Question Details

When recording variances in a standard cost 



1. Price Company's flexible budget shows $10,710 of overhead at 75% of capacity, which was the operating
level achieved during May. However, the company applied overhead to production during May at a rate
of $2.00 per direct labor hour based on a budgeted operating level of 6,120 direct labor hours (90% of
capacity). If overhead actually incurred was $11,183 during May, the controllable variance for the month
was:
A. $473 unfavorable.
B. $473 favorable.
C. $1,530 favorable.
D. $1,530 unfavorable.
E. $1,057 favorable.
2. Adams, Inc. uses the following standard to produce a single unit of its product: overhead (2 hrs. @ $3/hr.)
$6. The flexible budget for overhead is $100,000 plus $1 per direct labor hour. Actual data for the month
show overhead costs of $150,000, and 24,000 units produced. The overhead volume variance is:
A. $10,000 favorable.
B. $12,000 favorable.
C. $4,000 unfavorable.
D. $16,000 unfavorable.
E. $36,000 unfavorable.
3. Quantity variances for direct cost categories (direct materials and direct labor) are based on differences
between the actual inputs used and the standard inputs allowed for the actual output achieved. A key
difference in the analysis of quantity variances for direct cost categories and the analysis of the efficiency
variance for variable overhead is:
A. An efficiency variance for variable overhead cannot be calculated.
B.
The flexible-budget variance for variable overhead is always equal to the efficiency variance for
variable overhead.
C.
The efficiency variance for variable overhead is based on the cost effectiveness in using the costallocation
base.
D.
The flexible-budget variance for variable overhead is always equal to the spending variance for
variable overhead.
E.
There is no key difference between the analysis of quantity variances for direct cost categories and the
analysis of the efficiency variance for variable overhead; they should be evaluated in exactly the same
manner.
4. The following information relating to a company's overhead costs is available. Based on this information,

Budget fixed overhead rate per machine hour 	$0.50
Actual variable overhead 	$73,000
Budgeted variable overhead rate per machine hour 	$2.50
Actual fixed overhead 	$17,000
Budgeted hours allowed for actual output achieved 	32,000

the total overhead variance is:
Based on this information, the total overhead variance is:
A. $7,000 favorable.
B. $6,000 favorable.
C. $1,000 unfavorable.
D. $6,000 unfavorable.
E. $1,000 favorable.
5. When recording variances in a standard cost system:
A. Only unfavorable material variances are debited.
B. Only unfavorable material variances are credited.
C. Both unfavorable material and labor variances are credited.
D. All unfavorable variances are debited.
E. All unfavorable variances are credited.





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