Direct labor-hours would generally be a better measure of activity for a flexible budget than direct labor cost.

1. A key feature of a flexible budget is that actual results can be compared to budgeted costs at the same level of activity.

           

            Ans:  True    

        2. Direct labor-hours would generally be a better measure of activity for a flexible budget than direct labor cost.

           

            Ans:  True    

        3. In a flexible budget, when the activity declines, the variable costs per unit also declines.

           

            Ans:  False    

        4. Fixed costs should not be included in a flexible budget because they do not change when the level of activity changes.

           

            Ans:  False    

        5. To assess how well a production manager has controlled costs, actual costs should be compared to what the costs should have been for the planned level of production.

           

            Ans:  False    

        6. The overhead spending variance is not affected by excessive usage or waste of overhead materials.

           

            Ans:  False    

        7. The variable overhead efficiency variance provides a measure of how efficiently the activity base which underlies the flexible budget is being utilized in production.

           

            Ans:  True    

        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. The company's choice of the denominator level of activity affects the fixed overhead volume variance.

           

            Ans:  True     LO:  5; 6    

        9. The higher the denominator activity level used to compute the predetermined overhead rate, the higher the predetermined overhead rate.

           

            Ans:  False     LO:  5    

      10. 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 underapplied for the period.

           

            Ans:  False     LO:  5    

      11. When fixed manufacturing overhead cost is applied to work in process, it is treated as if it were a variable cost.

           

            Ans:  True     LO:  5    

      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.

           

            Ans:  True     LO:  5    

      13. There can be a volume variance for either variable manufacturing overhead or fixed manufacturing overhead.

           

            Ans:  False     LO:  6    

      14. If the denominator level of activity is less than the standard hours allowed for the output of the period, then the volume variance is unfavorable, indicating an overutilization of available facilities.

           

            Ans:  False     LO:  6    

      15. 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 overhead volume variance will necessarily occur in a month in which actual direct labor-hours differ from standard hours allowed.

           

            Ans:  False     LO:  6