Chapter 23 Practice Materials(4)

236 ??Chapter 23/Performance Evaluation Using Variances From Standard Costs

The standard costs and actual costs for factory overhead for the manufacture of 2,500 units of actual production are as follows:

Standard Costs Fixed overhead (based on 10,000 hours) 3 hours @ $.80 per hour Variable overhead 3 hours @ $2 per hour

Actual Costs Total variable cost, $18,000 Total fixed cost, $8,000

53. The amount of the factory overhead volume variance is:

a. $2,000 favorable b. $2,000 unfavorable c. $2,500 unfavorable d. $0 ANS: B DIF: Moderate OBJ: 23-04

NAT: AACSB Analytic | IMA-Performance Measurement

54. The amount of the total factory overhead cost variance is:

a. $2,000 favorable b. $5,000 unfavorable c. $2,500 unfavorable d. $0 ANS: B DIF: Moderate OBJ: 23-04

NAT: AACSB Analytic | IMA-Performance Measurement

55. The amount of the factory overhead controllable variance is:

a. $2,000 unfavorable b. $3,000 favorable c. $0

d. $3,000 unfavorable ANS: D DIF: Moderate OBJ: 23-04

NAT: AACSB Analytic | IMA-Performance Measurement

Chapter 23/Performance Evaluation Using Variances From Standard Costs ? 237

The standard factory overhead rate is $10 per direct labor hour ($8 for variable factory overhead and $2 for fixed factory overhead) based on 100% capacity of 30,000 direct labor hours. The standard cost and the actual cost of factory overhead for the production of 5,000 units during May were as follows:

Standard: 25,000 hours at $10 $250,000 Actual: Variable factory overhead 202,500 Fixed factory overhead 60,000

56. What is the amount of the factory overhead volume variance?

a. $12,500 favorable b. $10,000 unfavorable c. $12,500 unfavorable d. $10,000 favorable ANS: B DIF: Moderate OBJ: 23-04

NAT: AACSB Analytic | IMA-Performance Measurement

57. What is the amount of the factory overhead controllable variance?

a. $10,000 favorable b. $2,500 unfavorable c. $10,000 unfavorable d. $2,500 favorable ANS: B DIF: Moderate OBJ: 23-04

NAT: AACSB Analytic | IMA-Performance Measurement

58. Assuming that the standard fixed overhead rate is based on full capacity, the cost of available but

unused productive capacity is indicated by the: a. factory overhead cost volume variance b. direct labor cost time variance c. direct labor cost rate variance

d. factory overhead cost controllable variance ANS: A DIF: Easy OBJ: 23-04

NAT: AACSB Analytic | IMA-Performance Measurement

238 ??Chapter 23/Performance Evaluation Using Variances From Standard Costs

The standard factory overhead rate is $7.50 per machine hour ($6.20 for variable factory overhead and $1.30 for fixed factory overhead) based on 100% capacity of 80,000 machine hours. The standard cost and the actual cost of factory overhead for the production of 15,000 units during August were as follows:

Actual: Variable factory overhead $360,000 Fixed factory overhead 104,000 Standard hours allowed for units produced: 60,000 hours at $7.50 450,000

59. What is the amount of the factory overhead volume variance?

a. $12,000 unfavorable b. $12,000 favorable c. $14,000 unfavorable d. $26,000 unfavorable ANS: D DIF: Moderate OBJ: 23-04

NAT: AACSB Analytic | IMA-Performance Measurement

60. What is the amount of the factory overhead controllable variance?

a. $12,000 unfavorable b. $12,000 favorable c. $14,000 unfavorable d. $26,000 unfavorable ANS: B DIF: Moderate OBJ: 23-04

NAT: AACSB Analytic | IMA-Performance Measurement

61. Incurring actual indirect factory wages in excess of budgeted amounts for actual production results in

a:

a. quantity variance b. controllable variance c. volume variance d. rate variance ANS: B DIF: Difficult OBJ: 23-04

NAT: AACSB Analytic | IMA-Performance Measurement

62. The controllable variance measures:

a. operating results at less than normal capacity

b. the efficiency of using variable overhead resources c. operating results at more than normal capacity d. control over fixed overhead costs ANS: B DIF: Easy OBJ: 23-04

NAT: AACSB Analytic | IMA-Performance Measurement

Chapter 23/Performance Evaluation Using Variances From Standard Costs ? 239

63. The unfavorable volume variance may be due to all but the following factors:

a. failure to maintain an even flow of work b. machine breakdowns

c. unexpected increases in the cost of utilities d. failure to obtain enough sales orders ANS: C DIF: Easy OBJ: 23-04

NAT: AACSB Analytic | IMA-Performance Measurement

64. Favorable volume variances may be harmful when:

a. machine repairs cause work stoppages

b. supervisors fail to maintain an even flow of work

c. production in excess of normal capacity cannot be sold

d. there are insufficient sales orders to keep the factory operating at normal capacity ANS: C DIF: Difficult OBJ: 23-04

NAT: AACSB Analytic | IMA-Performance Measurement

65. The following data is given for the Walker Company:

Budgeted production 1,000 units Actual production 980 units Materials: Standard price per lb $2.00 Standard pounds per completed unit 12 Actual pounds purchased and used in production 11,800 Actual price paid for materials $23,000 Labor: Standard hourly labor rate $14 per hour Standard hours allowed per completed unit 4.5 Actual labor hours worked 4,560 Actual total labor costs $62,928 Overhead: Actual and budgeted fixed overhead $27,000 Standard variable overhead rate $3.50 per standard direct labor hour Actual variable overhead costs $15,500 Overhead is applied on standard labor hours.

The factory overhead controllable variance is: