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Chapter 11-3A

Acct 202

Select the best answer.

1. A static budget: 
A) is based totally on prior year's costs. 
B) is based on one anticipated activity level. 
C) is based on a range of activity. 
D) is preferred over a flexible budget in the evaluation of performance. 
E) presents a clear measure of performance when planned activity differs from actual activity. 

Ans: B

2. A flexible budget: 
A) parallels a static budget with respect to format and advantages of use. 
B) is preferred over a static budget in the evaluation of performance. 
C) gives management flexibility in terms of meeting budget goals. 
D) can be used to compare actual and budgeted costs at various levels of activity. 
E) is characterized by choices "b" and "d" above. 

Ans: E

3. Flexible budgets reflect a company's anticipated costs based on variations in: 
A) activity levels. 
B) inflation rates. 
C) managers. 
D) anticipated capital acquisitions. 
E) standards. 

Ans: A

4. A flexible budget for 5,000 hours revealed variable manufacturing overhead of $25,000 and fixed manufacturing overhead of $10,000. The budget for 10,000 hours would reveal total overhead costs of: 
A) $35,000. 
B) $45,000. 
C) $50,000. 
D) $60,000. 
E) $70,000. 

Ans: D

5. The relationship between activity and total budgeted overhead cost is represented by which of the following formulas? 
A) Total activity units + budgeted fixed overhead cost per unit. 
B) Budgeted variable overhead cost per unit + budgeted fixed overhead cost. 
C) (Budgeted variable overhead cost per unit x total activity units) + budgeted fixed overhead costs. 
D) (Budgeted fixed overhead cost per unit x total activity units) + (budgeted variable overhead cost per unit x total activity units). 
E) None of the above. 

Ans: C

6. In so far as overhead is concerned, what is the difference between normal costing and standard costing? 
A) Use of a predetermined overhead rate. 
B) Use of standard hours versus actual hours. 
C) Use of a standard rate versus an actual rate. 
D) The choice of an activity measure. 
E) There is no difference. 

Ans: B

7. Smithville uses labor hours to apply variable overhead to production. If the company's workers were very inefficient during the period, which of the following statements would be true about the variable-overhead efficiency variance? 
A) The variance would be favorable. 
B) The variance would be unfavorable. 
C) The nature of the variance (favorable or unfavorable) would be unknown based on the facts presented. 
D) The variance would be the same amount as the labor efficiency variance. 
E) None of the above. 

Ans: B

8. A fixed-overhead volume variance would normally arise when: 
A) planned activity coincides with actual levels of production. 
B) budgeted fixed overhead is overapplied to production. 
C) there is a fixed-overhead budget variance. 
D) actual fixed overhead exceeds budgeted fixed overhead. 
E) there is a variable-overhead efficiency variance. 

Ans: B

Duncanville, Inc., has the following overhead standards:

Variable overhead: 4 hours at $8 per hour
Fixed overhead: 4 hours at $10 per hour 

The standards were based on a planned activity of 20,000 machine hours. During the year, 5,000 units were scheduled for production. Actual data follow. 

Variable overhead incurred: $167,750 
Fixed overhead incurred: $210,000
Machine hours worked: 19,800
Actual units produced: 5,100 

9. Duncanville's variable-overhead spending variance is: 
A) $4,550 unfavorable. 
B) $9,350 unfavorable. 
C) $550 favorable. 
D) $4,800 favorable. 
E) not listed above. 

Ans: B

10. Duncanville's variable-overhead efficiency variance is: 
A) $550 favorable. 
B) $4,800 favorable. 
C) $550 unfavorable. 
D) $4,800 unfavorable. 
E) not listed above. 

Ans: B