The Production Volume variance is the difference between budgeted FOH and the FOH allocated on the basis of actual output produced. 5. Manufacturing companies treat fixed manufacturing overhead as if it were a variable cost for which purpose of cost accounting? Inventory costing purposes 6. Fixed overhead is underallocated if the general-ledger balance of the fixed manufacturing over-head control account is larger than the balance of the fixed Manufacturing Overhead allocated account. 7. The amount of underallocated or overallocated total overhead is the same as the amount of the total overhead variance.
8. Interpreting a cost variance for an activity area requires an understanding of the cost hierarchy used in the ABC systems. True- False 1. T 2. F 3. T 4. F 5. T 6. F 7. T 8. T 9. F 10. F 11. T Multiple Choice 1. Total overhead variance = Actual Variable overhead + Actual fixed overhead – Budgeted hours allowed for actual output produced x (budgeted variable overhead cost rate per machine-hour + budgeted fixed overhead costs rate per machine hour) B. 6,000 favorable Actual Variable overhead $ 73,000. 00 total budgeted overhead cost rate per machine hour $ 3. 00 Actual fixed overhead
$ 17,000. 00 budgeted hours allowed for actual output produced 32000 Budgeted variable overhead cost rate per machine hour $ 2. 50 Budgeted fixed overhead cost rate per macine hour $ 0. 50 Total Overhead incurred $ 90,000. 00 Total overhead allocated $ 96,000. 00 Total overhead variance $ (6,000. 00) 2. A. 76,000 Manufacturing overhead allocated = Budgeted total overhead cost rate x Budgeted hours allowed for actual output produced Total budgeted overhead $ 80,000. 00 budgeted machine hours used 20,000 required machine hours for each unit of output, at standard 2
Actual units of output producedd 9,500 Machine-hours used 19,500 Total overhead incurred $ 79,500. 00 Budgeted total overhead cost rate $ 4. 00 per machine Budgeted hours allowed for actual output produced 19,000 machine hours Manufacturing overhead allocated $ 76,000. 00 3. C. $5,500 Favorable Flexible Budget Variance = VOH spending variance + VOH efficiency variance 3,000 Favorable = VOH Spending variance + 2,500 Unfavorable VOH Spending variance = $3,000 Favorable – ($2,500 Unfavorable) VOH Spending variance = $5,500 Favorable