cost accounting test bank chapter 8.doc

Cost Accounting, 15e (Horngren/Datar/Rajan)Chapter 8 Flexible Budgets, Overhead Cost Variances, and Management ControlObjective 8.11) Compared to variable overhead costs planning, fixed overhead costs planning have an additional strategic issue of _.A) eliminating activities that do not add valueB) increasing the linearity between total costs and volume of productionC) choosing the appropriate level of investmentD) identifying essential value-adding activitiesAnswer: CDiff: 2Objective: 1AACSB: Analytical thinking2) Effective planning of variable overhead costs means that a company performs those variable overhead costs that primarily _.A) increase the planned variable overhead budgetsB) add value for the customer using the products or services C) increase the linearity between total costs and volume of productionD) identify the product advertising requirementsAnswer: BDiff: 1Objective: 1AACSB: Analytical thinking3) Which of the following statements is true of variable overhead costs?A) All the decisions determining the level of variable overhead costs are made at the start of a budget period.B) Planning of variable overhead costs includes choosing the appropriate level of capacity.C) Activities which add value are of least relevance while planning variable overhead costs. D) The level of variable overhead costs incurred in a period is mainly determined by day-to-day operating decisions.Answer: DDiff: 2Objective: 1AACSB: Analytical thinking4) Fixed overhead costs include _. A) the cost of sales commissions B) property taxes paid on plant facilities C) energy costs D) indirect materials Answer: BDiff: 1Objective: 1AACSB: Analytical thinking5) Effective planning of fixed overhead costs includes _.A) planning day-to-day operational decisions B) eliminating value-added costs C) determining which products are to be producedD) choosing the appropriate level of capacity Answer: DDiff: 2Objective: 1AACSB: Analytical thinking6) Effective planning of variable overhead costs includes _.A) choosing the appropriate level of investment B) eliminating value-added costs C) redesigning products to use fewer resources D) reorganizing management structureAnswer: CDiff: 2Objective: 1AACSB: Analytical thinking7) Most of the decisions determining the level of fixed overhead costs to be incurred will be made _.A) by the end of a budget periodB) by the middle of a budget periodC) on a day-to-day ongoing basisD) at the start of a budget periodAnswer: DDiff: 1Objective: 1AACSB: Analytical thinking8) The major challenge when planning fixed overhead is _. A) calculating total costs B) calculating the cost-allocation rate C) choosing the appropriate level of capacity D) choosing the appropriate planning period Answer: CDiff: 1Objective: 1AACSB: Analytical thinking9) An effective plan for variable overhead costs will eliminate activities that do not add value.Answer: TRUEDiff: 1Objective: 1AACSB: Analytical thinking10) At the start of the budget period, management will have made most decisions regarding the level of fixed overhead costs to be incurred. Answer: TRUEDiff: 2Objective: 1AACSB: Analytical thinking11) The planning of fixed overhead costs differs from the planning of variable overhead costs in terms of timing.Answer: TRUEDiff: 2Objective: 1AACSB: Analytical thinking12) The planning of fixed overhead costs does not differ from the planning of variable overhead costs. Answer: FALSEExplanation: The planning of fixed overhead costs differs from the planning of variable overhead costs in one important respect, timing. The level of fixed costs to be incurred will have been mostly decided upon at the start of the budget period, but the day-to-day ongoing operations decisions will be the main determinant in the level of variable overhead costs to be incurred in the period.Diff: 1Objective: 1AACSB: Analytical thinkingObjective 8.21) Which of the following mathematical expression is used to calculate budgeted variable overhead cost rate per output unit?A) Budgeted output allowed per input unit Budgeted variable overhead cost rate per input unitB) Budgeted input allowed per output unit Budgeted variable overhead cost rate per input