Exam (elaborations) TEST BANK FOR Introduction to Managerial Accounting 7th Edition Brewer Garrison

Exam (elaborations) TEST BANK FOR Introduction to Managerial Accounting 7th Edition Brewer Garrison Managerial-Accounting-7th-Edition-Test- Bank-Brewer Appendix 8A Predetermined Overhead Rates and Overhead Analysis in a Standard Costing System True / False Questions 1. A company has a standard cost system in which fixed and variable manufacturing overhead costs are applied to products on the basis of direct labor-hours. A fixed manufacturing overhead volume variance will NOT necessarily occur in a month in which production volume differs from sales volume. True False 2. The fixed manufacturing overhead volume variance is more meaningful than the budget variance for cost control purposes. True False 3. In a standard costing system, if the actual fixed manufacturing overhead cost exceeds the budgeted fixed manufacturing overhead cost for the period, then fixed manufacturing overhead cost would be overapplied for the period. True False 4. If all four of Argo Corporation's overhead variances are favorable, Argo's overhead will be underapplied. True False 5. A company has a standard cost system in which fixed and variable manufacturing overhead costs are applied to products on the basis of direct labor-hours. The company's choice of the denominator level of activity affects the fixed manufacturing overhead budget variance. True False 6. The higher the denominator activity level used to compute the predetermined overhead rate, the lower the predetermined overhead rate. True False App8A-1 Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Full file at Bank-Brewer 7. An unfavorable volume variance means that a firm operated at an activity level that was below the activity level planned for the period. True False 8. A company has a standard cost system in which fixed and variable manufacturing overhead costs are applied to products on the basis of direct labor-hours. A fixed manufacturing overhead volume variance will NOT necessarily occur in a month in which the fixed manufacturing overhead applied to units of product on the basis of standard hours allowed differs from the budgeted fixed manufacturing overhead. True False 9. A fixed manufacturing overhead volume variance occurs as the result of a difference between the denominator level of activity (in hours) and the standard hours allowed for the actual output of the period. True False 10. A company has a standard cost system in which fixed and variable manufacturing overhead costs are applied to products on the basis of direct labor-hours. A fixed manufacturing overhead volume variance will NOT necessarily occur in a month in which there is a fixed manufacturing overhead budget variance. True False 11. In a standard costing system where the denominator activity for the predetermined overhead rate is laborhours, overhead costs are applied to work in process on the basis of the standard labor-hours allowed for the actual output. True False 12. A company has a standard cost system in which fixed and variable manufacturing overhead costs are applied to products on the basis of direct labor-hours. The company's choice of the denominator level of activity has no effect on the variable portion of the predetermined overhead rate. True False 13. A favorable volume variance means that the company operated at an activity level greater than that planned for the period. True False 14. A company has a standard cost system in which fixed and variable manufacturing overhead costs are applied to products on the basis of direct labor-hours. The company's choice of the denominator level of activity affects the fixed manufacturing overhead volume variance. True False App8A-2 Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Full file at Bank-Brewer Multiple Choice Questions 15. Sulema, Inc. repairs and refinishes antique furniture. Manufacturing overhead at Sulema is applied to production on the basis of standard direct labor-hours. Which overhead variance(s) at Sulema would be unfavorably affected if the cost of solvents used to strip the old paint from the furniture unexpectedly doubles in price? A. variable overhead rate variance B. variable overhead efficiency variance C. fixed manufacturing overhead budget variance D. fixed manufacturing overhead volume variance 16. When computing standard cost variances, the difference between actual and standard price multiplied by actual quantity yields a(n): A. combined price and quantity variance. B. efficiency variance. C. price or rate variance. D. quantity variance. 17. The fixed manufacturing overhead budget variance is: A. the difference between budgeted fixed manufacturing overhead cost and actual fixed manufacturing overhead cost. B. the difference between actual fixed manufacturing overhead cost and applied fixed manufacturing overhead cost. C. the difference between budgeted fixed manufacturing overhead cost and applied fixed manufacturing overhead cost. D. the difference between fixed overhead at the planned level of activity and the flexible budget for actual activity. 18. A volume variance is computed for: A. both variable and fixed manufacturing overhead. B. variable manufacturing overhead only. C. fixed manufacturing overhead only. D. direct labor costs as well as overhead costs. App8A-3 Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Full file at Bank-Brewer 19. Which of the following variances is generally the least significant from the standpoint of cost control? A. Materials price variance. B. Labor efficiency variance. C. Fixed manufacturing overhead volume variance. D. Variable overhead rate variance. 20. Traveller Corporation sells one product and uses a standard cost system. Last year the overhead volume variance was zero. Which of the following is correct? A. Actual variable manufacturing overhead cost was equal to standard variable manufacturing overhead cost. B. Total applied overhead was equal to total actual overhead. C. The denominator activity was equal to actual activity. D. The budgeted fixed costs were equal to the applied fixed costs. 21. The Santos Corporation made an error when selecting a denominator level of activity and chose a much lower level than was realistic. This error would most likely result in a large: A. favorable variable overhead efficiency variance. B. favorable fixed manufacturing overhead budget variance. C. favorable fixed manufacturing overhead volume variance. D. unfavorable fixed manufacturing overhead budget variance. 22. In a standard cost system, overhead is applied to production on the basis of: A. the denominator hours chosen for the period. B. the actual hours required to complete the actual output of the period. C. the standard hours allowed to complete the actual output of the period. D. the actual cost of fixed overhead during the period. 23. Dori Castings is a job order shop that uses a standard cost system. Manufacturing overhead costs are applied on the basis of standard direct labor-hours. A volume variance will exist for Dori in a month where: A. production volume differs from sales volume. B. actual direct labor-hours differ from standard hours allowed. C. there is a budget variance in fixed manufacturing overhead costs. D. the fixed manufacturing overhead applied to units of product on the basis of standard hours allowed differs from the budgeted fixed manufacturing overhead. App8A-4 Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Full file at Bank-Brewer 24. Alex Corporation has a large underapplied overhead balance in the manufacturing overhead account. This could be explained by: A. an unfavorable volume variance, assuming all other variances are zero. B. a favorable volume variance, assuming all other variances are zero. C. standard hours allowed for the period's output being greater than denominator hours for the period. D. favorable total variance for overhead. 25. Coblentz Fabrication Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs) at $6.20 per MH. The company had budgeted its fixed manufacturing overhead cost at $40,000 for the month. During the month, the actual total variable manufacturing overhead was $48,970 and the actual total fixed manufacturing overhead was $43,000. The actual level of activity for the period was 8,300 MHs. What was the total of the variable overhead rate and fixed manufacturing overhead budget variances for the month? A. $2,490 Favorable B. $510 Favorable C. $510 Unfavorable D. $2,490 Unfavorable 26. Omary Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company has provided the following data for the most recent month: Budgeted level of activity 3,900 MHs Actual level of activity 4,100 MHs Standard variable manufacturing overhead rate $7.60 per MH Budgeted fixed manufacturing overhead cost $50,000 Actual total variable manufacturing overhead $31,980 Actual total fixed manufacturing overhead $54,000 What was the total of the variable overhead rate and fixed manufacturing overhead budget variances for the month? A. $1,520 Unfavorable B. $3,180 Favorable C. $4,820 Unfavorable D. $6,340 Unfavorable App8A-5 Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Full file at Bank-Brewer 27. Dexter Corporation uses a standard cost system and applies manufacturing overhead cost to units of product on the basis of standard direct labor-hours (DLHs). Information on Dexter Corporation's manufacturing overhead costs for last period is given below: Actual hours worked 40,000 DLHs Standard hours allowed for actual production 38,000 DLHs Denominator hours used in computing the predetermined overhead rate 35,000 DLHs Predetermined overhead rate $4 per DLH Actual overhead cost incurred $150,000 Given these data, the underapplied or overapplied overhead cost for the period would be: A. $10,000 overapplied B. $2,000 overapplied C. $10,000 underapplied D. $8,000 underapplied 28. Steinhagen Corporation applies manufacturing overhead to products on the basis of standard machinehours. Budgeted and actual overhead costs for the most recent month appear below: Original Budget Actual Costs Variable overhead costs: Supplies $5,460 $6,570 Indirect labor 3,640 4,410 Fixed overhead costs: Supervision 9,100 9,450 Utilities 5,980 5,850 Factory depreciation 22,100 22,520 Total overhead cost $46,280 $48,800 The company based its original budget on 2,600 machine-hours. The company actually worked 2,790 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 2,960 machine-hours. What was the overall fixed manufacturing overhead volume variance for the month? A. $5,148 Favorable B. $5,148 Unfavorable C. $2,717 Favorable D. $2,717 Unfavorable App8A-6 Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Full file at Bank-Brewer 29. Semaan Corporation applies manufacturing overhead to products on the basis of standard machine-hours. Budgeted and actual overhead costs for the month appear below: Original Budget Actual Costs Variable overhead costs: Supplies $11,340 $12,850 Indirect labor 15,120 17,080 Fixed overhead costs: Supervision 14,900 14,640 Utilities 5,800 6,010 Factory depreciation 9,700 9,410 Total overhead cost $56,860 $59,990 The company based its original budget on 2,700 machine-hours. The company actually worked 2,960 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 3,030 machine-hours. What was the overall fixed manufacturing overhead budget variance for the month? A. $3,130 Unfavorable B. $340 Unfavorable C. $340 Favorable D. $3,130 Favorable 30. Hairr Corporation bases its predetermined overhead rate on variable manufacturing overhead cost of $9.50 per machine-hour and fixed manufacturing overhead cost of $947,672 per period. If the denominator level