Practice Problems Chapter 11
9.
Interspace Merchandising anticipated selling 29,000 units of a
major product and paying sales commissions of $6 per unit. Actual
sales and sales commissions totaled 31,500 units and $182,700,
respectively. If the company used a static budget for performance
evaluations, Interstate would report a cost variance of:
A.
$6,30
0U.
B. $6,300F.
C. $8,700U.
D. $8,700F.
E. None of the other answers are correct.
Direct Material Quantity Variance=SP(AQ-SQ)
$6 (31,500-29,000) =$15,000U
Direct Material Price Variance= AQ (AP-SP)
31500(*5.8-6)= $-6,300F
** AP 5.8 = $182,700/31500 Units
Therefore,
Cost Variance=$15,000U-$6,300F=$8,700U
10.
Gridiron Merchandising anticipated selling 27,000 units of a major product and paying sales commissions of $6
per unit. Actual sales and sales commissions totaled 27,500 units and $171,400, respectively. If the company
used a flexible budget for performance evaluations, Gridiron would report a cost variance of:
11.
Bunnie’s Bakery anticipated making 17,000 fancy cakes during a recent period, requiring 14,000 hours of process
time. Each hour of process time was expected to cost the firm $11. Actual activity for the period was higher than
anticipated: 18,000 cakes and 15,200 hours. If each hour of process time actually cost Bunnie $12, what processtime variance would be disclosed on a performance report that incorporated static budgets and flexible budgets?
11-1
12.
Trois Elles Corporation recently prepared a manufacturing cost budget for an output of 50,000 units, as follows:
Actual units produced amounted to 60,000. Actual costs incurred were: direct materials, $110,000; direct labor,
$60,000; variable overhead, $100,000; and fixed overhead, $97,000. If Trois Elles evaluated performance by the
use of a flexible budget, a performance report would reveal a total variance of:
13.
Zin, Inc. is planning its cash needs for an upcoming period when 85,000 machine hours are expected to be
worked. Activity may drop as low as 78,000 hours if some overdue equipment maintenance procedures are
performed; on the other hand, activity could jump to 94,000 hours if one of Zin’s major competitors likely goes
bankrupt. A flexible cash budget to determine cash needs would best be based on:
14.
Young Corporation has a high probability of operating at 40,000 activity hours during the upcoming period, and
lower probabilities of operating at 30,000 hours and 50,000 hours. The company’s flexible budget revealed the
following:
Young’s flexible-budget formula, where Y is defined as total cost and AH represents activity hours, is:
11-2
15.
Young Corporation has a high probability of operating at 40,000 activity hours during the upcoming period, and
lower probabilities of operating at 30,000 hours and 50,000 hours. The company’s flexible budget revealed the
following:
If Young operated at 35,000 hours, its total budgeted cost would be:
17.
Gourmet Restaurants has the following flexible-budget formula:
Y = $13PH + $450,000 where PH is defined as process hours.
What is Gourmet’s budgeted total cost if its process hours equal 25,000?
18.
Delicious Treats (DT) anticipated that 84,000 process hours would be worked during an upcoming accounting
period when, in fact, 92,000 hours were actually worked. One of the company’s cost functions is expressed as
follows:
Y = $16PH + $640,000 where PH is defined as process hours
What budgeted dollar amount would appear in DT’s static budget and flexible budget for the preceding cost
function?
19.
Del’s Diner anticipated that 84,000 process hours would be worked during an upcoming accounting period when,
in fact, 90,000 hours were actually worked. One of the company’s cost functions is expressed as follows:
Y = $16PH + $640,000 where PH is defined as process hours
11-3
What is Del’s flexible budget (Y) for the preceding cost function?
21.
A flexible budget for 15,000 hours revealed variable manufacturing overhead of $90,000 and fixed manufacturing
overhead of $120,000. The budget for 25,000 hours would reveal total overhead costs of:
22.
A flexible budget for 15,000 hours revealed variable manufacturing overhead of $90,000 and fixed manufacturing
overhead of $120,000. The budget for 20,000 hours would reveal total overhead costs of:
44.
Rowe Corporation reported the following variances for the period just ended:
Variable-overhead spending variance: $50,000U
Variable-overhead efficiency variance: $28,000U
Fixed-overhead budget variance: $70,000U
Fixed-overhead volume variance: $30,000U
If Rowe desires to analyze variances that arose primarily from managers’ expenditures in excess of anticipated
amounts, the company should focus on variances that total:
46.
Robert Company, which applies overhead to production on the basis of machine hours, reported the following
data for the period just ended:
Actual units produced: 12,000
Actual variable overhead incurred: $77,700
Actual machine hours worked: 18,800
11-4
Standard variable overhead cost per machine hour: $4.50
If Robert estimates 1.5 hours to manufacture a completed unit, the company’s variable-overhead spending
variance is:
47.
Martin Company, which applies overhead to production on the basis of machine hours, reported the following
data for the period just ended:
Actual units produced: 9,000
Actual variable overhead incurred: $54,400
Actual machine hours worked: 16,000
Standard variable overhead cost per machine hour: $3.50
If Martin estimates two hours to manufacture a completed unit, the company’s variable-overhead efficiency
variance is:
48.
Abbott has a standard variable overhead rate of $4.50 per machine hour, and each unit produced has a standard
time allowed of three hours. The company’s static budget was based on 46,000 units. Actual results for the year
follow.
Actual units produced: 42,000
Actual machine hours worked: 120,000
Actual variable overhead incurred: $520,000
Abbott’s variable-overhead spending variance is:
49.
Abbott has a standard variable overhead rate of $4.50 per machine hour, and each unit produced has a standard
time allowed of three hours. The company’s static budget was based on 46,000 units. Actual results for the year
follow.
Actual units produced: 42,000
Actual machine hours worked: 120,000
Actual variable overhead incurred: $520,000
Abbott’s variable-overhead efficiency variance is:
50.
Luke, Inc. has a standard variable overhead rate of $5 per machine hour, with each completed unit expected to
take three machine hours to produce. A review of the company’s accounting records found the following:
11-5
Actual production: 19,500 units
Variable-overhead efficiency variance: $9,000U
Variable-overhead spending variance: $21,000F
What was Luke’s actual variable overhead during the period?
51.
Bushnell, Inc. has a standard variable overhead rate of $4 per machine hour, with each completed unit expected
to take three machine hours to produce. A review of the company’s accounting records found the following:
Actual variable overhead: $210,000
Variable-overhead efficiency variance: $18,000U
Variable-overhead spending variance: $30,000F
How many units did Bushnell actually produce during the period?
52.
Darling Company, which applies overhead to production on the basis of machine hours, reported the following
data for the period just ended:
Actual units produced: 12,000
Actual fixed overhead incurred: $730,000
Actual machine hours worked: 60,000
Budgeted fixed overhead: $720,000
Planned level of machine-hour activity: 50,000
If Darling estimates four hours to manufacture a completed unit, the company’s standard fixed overhead rate per
machine hour would be:
53.
Herman Company, which applies overhead to production on the basis of machine hours, reported the following
data for the period just ended:
Actual units produced: 13,000
Actual fixed overhead incurred: $742,000
Standard fixed overhead rate: $15 per hour
Budgeted fixed overhead: $720,000
Planned level of machine-hour activity: 48,000
If Herman estimates four hours to manufacture a completed unit, the company’s fixed-overhead budget variance
would be:
11-6
54.
Enberg Company, which applies overhead to production on the basis of machine hours, reported the following
data for the period just ended:
Actual units produced: 14,800
Actual fixed overhead incurred: $791,000
Standard fixed overhead rate: $13 per hour
Budgeted fixed overhead: $780,000
Planned level of machine-hour activity: 60,000
If Enberg estimates four hours to manufacture a completed unit, the company’s fixed-overhead volume variance
would be:
55.
Benson Company, which uses a standard cost system, budgeted $600,000 of fixed overhead when 40,000
machine hours were anticipated. Other data for the period were:
Actual units produced: 10,000
Standard production time per unit: 3.9 machine hours
Fixed overhead incurred: $620,000
Actual machine hours worked: 42,000
Benson’s fixed-overhead budget variance is:
56.
Benson Company, which uses a standard cost system, budgeted $600,000 of fixed overhead when 40,000
machine hours were anticipated. Other data for the period were:
Actual units produced: 10,000
Standard production time per unit: 3.9 machine hours
Fixed overhead incurred: $620,000
Actual machine hours worked: 42,000
Benson’s fixed-overhead volume variance is:
57.
Atlanta Enterprises incurred $828,000 of fixed overhead during the period. During that same period, the company
applied $845,000 of fixed overhead to production and reported an unfavorable budget variance of $41,000. How
much was Atlanta’s budgeted fixed overhead?
58.
Rich Company, which uses a standard cost system, budgeted $800,000 of fixed overhead when 50,000 machine
hours were anticipated. Other data for the period were:
11-7
Actual units produced: 10,600
Actual machine hours worked: 51,800
Actual variable overhead incurred: $475,000
Actual fixed overhead incurred: $790,100
Standard variable overhead rate per machine hour: $8.50
Standard production time per unit: 5 hours
Rich’s variable-overhead efficiency variance is:
59.
Rich Company, which uses a standard cost system, budgeted $800,000 of fixed overhead when 50,000 machine
hours were anticipated. Other data for the period were:
Actual units produced: 10,600
Actual machine hours worked: 51,800
Actual variable overhead incurred: $475,000
Actual fixed overhead incurred: $790,100
Standard variable overhead rate per machine hour: $8.50
Standard production time per unit: 5 hours
Rich’s fixed-overhead budget variance is:
60.
Sussex Company uses a standard cost system and prepared the following budget for May when 24,000 machine
hours of activity were anticipated: variable overhead, $48,000; fixed overhead: $240,000. Actual data for May
were:
Standard machine hours allowed for output attained: 25,000
Actual machine hours worked: 24,000
Variable overhead incurred: $50,000
Fixed overhead incurred: $250,000
The standard variable overhead rate for May is:
61.
The variable-overhead spending and efficiency variances are:
11-8
62.
The fixed-overhead budget and volume variances are:
63.
Draco, 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 when 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
Draco’s fixed-overhead budget variance is:
64.
Draco, 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 when 5,000 units were scheduled for
production. Actual data follow.
Variable overhead incurred: $167,750
11-9
Fixed overhead incurred: $210,000
Machine hours worked: 19,800
Actual units produced: 5,100
Draco’s fixed-overhead volume variance is:
65.
Draco, 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 when 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
Draco’s variable-overhead spending variance is:
66.
Draco, 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 when 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
Draco’s variable-overhead efficiency variance is:
67.
Draco, 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 when 5,000 units were scheduled for
production. Actual data follow.
Variable overhead incurred: $167,750
11-10
Fixed overhead incurred: $210,000
Machine hours worked: 19,800
Actual units produced: 5,100
The amount of variable overhead that Draco applied to production is:
68.
Sand Box Company is choosing new cost drivers for its accounting system. One driver is labor hours; the other is
a combination of machine hours for unit variable costs and number of setups for a pool of batch-level costs. Data
for the past year follow.
Assume that both cost pools are combined into a single pool, and labor hours is the driver. The total flexible
budget for the actual level of labor hours and the total variance for the combined pool are:
69.
Sand Box Company is choosing new cost drivers for its accounting system. One driver is labor hours; the other is
a combination of machine hours for unit variable costs and number of setups for a pool of batch-level costs. Data
for the past year follow.
11-11
Assume that the two separate pools are used. The flexible budget dollar amounts for the actual level of machine
hours and actual number of setups are:
74.
Master Products has the following information for the year just ended:
The company’s sales-volume variance is:
75.
Master Products has the following information for the year just ended:
11-12
The company’s sales-price variance is:
11-13
