Chapter 8 Review Questions and Exercises.
1. The variable overhead flexible-budget variance subdivides into which two variances? Spending Variance and efficiency Variance. 2. To compute the budgeted variable overhead cost rate for a manufacturing company divide budgeted variable overhead costs by the budgeted quantity of the Cost allocation base. 3. To compute the budgeted fixed overhead cost rate for a manufacturing company, divide budgeted fixed overhead costs by the Budgeted total quantity of cost-allocation base or Production- Denominator level. 4. The Production Volume variance is the difference between budgeted FOH and the FOH allocated on the basis of actual output produced. 5. Manufacturing companies treat fixed manufacturing overhead as if it were a variable cost for which purpose of cost accounting? Inventory costing purposes 6. Fixed overhead is underallocated if the general-ledger balance of the fixed manufacturing over-head control account is larger than the balance of the fixed Manufacturing Overhead allocated account. 7. The amount of underallocated or overallocated total overhead is the same as the amount of the total overhead variance. 8. Interpreting a cost variance for an activity area requires an understanding of the cost hierarchy used in the ABC systems.
1. Total overhead variance = Actual Variable overhead + Actual fixed overhead – Budgeted hours allowed for actual output produced x (budgeted variable overhead cost rate per machine-hour + budgeted fixed overhead costs rate per machine hour) B. 6,000 favorable
Actual Variable overhead
total budgeted overhead cost rate per machine hour
Actual fixed overhead
budgeted hours allowed for actual output produced
Budgeted variable overhead cost rate per machine hour
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