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Exam 10: Compute and Interpret the Fixed Overhead Variances

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Question 21

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Modine Corporation has provided the following data for September. $\begin{array}{llcc} \text { Denominator level of activity........................ } &1,600&\text { machine-hours}\\ \text {Budgeted fixed manufacturing overhead costs } &\$2,400\\ \text {Fixed portion of the predetermined overhead } &\\ \text {rate................................................................ } &\$26.50&\text { per machine-hour}\\ \text { Actual level of activity.................................. } &1,700&\text { machine-hours}\\ \text { Standard machine-hours allowed for the actual } &\\ \text { output .........................................................} &2,000&\text { machine-hours}\\ \text { Actual fixed manufacturing overhead costs....} &\$41,740\\\end{array}$ Required: a.Compute the budget variance for September.Show your work! b.Compute the volume variance for September.Show your work!

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a.Budget variance = Actual fixed manufac...

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Question 22

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The predetermined overhead rate (variable and fixed) is $7.50 per machine-hour and the denominator activity level is 135,000 machine-hours.If the variable portion of the predetermined overhead rate is $3.00 per machine-hour,then the budgeted fixed factory overhead for the year is:

A) $30,000
B) $607,500
C) $405,000
D) $1,012,500

E) A) and D)
F) B) and C)

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Question 23

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Madero Corporation's manufacturing overhead includes $6.20 per machine-hour for variable manufacturing overhead and $711,360 per period for fixed manufacturing overhead. Required: Determine the predetermined overhead rate for the denominator level of activity of 9,600 machine-hours.

Wriphoff Company uses a standard cost system to collect costs related to the production of its clay bud vases.Manufacturing overhead at Wriphoff is applied to production on the basis of standard direct labor-hours.The overhead standards used at Wriphoff are as follows: $\begin{array}{lcc}&\text { Standard Cost Per Hour } & \text { Standard Cost Per Vase }\\\text { Variable overhead ........ } & \$ 6.40 & \$ 5.76 \\\text { Fixed overhead .......... } & \$ 9.60 & \$ 8.64\end{array}$ The standards above were based on an expected annual volume of 40,000 bud vases or 36,000 direct labor-hours.The actual results for last year were as follows: $\begin{array}{lr}\text { Number of vases produced........... } & 35,600 \\\text { Direct labor-hours incurred ........... } & 34,250 \\\text { Variable overhead cost ................ } & \$ 212,350 \\\text { Fixed overhead cost } \ldots \ldots \ldots \ldots \ldots \ldots \ldots . . . & \$ 338,000\end{array}$ -What was Wriphoff's variable overhead rate variance for last year?

Labossiere Corporation has provided the following data for November. $\begin{array}{llcc} \text {Denominator level of activity........................... } &7,000& \text {machine-hours } \\ \text { Budgeted fixed manufacturing overhead costs } &\$204,400\\ \text { Fixed portion of the predetermined overhead } &\\ \text { rate................................................................. } &\$29.20& \text { per machine-hour } \\ \text {Actual level of activity..................................... } &7,100& \text { machine-hours } \\ \text { Standard machine-hours allowed for the actual } &\\ \text {output.............................................................. } &6,700& \text { machine-hours } \\ \text {Actual fixed manufacturing overhead costs...... } &\$209,990\\\end{array}$ -The volume variance for November is:

A company has a standard cost system in which fixed and variable manufacturing overhead costs are applied to products on the basis of direct labor-hours.The amount of overhead that the company would apply to finished production would ordinarily be the actual direct labor-hours times the predetermined overhead rate per direct labor-hour.

Wriphoff Company uses a standard cost system to collect costs related to the production of its clay bud vases.Manufacturing overhead at Wriphoff is applied to production on the basis of standard direct labor-hours.The overhead standards used at Wriphoff are as follows: $\begin{array}{lcc}&\text { Standard Cost Per Hour } & \text { Standard Cost Per Vase }\\\text { Variable overhead ........ } & \$ 6.40 & \$ 5.76 \\\text { Fixed overhead .......... } & \$ 9.60 & \$ 8.64\end{array}$ The standards above were based on an expected annual volume of 40,000 bud vases or 36,000 direct labor-hours.The actual results for last year were as follows: $\begin{array}{lr}\text { Number of vases produced........... } & 35,600 \\\text { Direct labor-hours incurred ........... } & 34,250 \\\text { Variable overhead cost ................ } & \$ 212,350 \\\text { Fixed overhead cost } \ldots \ldots \ldots \ldots \ldots \ldots \ldots . . . & \$ 338,000\end{array}$ -What was Wriphoff's fixed manufacturing overhead budget variance for last year?

