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Exam 10: Compute and Interpret the Fixed Overhead Variances

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Question 1

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Wintersmith Corporation estimates that its variable manufacturing overhead is $11.60 per machine-hour and its fixed manufacturing overhead is $278,124 per period. -If the denominator level of activity is 4,300 machine-hours,the predetermined overhead rate would be:

A) $76.28
B) $64.68
C) $1,160.00
D) $11.60

E) A) and B)
F) A) and C)

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Question 2

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Wiley Corporation bases its predetermined overhead rate on variable manufacturing overhead cost of $13.90 per machine-hour and fixed manufacturing overhead cost of $944,300 per period.If the denominator level of activity is 7,100 machine-hours,the predetermined overhead rate would be:

A) $1,390.00
B) $146.90
C) $13.90
D) $133.00

E) All of the above
F) A) and B)

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Question 3

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Felux Corporation has provided the following data for October. $\begin{array}{llcc} \text { Denominator level of activity........................ } &1,300&\text { machine-hours}\\ \text {Budgeted fixed manufacturing overhead costs } &\$49,790\\ \text { Standard machine-hours allowed for the actual } &\\ \text { output .........................................................} &1,600&\text { machine-hours}\\ \text { Actual fixed manufacturing overhead costs....} &\$49,050\\\end{array}$ Required: a.Compute the budget variance for October.Show your work! b.Compute the volume variance for October.Show your work!

Mattern Corporation applies manufacturing overhead to products on the basis of standard machine-hours.Budgeted and actual fixed manufacturing overhead costs for the most recent month appear below: $\begin{array}{llcc} &\text {Original Budget } & \text { Actual Costs }\\ \text {Fixed manufacturing overhead costs: } &\\ \text { Supervision } &\$16,470&\$16,930\\ \text {Utilities } &14,030&14,030\\ \text { Factory depreciation } &\underline{45,140}&\underline{45,520}\\ \text { Total fixed manufacturing overhead cost. } &\underline{\underline{\$75,640}}&\underline{\underline{\$76,480}}\\\end{array}$ The company based its original budget on 6,100 machine-hours.The company actually worked 5,710 machine-hours during the month.The standard hours allowed for the actual output of the month totaled 5,540 machine-hours.What was the overall fixed manufacturing overhead volume variance for the month?

Wintersmith Corporation estimates that its variable manufacturing overhead is $11.60 per machine-hour and its fixed manufacturing overhead is $278,124 per period. -If the denominator level of activity is 4,200 machine-hours,the fixed element in the predetermined overhead rate would be:

If all four of Argo Corporation's overhead variances are favorable,Argo's overhead will be overapplied.

Hoops Corporation applies manufacturing overhead to products on the basis of standard machine-hours.The company's predetermined overhead rate for fixed manufacturing overhead is $1.30 per machine-hour and the denominator level of activity is 3,700 machine-hours.In the most recent month,the total actual fixed manufacturing overhead was $4,450 and the company actually worked 4,000 machine-hours during the month.The standard hours allowed for the actual output of the month totaled 3,880 machine-hours.What was the overall fixed manufacturing overhead volume variance for the month?

The fixed manufacturing overhead budget variance is more meaningful than the volume variance for cost control purposes.

The higher the denominator level of activity:

Jessep Corporation has a standard cost system in which manufacturing overhead is applied on the basis of standard direct labor-hours.The company has provided the following data concerning its fixed manufacturing overhead costs in March: $\begin{array}{llcc} \text {Denominator hours.................................... } &15,000&\text { hours }\\ \text {Actual hours worked..........................} &14,000&\text { hours }\\ \text {Standard hours allowed for the output................... } &12,000&\text { hours }\\ \text { Flexible budget fixed manufacturing overhead cost.....} &\$45,000\\ \text { Actual fixed manufacturing overhead costs................}&\$48,000\end{array}$ -The fixed manufacturing overhead volume variance is:

The denominator activity represents the actual level of activity recorded for a period.

The volume variance provides a measure of the utilization of plant facilities.

If the denominator activity (in hours)used to compute the predetermined overhead rate is equal to the actual activity (in hours)for the period,then there is no volume variance.

The following data pertain to operations for the most recent period: $\begin{array}{lrc}\text { Actual hours ................................................ } & 6,400& \text { DLHs } \\\text { Standard hours allowed for the actual output............... } & 6,273 &\text { DLHs }\\\text { Actual total variable manufacturing overhead cost....... }&\$ 58,110 \\\end{array}$ -What is the predetermined fixed manufacturing overhead rate to the nearest cent?

The following data pertain to operations for the most recent period: $\begin{array}{lrc}\text { Actual hours ................................................ } & 6,400& \text { DLHs } \\\text { Standard hours allowed for the actual output............... } & 6,273 &\text { DLHs }\\\text { Actual total variable manufacturing overhead cost....... }&\$ 58,110 \\\end{array}$ -What was the fixed manufacturing overhead budget variance for the period to the nearest dollar?

The Ferris Company applies manufacturing overhead costs to products on the basis of standard direct labor-hours.The standard cost card shows that 3 direct labor-hours are required per unit of product.For August,the company budgeted to work 90,000 direct labor-hours and to incur the following total manufacturing overhead costs: $\begin{array}{llcc} \text { Total variable manufacturing overhead costs......} &\$99,000\\ \text {Total fixed manufacturing overhead costs ........... } &\$118,800\\\end{array}$ During August,the company completed 28,000 units of product,worked 86,000 direct labor-hours,and incurred the following total manufacturing overhead costs: $\begin{array}{llcc} \text { Total variable manufacturing overhead costs......} &\$98,900\\ \text {Total fixed manufacturing overhead costs ........... } &\$115,300\\\end{array}$ The denominator activity in the predetermined overhead rate is 90,000 direct labor-hours. -For August,the variable overhead rate variance is:

A manufacturer of industrial equipment uses a standard costing system in which standard machine-hours (MHs) is the measure of activity.Data from the company's flexible budget for manufacturing overhead are given below: $\begin{array}{llcc} \text {Denominator level of activity................................... } &5,100&\text { MHs }\\ \text {Overhead costs at the denominator activity level: } &\\ \text {Variable overhead cost............................................. } &\$12,495\\ \text { Fixed overhead cost ................................................} &\$62,220\\\end{array}$ The following data pertain to operations for the most recent period: $\begin{array}{lrc}\text { Actual hours ................................................ } &5,300& \text { MHs } \\\text { Standard hours allowed for the actual output............... } &5,160 &\text { MHs }\\\text { Actual total variable manufacturing overhead cost....... }&\$ 12,985 \\\text { Actual total fixed manufacturing overhead cost } & \$60,270\end{array}$ -What is the predetermined overhead rate to the nearest cent?

The fixed manufacturing overhead volume variance is due to:

A manufacturing company uses a standard costing system in which standard machine-hours (MHs) is the measure of activity.Data from the company's flexible budget for manufacturing overhead are given below: \begin{array}{llcc} \text {Denominator level of activity } &8,900\quad \text { \mathrm{MHs} }\\ \text { Overhead costs at the denominator activity level: } &\\ \text { Variable overhead cost } &\$86,775\\ \text {Fixed overhead cost } &\$137,950\\ &\\ \text { } &\\\end{array} The following data pertain to operations for the most recent period: $\begin{array}{llcc} \text {Actual hours } &9,000\quad\text { MHs }\\ \text {Standard hours allowed for the actual output. } &8,977\quad\text { MHs }\\ \text {Actual total variable manufacturing overhead cost } &\$88,650\\ \text { Actual total fixed manufacturing overhead cost } &\$136,850\\\end{array}$ -What is the predetermined overhead rate to the nearest cent?

Mauve Company uses a standard cost system in which it applies manufacturing overhead to units of product on the basis of standard direct labor-hours (DLHs) .The following data pertain to last month: $\begin{array}{c}\begin{array}{lll}\text { Actual hours worked..........................................}\\\text { Budgeted fixed manufacturing overhead costs....}\\\text { Actual fixed manufacturing overhead costs........}\\\text { Standard hours allowed.....................................}\\\text { Predetermined overhead rate............................}\end{array}\begin{array}{lll}2,400 & \text { DLHs } \\\$ 10,000 & \\\$ 10,400 & \\2,500 & \text { DLHs } \\\$ 5 & \text { per DLH }\end{array}\end{array}$ The fixed manufacturing overhead budget variance is: