhead cost of $87,822

per period. If the denominator level of activity is 4,100 machine-hours, the fixed component in

the predetermined overhead rate would be:

A. $25.42

B. $4.00

C. $21.42

D. $400.00




AACSB: Analytic



Blooms: Apply

Difficulty: 1 Easy


App10A -25


42. Bruley Corporation applies manufacturing overhead to products on the basis of standard

machine-hours. The company's predetermined overhead rate for fixed manufacturing

overhead is $3.30 per machine-hour and the denominator level of activity is 3,500 machine-

hours. In the most recent month, the total actual fixed manufacturing overhead was $11,570

and the company actually worked 3,430 machine-hours during the month. The standard hours

allowed for the actual output of the month totaled 3,450 machine-hours. What was the overall

fixed manufacturing overhead volume variance for the month?

A. $66 Favorable

B. $231 Favorable

C. $231 Unfavorable

D. $165 Unfavorable


= (3,500 machine-hours $3.30 per machine-hour) - (3,450 machine-hours $3.30 per

machine-hour)

= $11,550 - $11,385

= $165 U

AACSB: Analytic



Blooms: Apply

Difficulty: 1 Easy


App10A -26


Nitrol Corporation manufactures brass vases using a standard cost system with standard

machine-hours as the activity base for overhead. The following information relates to vase

production at Nitrol for last year:

The standard machine-hours per vase is 1.25. Last year Nitrol produced 84,000 vases.

43. What was Nitrol's variable overhead rate variance for last year?

A. $1,000 Favorable




SR = $50,000 100,000 hours = $0.50 per hour

AH AR = $53,560


= ($53,560) - (103,000 hours $0.50 per hour)

= $53,560 - $51,500

= $2,060 U

AACSB: Analytic



Blooms: Apply

Difficulty: 3 Hard


significance.

App10A -27


44. What was Nitrol's fixed manufacturing overhead volume variance for last year?

A. $2,500 Favorable

B. $7,500 Favorable

C. $12,500 Favorable


Fixed component of the predetermined overhead rate = $250,000 100,000 hours = $2.50 per

hour

Standard hours allowed for the actual output = 1.25 hours per unit 84,000 units = 105,000

hours



= $2.50 per hour (100,000 hours - 105,000 hours)

= $2.50 per hour (-5,000 hours)

= $12,500 F

AACSB: Analytic



Blooms: Apply

Difficulty: 3 Hard


App10A -28


45. What was Nitrol's total underapplied or overapplied overhead cost for last year?

A. $1,060 overapplied

B. $1,060 underapplied

C. $7,940 overapplied

D. $13,940 overapplied

Standard overhead cost per hour = ($50,000 + $250,000) 100,000 hours = $3 per hour

Standard overhead cost applied = $3 per hour (1.25 hours per vase 84,000 vases) = $3

per hour 105,000 hours = $315,000

Total overhead cost incurred = $53,560 + $247,500 = $301,060

Overhead overapplied = $315,000 - $301,060 = $13,940

AACSB: Analytic



Blooms: Apply

Difficulty: 3 Hard


significance.


The Dillon Corporation makes and sells a single product. Overhead costs are applied on the

basis of standard direct labor-hours. The standard cost card shows that 5 direct labor-hours

are required per unit. The Dillon Corporation had the following budgeted and actual data for

March:

App10A -29


46. The variable overhead rate variance for March is:

A. $4,900 U

B. $11,060 U

C. $14,700 U

D. $17,300 U

AH AR = $140,500

SR = $123,200 154,000 hours = $0.80 per hour


= ($140,500) - (161,800 hours $0.80 per hour)

= $140,500 - $129,440

= $11,060 U

AACSB: Analytic



Blooms: Apply

Difficulty: 3 Hard


significance.

App10A -30


47. The variable overhead efficiency variance for March is:

A. $12,400 F

B. $6,160 U

C. $12,400 U

D. $6,160 F

Standard hours per unit = 154,000 hours 30,800 units = 5 hours per unit

SH = 33,900 units 5 hours per unit = 169,500 hours

SR = $123,200 154,000 hours = $0.80 per hour

Variable overhead efficiency variance = (AH - SH) SR

= (161,800 hours - 169,500 hours) $0.80 per hour

= (-7,700 hours) $0.80 per hour

= $6,160 F

AACSB: Analytic



Blooms: Apply

Difficulty: 3 Hard


significance.

App10A -31


48. The fixed manufacturing overhead budget variance for March is:

A. $900 F

B. $3,900 F

C. $3,000 U

D. $7,750 F


= $80,000 - $77,000

= $3,000 U

AACSB: Analytic



Blooms: Apply



App10A -32


49. The fixed manufacturing overhead volume variance for March is:

A. $7,750 F

B. $7,750 U

C. $1,550 F

D. $3,900 U


hour


hours

Fixed overhead applied to work in process = $0.50 per hour 169,500 hours = $84,750

Volume variance = Budgeted fixed overhead - Fixed overhead applied to work in process

= $77,000 - $84,750

= $7,750 F

AACSB: Analytic



Blooms: Apply

Difficulty: 3 Hard


Derf Corporation uses a standard cost system in which it applies manufacturing overhead on

the basis of standard direct labor-hours. Two direct labor-hours are required for each unit

produced. The denominator activity was set at 9,000 units. Manufacturing overhead was

budgeted at $135,000 for the period; 20 percent of this cost was fixed. The 17,200 hours

worked during the period resulted in production of 8,500 units. Variable manufacturing

overhead cost incurred was $108,500 and fixed manufacturing overhead cost was $28,000.

App10A -33


50. The variable overhead rate variance for the period was:





SR = (0.8 $135,000) (9,000 units 2 hours per unit) = $108,000 18,000 hours = $6 per

hour

AH AR = $108,500


= ($108,500) - (17,200 hours $6 per hour)

= $108,500 - $103,200

= $5,300 U

AACSB: Analytic



Blooms: Apply

Difficulty: 3 Hard


significance.


App10A -34


51. The variable overhead efficiency variance for the period was:





SR = (0.8 $135,000) (9,000 units 2 hours per unit) = $108,000 18,000 hours = $6 per

hour

SH = 8,500 units 2.00 hours per unit = 17,000 hours


= (17,200 hours - 17,000 hours) $6 per hour

= (200 hours) $6 per hour

= $1,200 Us

AACSB: Analytic



Blooms: Apply

Difficulty: 3 Hard


significance.


App10A -35


52. The fixed manufacturing overhead budget variance for the period was:






= $28,000 - $27,000

= $1,000 U

AACSB: Analytic



Blooms: Apply




App10A -36


53. The fixed manufacturing overhead volume variance for the period was:

A. $750 Unfavorable




Fixed component of the predetermined overhead rate = (0.2 $135,000) (9,000 units 2

hours per unit) = $27,000 18,000 hours = $1.50 per hour


hours




= $1.50 per hour (1,000 hours)

= $1,500 U

AACSB: Analytic



Blooms: Apply

Difficulty: 3 Hard



App10A -37


Vette Tie Corporation has developed the following manufacturing overhead standards to use

in applying overhead to the production of its hand-painted silk ties. Manufacturing overhead at

Vette is applied to production on the basis of standard direct labor-hours (DLHs).

The above standards were based on an expected annual volume of 60,000 ties. The actual

results for last year were as follows:

54. What was Vette's variable overhead rate variance?


B. $13,200 Favorable



AH AR = $880,000


= ($880,000) - (64,000 hours $14.00 per hour)

= $880,000 - $896,000

= $16,000 F

AACSB: Analytic



Blooms: Apply



App10A -38


significance.

55. What was Vette's fixed manufacturing overhead budget variance?


B. $3,000 Favorable




= $525,000 - $528,000

= $3,000 F

AACSB: Analytic



Blooms: Apply



App10A -39


56. What total amount of manufacturing overhead cost (variable and fixed) did Vette apply to the

58,000 ties produced during the year?

A. $1,276,000

B. $1,403,600

C. $1,421,200

D. $1,452,000

Standard overhead cost per unit = $15.40 per unit + $8.80 per unit = $24.20 per unit

Standard overhead cost applied = $24.20 per unit 58,000 units = $1,403,600

AACSB: Analytic



Blooms: Apply



significance.


App10A -40


Pohl Corporation uses a standard cost system in which manufacturing overhead is applied on

the basis of standard machine-hours. For June, the company's manufacturing overhead

flexible budget showed the following total budgeted costs at a denominator activity level of

20,000 machine-hours:

During June, 17,000 machine-hours were used to complete 13,000 units of product, and the

following actual total overhead costs were incurred:

At standard, each unit of finished product requires 1.4 hours of machine time.

App10A -41


57. The total predetermined overhead rate per machine-hour for June was:

A. $2.57 per machine-hour

B. $1.30 per machine-hour

C. $2.80 per machine-hour

D. $3.15 per machine-hour

Predetermined overhead rate = Estimated total manufacturing overhead Estimated total

amount of the allocation base = ($16,000 + $10,000 + $20,500 + $9,500) 20,000 machine-

hours

= $56,000 20,000 machine-hours = $2.80 per machine-hour

AACSB: Analytic



Blooms: Apply

Difficulty: 3 Hard


App10A -42


58. The variable overhead rate variance for maintenance cost for June was

A. $1,020 F

B. $1,020 U

C. $3,230 F

D. $3,230 U

SR = $16,000 20,000 machine-hours = $0.80 per machine-hour



= $14,620 - $13,600

= $1,020 U

AACSB: Analytic



Blooms: Apply

Difficulty: 3 Hard


significance.

App10A -43


59. The variable overhead efficiency variance for utilities cost for June was

A. $400 F

B. $400 U

C. $600 F

D. $600 U

SH = 13,000 units 1.4 machine-hours per unit = 18,200 machine-hours

SR = ($10,000) 20,000 machine-hours = $0.50 per machine-hour


= (17,000 machine-hours - 18,200 machine-hours) $0.50 per machine-hour

= (-1,200 machine-hours) $0.50 per machine-hour

= $600 F

AACSB: Analytic



Blooms: Apply

Difficulty: 3 Hard


significance.

App10A -44


60. The fixed manufacturing overhead budget variance (in total) for June was:

A. $3,230 F

B. $3,230 U

C. $1,180 F

D. $1,180 U


= ($19,320 + $9,500) - ($20,500 + $9,500)

= $28,820 - $30,000

= $1,180 Fs

AACSB: Analytic



Blooms: Apply

Difficulty: 3 Hard


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:

App10A -45


61. The predetermined overhead rate per MH is closest to:

A. $17.91 per MH

B. $18.59 per MH

C. $18.00 per MH

D. $18.50 per MH

Variable overhead + Fixed overhead = $35,075 + $77,775


amount of the allocation base = $112,850 6,100 MHs = $18.50 per MH

AACSB: Analytic



Blooms: Apply



significance.

App10A -46


62. The overhead applied to products during the period was closest to:

A. $112,850

B. $113,415

C. $116,550

D. $110,889

Variable overhead + Fixed overhead = $35,075 + $77,775


amount of the allocation base = $112,850 6,100 MHs = $18.50 per MH

Overhead applied = Predetermined overheard rate Standard hours allowed for the actual

output

= $18.50 per MH 5,994 MHs = $110,889

AACSB: Analytic



Blooms: Apply



significance.

App10A -47


63. The variable overhead rate variance for the period was closest to:

A. $315 U

B. $1,465 F

C. $1,465 U

D. $315 F

SR = $35,075 6,100 MHs = $5.75 per MH

AH AR = $36,540

Labor rate variance = (AH AR) - (AH SR)

= $36,540 - (6,300 MHs $5.75 per MH)

= $36,540 - $36,225

= $315 U

AACSB: Analytic



Blooms: Apply



significance.

App10A -48


64. The variable overhead efficiency variance for the period is closest to:

A. $300 F

B. $1,465 U

C. $1,760 U

D. $1,775 U


= (6,300 MHs - 5,994 MHs) $5.75 per MH

= (306 MHs) $5.75 per MH

= $1,759.50 U

AACSB: Analytic



Blooms: Apply



significance.

65. The fixed manufacturing overhead budget variance for the period is closest to:

A. $900 F

B. $452 F

C. $3,734 F

D. $3,450 U


= $76,875 - $77,775 = $900 F

AACSB: Analytic

App10A -49




Blooms: Apply



66. The fixed manufacturing overhead volume variance for the period is closest to:

A. $1,359 U

B. $2,550 F

C. $3,902 U

D. $1,352 U


overhead cost Estimated total amount of the allocation base = $77,775 6,100 MHs =

$12.75 per MH


= $77,775 - (5,994 MH $12.75 per MH)

= $77,775 - $76,423.50

= $1,351.50 U

AACSB: Analytic



Blooms: Apply



App10A -50


Cuda Manufacturing Corporation uses a standard cost system with machine-hours (MHs) as

the activity base for overhead. The following information relates to Cuda's operations last year:

67. What was Cuda's variable overhead rate variance?




D. $21,000 Favorable

AH AR = $370,000


= ($370,000) - (52,000 MHs $7 per MH)

= $370,000 - $364,000

= $6,000 U

AACSB: Analytic



Blooms: Apply



significance.

App10A -51


68. What was Cuda's fixed manufacturing overhead budget variance?

A. $9,000 Favorable





= $615,000 - (50,000 MHs $12 per MH)

= $615,000 - $600,000

= $15,000 U

AACSB: Analytic



Blooms: Apply



69. What total amount of manufacturing overhead cost (variable and fixed) did Cuda apply to

production?

A. $950,000

B. $985,000

C. $988,000

D. $1,045,000

Manufacturing overhead cost applied = 55,000 MHs ($7 per MH + $12 per MH)

= 55,000 MHs ($19 per MH) = $1,045,000

AACSB: Analytic

App10A -52




Blooms: Apply



significance.


The Claus Corporation makes and sells a single product and uses standard costing. During

January, the company actually used 8,700 direct labor-hours (DLHs) and produced 3,000 units

of product. The standard cost card for one unit of product includes the following:

Variable factory overhead: 3.0 DLHs @ $4.00 per DLH.

Fixed factory overhead: 3.0 DLHs @ $3.50 per DLH.

For January, the company incurred $22,000 of actual fixed manufacturing overhead costs and

recorded a $875 favorable volume variance.

App10A -53


70. The denominator level of activity in direct labor-hours (DLHs) used by Claus in setting the

predetermined overhead rate for January is:

A. 9,500 DLHs

B. 9,250 DLHs

C. 8,750 DLHs

D. 10,500 DLHs



$875 F = $3.50 per DLH [Denominator hours - (3.0 DLHs per unit 3,000 units)]

-$875 = $3.50 per DLH [Denominator hours - (3.0 DLHs per unit 3,000 units)]

-$875 = $3.50 per DLH [Denominator hours - (9,000 DLHs)]

-$875 = ($3.50 per DLH Denominator hours) - $31,500

$3.50 per DLH Denominator hours = $31,500 - $875

$3.50 per DLH Denominator hours = $30,625

Denominator hours = $30,625 $3.50 per DLH = 8,750 DLHs

AACSB: Analytic



Blooms: Apply

Difficulty: 3 Hard


App10A -54


71. The fixed manufacturing overhead cost used to compute the predetermined overhead rate

was:

A. $31,500

B. $30,625

C. $32,375

D. $33,250

Fixed overhead applied to work in process = $3.50 per DLH 3.0 DLHs per unit 3,000 units

= $31,500

Volume variance = Budgeted fixed overhead - Fixed overhead applied to work in process

$875 F = Budgeted fixed overhead - $31,500

-$875 = Budgeted fixed overhead - $31,500

Budgeted fixed overhead = $31,500 - $875 = $30,625

AACSB: Analytic



Blooms: Apply

Difficulty: 3 Hard


App10A -55


A manufacturer of playground 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:


72. The predetermined fixed manufacturing overhead rate is closest to:

A. $12.24 per MH

B. $13.55 per MH

C. $13.87 per MH

D. $11.96 per MH

Predetermined overhead rate = Budgeted total overhead Denominator level of activity

= $40,650 3,000 MHs = $13.55 per MH

AACSB: Analytic



Blooms: Apply



App10A -56


73. The fixed manufacturing overhead applied to products during the period is closest to:

A. $40,650

B. $42,981

C. $41,600

D. $46,070


= $40,650 3,000 MHs = $13.55 per MH

Fixed manufacturing overhead applied = Predetermined overheard rate Standard hours

allowed for the actual output = $13.55 per MH 3,172 MHs = $42,980.60

AACSB: Analytic



Blooms: Apply




A. $4,470 U

B. $950 U

C. $2,790 F

D. $1,381 U


= $41,600 - $40,650 = $950 U

AACSB: Analytic

App10A -57




Blooms: Apply




A. $2,256 F

B. $2,331 F

C. $3,089 U

D. $5,420 F


= $40,650 3,000 MHs = $13.55 per MH


= $40,650 - (3,172 MHs $13.55 per MH)

= $40,650 - $42,980.60

= $2,330.60 F

AACSB: Analytic



Blooms: Apply



App10A -58


The Murray Corporation uses a standard cost system in which it applies manufacturing

overhead on the basis of standard direct labor-hours (DLHs). The company recorded the

following activity and cost data for May:

76. The amount of fixed manufacturing overhead cost that was used to compute the fixed

component of the predetermined overhead rate was:

A. $54,135

B. $60,150

C. $59,465

D. $57,600

Fixed component of the predetermined overhead rate = Budgeted fixed overhead

Denominator level of activity

$0.90 per DLH = Budgeted fixed overhead cost 64,000 DLHs

Budgeted fixed overhead cost = $0.90 per DLH 64,000 DLHs = $57,600

AACSB: Analytic



Blooms: Apply

Difficulty: 3 Hard


App10A -59


77. The amount of fixed manufacturing overhead cost applied during May was:

A. $52,535

B. $54,135

C. $36,090

D. $50,400

Fixed manufacturing overhead cost applied to work in process = 40,100 units 1.5 DLHs per

unit $0.90 per DLH = $54,135

AACSB: Analytic



Blooms: Apply



App10A -60


78. The fixed manufacturing overhead budget variance for May was:

A. $8,000 F

B. $8,000 U

C. $1,600 F

D. $1,600 U

Fixed component of the predetermined overhead rate = Budgeted fixed overhead

Denominator level of activity

$0.90 per DLH = Budgeted fixed overhead cost 64,000 DLHs

Budgeted fixed overhead cost = $0.90 per DLH 64,000 DLHs = $57,600


= $56,000 - $57,600 = $1,600 F

AACSB: Analytic



Blooms: Apply

Difficulty: 3 Hard


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:


App10A -61



A. $166 U

B. $422 F

C. $585 F

D. $1,400 U


= $28,295 - $26,895

= $1,400 U

AACSB: Analytic



Blooms: Apply

Difficulty: 1 Easy


App10A -62



A. $978 F

B. $993 F

C. $163 F

D. $815 F


DLH


= $26,895 - (3,420 DLHs $8.15 per DLH)

= $26,895 - $27,873

= $978 F

AACSB: Analytic



Blooms: Apply



The Forbes Corporation uses a standard cost system in which overhead costs are applied to

products on the basis of standard direct labor-hours (DLHs). The following data applied to the

company's activities for June:

App10A -63


81. The fixed component of the predetermined overhead rate for June is:

A. $3.00 per DLH

B. $3.23 per DLH

C. $3.78 per DLH

D. $3.46 per DLH






Fixed component of the predetermined overhead rate = Estimated fixed overhead cost

Estimated total amount of the allocation base = $150,000 50,000 DLHs = $3 per DLH

AACSB: Analytic



Blooms: Apply

Difficulty: 3 Hard


App10A -64


82. The volume variance for June is:




D. $44,954 Favorable






Fixed component of the predetermined overhead rate = Estimated fixed overhead cost

Estimated total amount of the allocation base = $150,000 50,000 DLHs = $3 per DLH



= $3 per DLH [50,000 DLHs - (21,000 units 3 DLHs per unit)]

= $3 per DLH [50,000 DLHs - (63,000 DLHs)]

= $3 per DLH [-13,000 DLHs]

= $39,000 F

AACSB: Analytic



Blooms: Apply

Difficulty: 3 Hard


App10A -65


The Murray Corporation makes and sells a single product. The company recorded the

following activity and cost data for May:

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

83. The fixed manufacturing overhead used to calculate the predetermined overhead rate was:

A. $64,125

B. $67,500

C. $68,400

D. $70,275

$0.95 per DLH = Fixed manufacturing overhead 72,000 DLHs

Fixed manufacturing overhead = $0.95 per DLH 72,000 DLHs

Fixed manufacturing overhead = $68,400

AACSB: Analytic



Blooms: Apply

Difficulty: 3 Hard


App10A -66


84. 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

Fixed manufacturing overhead cost applied to work in process = $0.95 per DLH 1.5 DLHs

per unit 45,000 units = $64,125

AACSB: Analytic



Blooms: Apply

Difficulty: 3 Hard


App10A -67


85. The fixed manufacturing overhead budget variance for May was:

A. $2,400 U

B. $2,400 F

C. $6,000 U

D. $6,000 F

$0.95 per DLH = Fixed manufacturing overhead 72,000 DLHs

Fixed manufacturing overhead = $0.95 per DLH 72,000 DLHs

Fixed manufacturing overhead = $68,400


= $66,000 - $68,400 = $2,400 F

AACSB: Analytic



Blooms: Apply

Difficulty: 3 Hard


The following data for February has been provided by Gillard Corporation.

App10A -68


86. The budget variance for February is:

A. $7,440 F

B. $7,440 U

C. $1,140 F

D. $1,140 U


= $69,960 - $68,820

= $1,140 U

AACSB: Analytic



Blooms: Apply

Difficulty: 1 Easy


App10A -69


87. The volume variance for February is:

A. $5,580 F

B. $5,580 U

C. $7,440 U

D. $7,440 F


hour




= $18.60 per hour (-300 hours)

= $5,580 F

AACSB: Analytic



Blooms: Apply

Difficulty: 1 Easy


Odonell Corporation estimates that its variable manufacturing overhead is $11.20 per

machine-hour and its fixed manufacturing overhead is $563,640 per period.

App10A -70


88. If the denominator level of activity is 6,000 machine-hours, the variable component in the

predetermined overhead rate would be:





$11.20 per machine-hour (given)

AACSB: Analytic



Blooms: Apply

Difficulty: 1 Easy


89. If the denominator level of activity is 6,000 machine-hours, the fixed component in the


A. $1,120.00 per machine-hour




Fixed component of the predetermined overhead rate = Estimated total fixed manufacturing

overhead Denominator level of activity = $563,640 6,000 machine-hours = $93.94 per

machine-hour

AACSB: Analytic


App10A -71



Blooms: Apply

Difficulty: 1 Easy


90. If the denominator level of activity is 6,100 machine-hours, the predetermined overhead rate

would be:


B. $1,120.00 per machine-hour



Predetermined overhead rate = Estimated total manufacturing overhead Denominator level

of activity

= [$563,640 + ($11.20 per machine-hour 6,100 machine-hours)] 6,100 machine-hours

= [$563,640 + $68,320] 6,100 machine-hours

= $631,960 6,100 machine-hours

= $103.60 per machine-hour

AACSB: Analytic



Blooms: Apply

Difficulty: 1 Easy


Tillinghast Corporation estimates that its variable manufacturing overhead is $9.60 per

machine-hour and its fixed manufacturing overhead is $14,630 per period.

App10A -72


91. If the denominator level of activity is 1,000 machine-hours, the variable component in the






$9.60 per machine-hour (given)

AACSB: Analytic



Blooms: Apply

Difficulty: 1 Easy


92. If the denominator level of activity is 1,000 machine-hours, the fixed component in the






Fixed component of the predetermined overhead rate = Estimated fixed overhead

Denominator level of activity = $14,630 1,000 machine-hours = $14.63 per machine-hour

AACSB: Analytic



Blooms: Apply

App10A -73


Difficulty: 1 Easy


93. If the denominator level of activity is 1,100 machine-hours, the predetermined overhead rate

would be:





Predetermined overhead rate = Estimated total manufacturing overhead Denominator level

of activity

= [$14,630 + ($9.60 per machine-hour 1,100 machine-hours] 1,100 machine-hours

= [$14,630 + $10,560] 1,100 machine-hours

= $25,190 1,100 machine-hours

= $22.90 per machine-hour

AACSB: Analytic



Blooms: Apply

Difficulty: 1 Easy


Saffold Corporation has provided the following data for December.

App10A -74


94. The budget variance for December is:

A. $10,050 U

B. $6,540 U

C. $6,540 F

D. $10,050 F


= $284,730 - $274,680

= $10,050 U

AACSB: Analytic



Blooms: Apply

Difficulty: 1 Easy


App10A -75


95. The volume variance for December is:

A. $6,540 F

B. $6,540 U

C. $16,350 F

D. $16,350 U




= $32.70 per hour (-500 hours)

= $16,350 F

AACSB: Analytic



Blooms: Apply

Difficulty: 1 Easy


App10A -76


A furniture manufacturer 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:


96. The predetermined overhead rate is closest to:

A. $21.90 per hour

B. $21.80 per hour

C. $21.16 per hour

D. $21.26 per hour


= ($31,845 + $40,425) 3,300 hours

= $72,270 3,300 hours

= $21.90 per hour

AACSB: Analytic



Blooms: Apply



App10A -77


97. The overhead applied to products during the period was closest to:

A. $74,460

B. $72,270

C. $67,408

D. $71,955


= ($31,845 + $40,425) 3,300 hours

= $72,270 3,300 hours

= $21.90 per hour

Overhead applied = Predetermined overhead rate Standards hours allowed for the actual

output

= $21.90 per hour 3,078 hours

= $67,408.20

AACSB: Analytic



Blooms: Apply



App10A -78



A. $2,675 U

B. $1,450 F

C. $3,691 F

D. $1,270 F


= $38,975 - $40,425

= $1,450 F

AACSB: Analytic



Blooms: Apply



App10A -79



A. $2,720 U

B. $1,225 F

C. $2,811 U

D. $3,945 U


hour


= $40,425 - (3,078 hours $12.25 per hour)

= $40,425 - $37,705.50

= $2,719.50 U

AACSB: Analytic



Blooms: Apply



Homer Corporation has a standard cost system in which manufacturing overhead is applied on

the basis of standard machine-hours. The company has provided the following data

concerning its manufacturing overhead costs for last year:

App10A -80


100. The fixed manufacturing overhead budget variance was:

A. $200 F

B. $400 U

C. $300 F

D. $240 U


= $3,800 - $4,000

= $200 F

AACSB: Analytic



Blooms: Apply

Difficulty: 1 Easy


chapter 10a

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