Ch. 8

Question 1

a costing system that (1) traces direct costs to output produced and (2) allocates overhead costs

Answer 1

standard costing

Question 2

how does the standard costing system trace direct costs to output produced

Answer 2

standard prices/rates
*
standard quantities of inputs allowed for actual outputs produced

Question 3

how does standard costing system allocate overhead cost, on the basis of the

Answer 3

standard overhead cost rates
*
standard quantities of the allocation bases allowed for the actual outputs produced

Question 4

4 steps of calculating budgeted variable overhead cost rates

Answer 4

1. Choose the period to be used for the budget
2. Select the cost allocation bases to use in allocating the variable overhead costs to the output produced
3. Identify the variable overhead costs associated with each cost allocation base
4. Compute the rate per unit of each cost allocation base used to allocate to variable overhead costs to the output produced

Question 5

budgeted variable overhead cost rate per output unit equation

Answer 5

budgeted variable overhead cost rate per output unit =

budgeted input allowed per output unit
*
budgeted variable overhead cost rate per input unit

Question 6

4 steps to calculating the budgeted fixed overhead rate

Answer 6

1. Choose the period to be used for the budget
2. Select the cost allocation bases to use in allocating the fixed overhead costs to the output produced
3. Identify the fixed overhead costs associated with each cost allocation base
4. Compute the rate per unit of each cost allocation base used to allocate fixed overhead costs to the output produced

Question 7

whats the difference in steps to develop the budgeted variable overhead rate and teh budgeted fixed overhead rate

Answer 7

no difference, anytime you would use the varibale overhead use fixed instead

Question 8

budgeted fixed overhead cost per unit of cost allocation base equation

Answer 8

budgeted fixed overhead cost per unit of cost allocation base =

budgeted total costs in fixed overhead cost pool
/
budgeted total quantity of cost allocation base

Question 9

budgeted fixed overhead cost per output unit equation

Answer 9

budgeted fixed overhead cost per output unit =

budgeted quantity of cost allocation base allowed per output unit
*
budgeted fixed overhead cost per unit of cost allocation base

Question 10

measures the difference between actual variable overhead costs incurred and flexible budget variable overhead amounts
(its like comparing your actual grocery bill to what you planned to spend)

Answer 10

flexible budget variance

Question 11

variable overhead flexible budget variance equation

Answer 11

variable overhead flexible budget variance =

actual costs incurred
-
flexible budget amount

Question 12

measures how efficiently the cost allocation base (like machine hours) was used. if you used more machine hours than planned this variance will show it

Answer 12

efficiency variance

Question 13

variable overhead efficiency variance equation

Answer 13

variable overhead efficiency variance =

(actual quantity of variable overhead cost allocation base used for actual output
-
budgeted quantity of variable overhead cost allocation base allowed for actual output)
* budgeted variable overhead cost per unit of cost allocation base

Question 14

• workers were less efficient than expected in using machines
• the production scheduler inefficiently scheduled jobs, resulting in more machine-hours used than budget
• machines were not maintained in good operating condition
• webbs sales staff promised a distributor a rush delivery, which resulted in more machine-hours used than budgeted
• budgeted machine time standards were set too tight
  (what are these)

Answer 14

possible causes of unfavorable MOH efficiency variance

Question 15

the difference between the actual cost per unit of the cost allocation base and the budgeted cost per unit
(its like finding out you paid more or less per item than you expected)

Answer 15

variable overhead spending variance

Question 16

variable overhead spending variance equation

Answer 16

variable overhead spending variance =

(actual variable overhead cost per unit of cost allocation base
-
budgeted variable overhead cost per unit of cost allocation base)
* actual quantity of variable overhead cost allocation base used

Question 17

the difference between what you expected to spend on the party and what you actually spend

Answer 17

fixed overhead flexible budget variance

Question 18

calulated by subtracting the flexible budget amount from the actual costs incurred

Answer 18

fixed overhead flexible budget variance

Question 19

fixed overhead flexible budget variance equation

Answer 19

fixed overhead flexible budget variance =

actual costs incurred
-
flexible budget amount

Question 20

the fixed overhead spending variance is the same as the

Answer 20

fixed overhead flexible budget variance
(bc fixed costs dont change with production efficiency

Question 21

the difference between the budgeted fixed overhead and the fixed overhead allocated based on actual output
(its like the gap between the factorys full potential and what it actually produces)

Answer 21

production volume variance

Question 22

production volume variance equation

Answer 22

production volume variance =

budgeted fixed overhead
-
fixed overhead allocated for actual output units produced

Question 23

which variance does variable overhead not have

Answer 23

no production volume variance

Question 24

which variance does fixed overhead not have

Answer 24

no efficiency variance

Question 25

what are the 4 variances in the 4 variance analysis

Answer 25

Variable overhead 1. spending variance 2. efficiency variance Fixed overhead 3. spending variance 4. production volume variance

Question 26

which companies use 4 volume variance

Answer 26

large, complex businesses

Question 27

what make the combined variane analysis different than the 4 variance analysis

Answer 27

it combines the spending variances of variable and fixed overhead

Question 28

the sum of the flexible budget variance and the production volume variance

Answer 28

total overhead variance

Question 29

(are these involved with variable mfg. overhead or fixed mfg. overhead) - indirect materials (glue, nuts, bolts, etc. - energy (gas/electric) - maintenance (preventative or routine (maintenance of machines)

Answer 29

variable mfg. overhead (these all fluctuate with output, but can not be directly traced to output units)

Question 30

focus on the activities that create superior product or service for their customers and eliminate activities that do not add value (is this planning for variable or fixed manufacturing overhead costs

Answer 30

variable Mfg overhead

Question 31

- undertake only essential activities and then plan to be efficient in that undertaking - additional strategic issue: choosing the appropriate level of capacity or investment that will benefit the company in the long run (is this planning for variable or fixed manufacturing overhead costs

Answer 31

fixed mfg overhead