An unfavorable fixed manufacturing overhead volume variance would be caused by:

Wriphoff Company uses a standard cost system to collect costs related to the production of its clay bud vases.Manufacturing overhead at Wriphoff is applied to production on the basis of standard direct labor-hours.The overhead standards used at Wriphoff are as follows: $\begin{array}{lcc}&\text { Standard Cost Per Hour } & \text { Standard Cost Per Vase }\\\text { Variable overhead ........ } & \$ 6.40 & \$ 5.76 \\\text { Fixed overhead .......... } & \$ 9.60 & \$ 8.64\end{array}$ The standards above were based on an expected annual volume of 40,000 bud vases or 36,000 direct labor-hours.The actual results for last year were as follows: $\begin{array}{lr}\text { Number of vases produced........... } & 35,600 \\\text { Direct labor-hours incurred ........... } & 34,250 \\\text { Variable overhead cost ................ } & \$ 212,350 \\\text { Fixed overhead cost } \ldots \ldots \ldots \ldots \ldots \ldots \ldots . . . & \$ 338,000\end{array}$ -The amount of fixed manufacturing overhead cost contained in the company's flexible budget for manufacturing overhead for September was:

Gayman Corporation applies manufacturing overhead to products on the basis of standard machine-hours.The company bases its predetermined overhead rate on 7,300 machine-hours.The company's total budgeted fixed manufacturing overhead is $28,470.In the most recent month,the total actual fixed manufacturing overhead was $28,940.The company actually worked 7,510 machine-hours during the month.The standard hours allowed for the actual output of the month totaled 7,670 machine-hours.What was the overall fixed manufacturing overhead volume variance for the month?

The economic impact of the inability to reach a target denominator level of activity would best be measured by:

Wintersmith Corporation estimates that its variable manufacturing overhead is $11.60 per machine-hour and its fixed manufacturing overhead is $278,124 per period. -If the denominator level of activity is 4,200 machine-hours,the variable element in the predetermined overhead rate would be:

Which of the following variances would be useful in calling attention to possible problems in the control of spending on overhead items? $\quad$$\quad$$\begin{array}{llcc}\text { Variable overhead rate variance}&\text { Fixed overhead budget variance }\end{array}$ A. $\begin{array}{llcc} \quad\quad\quad\quad\quad\quad\text { No } &\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad \text { No }\end{array}$ B. $\begin{array}{llcc}\quad\quad\quad\quad\quad\quad\ \text { No } & \quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Yes }\end{array}$ C. $\begin{array}{llcc}\quad\quad\quad\quad\quad\quad\text { Yes } & \quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { No } \end{array}$ D. $\begin{array}{llcc}\quad\quad\quad\quad\quad\quad\text { Yes } & \quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Yes }\end{array}$

A decrease in denominator level of activity will:

Henley Company uses a standard cost system in which it applies manufacturing overhead to units of product on the basis of standard 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:

Sucher Company uses a standard cost system in which manufacturing overhead costs are applied to units of product on the basis of standard machine-hours.The company's standards are based on variable manufacturing overhead of $3 per machine-hour and fixed manufacturing overhead of $300,000 per year.The denominator level of activity is 30,000 machine-hours.Standards call for 2.5 machine-hours per unit of output.Actual activity and manufacturing overhead costs for the year are given below: $\begin{array}{lcl} \text { Units produced.................... } &12,800& \text {units}\\ \text { Machine-hours used............. } &31,600& \text {machine-hours}\\ \text { Overhead costs incurred: } &\\ \text { Variable costs...................... } &\$96,000\\ \text { Fixed costs..........................} &\$297,000\\\end{array}$ Required: a.What are the standard hours allowed for the output? b.What was the variable overhead rate variance? c.What was the variable overhead efficiency variance? d.What was the fixed manufacturing overhead budget variance? e.What was the fixed manufacturing overhead volume variance?

Hart Company's labor standards call for 500 direct labor-hours to produce 250 units of product.During October the company worked 625 direct labor-hours and produced 300 units.The standard hours allowed for October would be:

A furniture 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: $\begin{array}{llcc} \text {Denominator level of activity } &1,100\quad\text { DLHs }\\ \text { Overhead costs at the denominator activity level: } &\\ \text { Variable overhead cost } &\$7,920\\ \text { Fixed overhead cost } &\$10,120\\\end{array}$ The following data pertain to operations for the most recent period: $\begin{array}{lrc}\text { Actual hours ................................................ } & 1,200& \text { DLHs } \\\text { Standard hours allowed for the actual output............... } & 1,166 &\text { DLHs }\\\text { Actual total variable manufacturing overhead cost....... }&\$ 8,460 \\\text { Actual total fixed manufacturing overhead cost } & \$ 9.070\end{array}$ -How much overhead was applied to products during the period to the nearest dollar?

A company has a standard cost system in which fixed and variable manufacturing overhead costs are applied to products on the basis of direct labor-hours.The company's choice of the denominator level of activity has no effect on the fixed manufacturing overhead volume variance.

Wolle Corporation estimates that its variable manufacturing overhead is $11.60 per machine-hour and its fixed manufacturing overhead is $298,936 per period. -If the denominator level of activity is 4,300 machine-hours,the fixed element in the predetermined overhead rate would be: