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

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