Ch 8 Cost Accounting Exam

Topics: Variable cost, Costs, Cost accounting Pages: 44 (6188 words) Published: February 17, 2014
CHAPTER 8: FLEXIBLE BUDGETS, VARIANCES, AND MANAGEMENT
CONTROL: II

TRUE/FALSE

1.Overhead costs are a major part of costs for most companies – more than 50% of all costs for some companies.

Answer:TrueDifficulty:1Objective:1

2.At the start of the budget period, management will have made most decisions regarding the level of variable costs to be incurred.

Answer:FalseDifficulty:1Objective:1
At the start of the budget period, management will have made most decisions regarding the level of fixed costs to be incurred.

3.One way to manage both variable and fixed overhead costs is to eliminate nonvalue-adding activities.

Answer:TrueDifficulty:1Objective:1

4.In a standard costing system, the variable-overhead rate per unit is generally expressed as a standard cost per output unit.

Answer:TrueDifficulty:1Objective:2

5.For calculating the cost of products and services, a standard costing system does not have to keep track of actual costs.

Answer:TrueDifficulty:3Objective:2

6.The budget period for variable-overhead costs is typically less than 3 months.

Answer:FalseDifficulty:1Objective:3
The budget period for variable-overhead costs is typically 12 months.

7.A favorable variable overhead spending variance can be the result of paying lower prices than budgeted for variable overhead items such as energy.

Answer:TrueDifficulty:1Objective:3

8.The variable overhead efficiency variance is computed in a different way than the efficiency variance for direct-cost items.

Answer:FalseDifficulty:1Objective:3
The variable overhead efficiency variance is computed the same way as the efficiency variance for direct-cost items. 9.The variable overhead flexible-budget variance measures the difference between standard variable overhead costs and flexible-budget variable overhead costs.

Answer:FalseDifficulty:1Objective:3
The variable overhead flexible-budget variance measures the difference between the actual variable overhead costs and the flexible-budget variable-overhead costs.

10.The variable overhead efficiency variance measures the efficiency with which the cost-allocation base is used.

Answer:TrueDifficulty:1Objective:3

11.The variable overhead efficiency variance can be interpreted the same way as the efficiency variance for direct-cost items.

Answer:FalseDifficulty:2Objective:4
The interpretations are different. The variable overhead efficiency variance focuses on the quantity of allocation-base used, while the efficiency variance for direct-cost items focuses on the quantity of materials and labor-hours used.

12.An unfavorable variable overhead efficiency variance indicates that variable overhead costs were wasted and inefficiently used.

Answer:FalseDifficulty:3Objective:4
An unfavorable variable overhead efficiency variance indicates that the company used more than planned of the cost-allocation base.

13.Causes of a favorable variable overhead efficiency variance might include using lower-skilled workers than expected.

Answer:FalseDifficulty:2Objective:4
Possible causes of a favorable variable overhead efficiency variance might include using higher-skilled workers that are more efficient than expected.

14.For fixed overhead costs, the flexible-budget amount is always the same as the static-budget amount.

Answer:TrueDifficulty:2Objective:5

15.The fixed overhead flexible-budget variance is the difference between actual fixed overhead costs and the fixed overhead costs in the flexible budget.

Answer:TrueDifficulty:1Objective:5

16.There is never an efficiency variance for fixed costs.

Answer:TrueDifficulty:2Objective:5

17.All unfavorable overhead variances decrease operating income compared to the budget.

Answer:TrueDifficulty:2Objective:5

18.A favorable fixed overhead flexible-budget variance indicates...
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