unitC) Budgeted output allowed per input unit Budgeted variable overhead cost rate per input unitD) Budgeted input allowed per output unit Budgeted variable overhead cost rate per input unitAnswer: DDiff: 2Objective: 2AACSB: Analytical thinking2) While calculating the costs of products and services, a standard costing system _.A) allocates overhead costs on the basis of the actual overhead-cost rates B) uses standard costs to determine the cost of products C) does not keep track of overhead cost D) traces direct costs to output by multiplying the standard prices or rates by the actual quantities Answer: BDiff: 2Objective: 2AACSB: Analytical thinking3) Which of the following is a step in developing budgeted variable overhead rates? A) identifying the fixed costs associated with direct manufacturing laborB) estimating the budgeted denominator level based on expected utilization of available capacityC) selecting the cost-allocation base to use in allocating machine-handling costsD) choosing the appropriate level of capacity or investmentAnswer: CDiff: 1Objective: 2AACSB: Analytical thinking4) Which of the following is the mathematical expression for the budgeted fixed overhead cost per unit of cost allocation base?A) Budgeted fixed overhead cost per unit of cost allocation base = Actual total costs in fixed overhead cost pool Budgeted total quantity of cost allocation base B) Budgeted fixed overhead cost per unit of cost allocation base = Budgeted total costs in fixed overhead cost pool Budgeted total quantity of cost allocation baseC) Budgeted fixed overhead cost per unit of cost allocation base = Actual total costs in fixed overhead cost pool Actual total quantity of cost allocation baseD) Budgeted fixed overhead cost per unit of cost allocation base = Budgeted total costs in fixed overhead cost pool Actual total quantity of cost allocation base Answer: BDiff: 2Objective: 2AACSB: Analytical thinking5) In flexible budgets, costs that remain the same regardless of the output levels within the relevant range are _.A) allocated costs B) budgeted costs C) fixed costs D) variable costs Answer: CDiff: 1Objective: 2AACSB: Analytical thinking6) Alka Corporation manufactures industrial-sized gas furnaces and uses budgeted machine-hours to allocate variable manufacturing overhead. The following information pertains to the companys manufacturing overhead data:Budgeted output units29,000 unitsBudgeted machine-hours10,150 hoursBudgeted variable manufacturing overhead costs for 10,150 hours$324,800Actual output units produced31,000 unitsActual machine-hours used14,400 hoursActual variable manufacturing overhead costs$333,250What is the budgeted variable overhead cost rate per output unit? A) $11.70 B) $11.75 C) $11.20D) $11.00 Answer: CExplanation: C) Machine hour per unit = 10,150 29,000 = 0.35Budgeted cost per machine hour = $324,800 10,150 = $32Budgeted cost per unit = $32 0.35 = $11.20Diff: 2Objective: 2AACSB: Application of knowledge7) Christine Corporation manufactures baseball uniforms and uses budgeted machine-hours to allocate variable manufacturing overhead. The following information pertains to the companys manufacturing overhead data:Budgeted output units10,000 unitsBudgeted machine-hours15,000 hoursBudgeted variable manufacturing overhead costs for 15,000 hours$180,000Actual output units produced9,000 unitsActual machine-hours used14,000 hoursActual variable manufacturing overhead costs$171,000What is the budgeted variable overhead cost rate per output unit? A) $12.00 B) $12.21 C) $18.00 D) $19.00 Answer: CExplanation: C) Budgeted rate = $180,000/15,000 = $12.00 per machine hourBudgeted machine hours per unit = 15,000/10,000 = 1.5 hours per unitCost rate per output unit = $12.00 x 1.5 = $18.00 Diff: 2Objective: 2AACSB: Analytical thinking8) Green Energy Inc. produces fertilizer and distributes the product by using his tanker trucks. Green Energy uses budgeted fleet hours to allocate variable manufacturing overhead. The following information relates to the companys manufacturing overhead data:Budgeted output units730 truckloadsBudgeted fleet hours511 hoursBudgeted pounds of fertilizer24,000,000 poundsBudgeted variable manufacturing overhead costs for 730 loads$89,425Actual output units produced and delivered720 truckloadsActual fleet hours436 hoursActual pounds of fertilizer produced and delivered25,200,000 poundsActual variable manufacturing overhead costs$87,120What is the budgeted variable overhead cost rate per output unit? A) $120.00 B) $122.50C) $123.69D) $121.00Answer: BExplanation: B) Budgeted fleet hours per unit = 511 730= 0.7Budgeted cost per fleet hour = $89,425 511 = $175Budgeted cost per unit = $175 0.7 = $122.5Diff: 2Objective: 2AACSB: Application of knowledge9) Standard costing is a costing system that allocates overhead costs on the basis of the standard overhead-cost rates times the standard quantities of the allocation bases allowed for the actual outputs produced.Answer: TRUEDiff: 1Objective: 2AACSB: Analytical thinking10) Fixed costs automatically increase or decrease with the level of activity within a relevant range of activity.Answer: FALSEExplanation: Fixed costs do not automatically increase or decrease with the level of activity within the relevant range.Diff: 1Objective: 2AACSB: Analytical thinking11) Standard costing is a cost system that allocates overhead costs on the basis of overhead cost rates based on actual overhead costs times the standard quantities of the allocation bases allowed for the actual outputs produced. Answer: FALSEExplanation: Standard costing is a costing system that traces direct costs to output produced by multiplying the standard prices or rates by the standard quantities of inputs allowed for actual outputs produced.Diff: 2Objective: 2AACSB: Analytical thinking12) Computing standard costs at the start of the budget period results in a complex record keeping system.Answer: FALSEExplanation: Computing standard costs at the start of the budget period simplifies record keeping because no records are needed of the actual overhead costs or of the actual quantities of the cost-allocation bases used.Diff: 2Objective: 2AACSB: Analytical thinking13) List the four steps to develop budgeted variable overhead cost-allocation.Answer: Step 1: Choose the period to be used for the budget.Step 2: Select the cost-allocation bases to use in allocating the variable overhead costs to the output produced.Step 3: Identify the variable overhead costs associated with each cost-allocation base.Step 4: Compute the rate per unit of each cost-allocation base used to allocate the variable overhead costs to the output produced.Diff: 2Objective: 2AACSB: Analytical thinking14) What is a standard costing system?Answer: Standard costing is a costing system that (1) traces direct costs to output produced by multiplying the standard prices or rates by the standard quantities of inputs allowed for actual outputs produced and (2) allocates overhead costs on the basis of the standard overhead-cost rates times the standard quantities of the allocation bases allowed for the actual outputs produced.Diff: 2Objective: 2AACSB: Analytical thinkingObjective 8.31) The variable overhead spending variance measures the difference between _, multiplied by the actual quantity of variable overhead cost-allocation base used. A) the actual variable overhead cost per unit and the budgeted variable overhead cost per unitB) the standard variable overhead cost rate and the budgeted variable overhead cost rateC) the actual variable overhead cost per unit and the budgeted fixed overhead cost per unitD) the actual quantity per unit and the budgeted quantity per unitAnswer: ADiff: 2Objective: 3AACSB: Analytical thinking2) A $5,000 unfavorable flexible-budget variance indicates that _.A) the flexible-budget amount exceeded actual variable manufacturing overhead by $5,000 B) the actual variable manufacturing overhead exceeded the flexible-budget amount by $5,000 C) the flexible-budget amount exceeded standard variable manufacturing overhead by $5,000 D) the standard variable manufacturing overhead exceeded the flexible-budget amount by $5,000 Answer: BDiff: 2Objective: 3AACSB: Analytical thinkingUse the following information to answer the following questions:Autogas Corporation manufactures industrial-sized gas furnaces and uses budgeted machine hours to allocate variable manufacturing overhead. The following information relates to the companys manufacturing overhead data:Budgeted output units31,000 unitsBudgeted machine-hours16,585 hoursBudgeted variable manufacturing overhead costs for 16,585 hours$348,285Actual output units produced33,000 unitsActual machine-hours used14,400 hoursActual variable manufacturing overhead costs$384,0003) What is the flexible-budget amount for variable manufacturing overhead? A) $348,750B) $370,755C) $384,000D) $360,727Answer: BExplanation: B) Budgeted machine hours per unit = 16,585 31,000 = 0.535Budgeted machine hours allowed for 33000 units = 33,000 0.535= 17,655Budgeted variable overhead rate per machine hour = $348,285 16,585 = $21.00Flexible-budget amount = 17,655 $21.00 = $370,755Diff: 2Objective: 3AACSB: Application of knowledge4) What is the flexible-budget variance for variable manufacturing overhead? A) $13,245 unfavorableB) $35,715 unfavorableC) $13,245 favorableD) $35,715 favorableAnswer: AExplanation: A) Budgeted machine hours per unit = 16,585 31,000 = 0.535Budgeted machine hours allowed for 33000 units = 33,000 0.535 = 17,655Budgeted variable overhead rate per machine hour = $348,285 16,585 = $21.00Flexible-budget amount = 17,655 $21.00 = $370,755Flexible-budget variance = $384,000 $370,755 = $13,245 unfavorable Diff: 3Objective: 3AACSB: Application of knowledge5) What is the amount of the budgeted variable manufacturing overhead cost per unit?A) $11.745B) $10.570C) $11.235 D) $11.636 Answer: CExplanation: C) Budgeted machine hours per unit = 16,585 31,000 = 0.535Budgeted variable overhead rate per machine hour = $348,285 16,585 = $21.00Budgeted variable manufacturing overhead cost per unit = 0.535 $21.00 = $11.235Diff: 3Objective: 3AACSB: Application of knowledgeUse the following information to answer the questions below:Baseballic Corporation manufactures baseball uniforms and uses budgeted machine-hours to allocate variable manufacturing overhead. The following information relates to the companys manufacturing overhead data:Budgeted output units11,250 unitsBudgeted machine-hours22,500 hoursBudgeted variable manufacturing overhead costs for 22,500 hours$213,750Actual output units produced11,500 unitsActual machine-hours used22,000 hoursActual variable manufacturing overhead costs$225,0006) What is the flexible-budget amount for variable manufacturing overhead?A) $225,000B) $218,500 C) $213,750D) $221,750 Answer: BExplanation: B) Budgeted machine hours per unit = 22,500 11,250 = 2Budgeted machine hours allowed for 11,500 units = 11,500 2 = 23,000Budgeted variable overhead rate per machine hour = $213,750 22,500 = $9.5Flexible-budget amount = 23,000 $9.5 = $218,500 Diff: 3Objective: 3AACSB: Application of knowledge7) What is the flexible-budget variance for variable manufacturing overhead? A) $6,500 unfavorable B) $6,500 favorable C) $11,250 unfavorableD) $11,250 favorableAnswer: AExplanation: A) Budgeted machine hours per unit = 22,500 11,250 = 2Budgeted machine hours allowed for 11,500 units = 11,500 2 = 23,000Budgeted variable overhead rate per machine hour = $213,750 22,500 = $9.5Flexible-budget amount = 23,000 $9.5 = $218,500Flexible-budget variance = $225,000 $218,500 = $6,500 unfavorableDiff: 3Objective: 3AACSB: Application of knowledge8) What is the amount of the budgeted variable manufacturing overhead cost per unit?A) $9.50 per unit B) $18.58 per unitC) $19.00 per unitD) $19.56 per unitAnswer: CExplanation: C) Budgeted machine hours per unit = 22,500 11,250 = 2Budgeted variable overhead rate per machine hour = $213,750 22,500 = $9.5Budgeted variable manufacturing overhead cost per unit = 2 $9.5 = $19.00Diff: 3Objective: 3AACSB: Application of knowledgeUse the following information to answer the questions below:Mynarc Corporation produces fertilizer and distributes the product by using his tanker trucks. Mynarc uses budgeted fleet hours to allocate variable manufacturing overhead. The following information pertains to the companys manufacturing overhead data:Budgeted output units675 truckloadsBudgeted fleet hours540 hoursBudgeted variable manufacturing overhead costs for 675 loads$82,350Actual output units produced and delivered630 truckloadsActual fleet hours436 hoursActual vari