Pleiss Corporation applies manufacturing overhead to products on the basis of standard machine-hours. The company's cost formula for variable overhead cost is $2.40 per machine-hour. The actual variable overhead cost for the month was $5,240. The original budget for the month was based on 2,100 machine-hours.

Pleiss Corporation applies manufacturing overhead to products on the basis of standard machine-hours. The company's cost formula for variable overhead cost is $2.40 per machine-hour. The actual variable overhead cost for the month was $5,240. The original budget for the month was based on 2,100 machine-hours. The company actually worked 2,270 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 2,280 machine-hours. What was the variable overhead efficiency variance for the month?

            A)      $24 favorable

            B)      $232 favorable

            C)      $208 favorable

            D)      $432 unfavorable

           

            Ans:  A    

            Solution:

           

            Budgeted machine-hours: 2,100

Actual machine-hours: 2,270

Standard machine-hours allowed: 2,280

		Cost Formula (per MH)	(1) Budget Based on 2,270 MHs (AH × SR)	(2) Budget Based on 2,280 MHs (SH × SR)	(1) − (2) Efficiency Variance
	Variable overhead costs	$2.40	$5,448	$5,472	$24 F

      47. Pyrdum Corporation produces metal telephone poles. In the most recent month, the company budgeted production of 3,500 poles. Actual production was 3,800 poles. According to standards, each pole requires 4.6 machine-hours. The actual machine-hours for the month were 17,800 machine-hours. The budgeted indirect labor is $5.40 per machine-hour. The actual indirect labor cost for the month was $96,712. The variable overhead efficiency variance for indirect labor is:

            A)      $2,320 U

            B)      $1,728 F

            C)      $2,320 F

            D)      $1,728 U

           

            Ans:  D    

            Solution:

           

            Standard hours = Actual production in units × Standard machine-hours per unit

= 3,800 × 4.6 = 17,480

Variable overhead efficiency variance = SR × (AH − SH)

= $5.40 × (17,800 − 17,480) = $5.40 × 320 = $1,728 U

      48. Hermansen Corporation produces large commercial doors for warehouses and other facilities. In the most recent month, the company budgeted production of 5,100 doors. Actual production was 5,400 doors. According to standards, each door requires 3.8 machine-hours. The actual machine-hours for the month were 20,880 machine-hours. The budgeted supplies cost is $7.90 per machine-hour. The actual supplies cost for the month was $152,063. The variable overhead efficiency variance for supplies cost is:

            A)      $10,045 F

            B)      $10,045 U

            C)      $2,844 F

            D)      $2,844 U

           

            Ans:  D    

            Solution:

           

            Standard hours = Actual production in units × Standard machine-hours per unit

= 5,400 × 3.8 = 20,520

Variable overhead efficiency variance = SR × (AH − SH)

= $7.90 × (20,880 − 20,520) = $7.90 × 360 = $2,844 U

      49. The following data have been provided by Moretta Corporation, a company that produces forklift trucks:

           

	Budgeted production.................................	3,400	trucks
	Standard machine-hours per truck.............	2.9	machine-hours
	Budgeted supplies cost..............................	$1.50	per machine-hour
	Actual production......................................	3,800	trucks
	Actual machine-hours................................	10,930	machine-hours
	Actual supplies cost (total)........................	$17,496

            The variable overhead efficiency variance for supplies cost is:

            A)      $135 U

            B)      $135 F

            C)      $966 U

            D)      $966 F

           

            Ans:  B    

            Solution:

           

            Standard hours = Actual production in units × Standard machine-hours per unit

= 3,800 × 2.9 = 11,020

Variable overhead efficiency variance = SR × (AH − SH)

= $1.50 × (10,930 − 11,020) = $1.50 × (-$90) = $135 F

      50. Ronda Manufacturing Company uses a standard cost system with machine-hours as the activity base for overhead. Last year, Ronda incurred $840,000 of fixed manufacturing overhead and generated a $42,000 favorable fixed overhead budget variance. The following data relate to last year's operations:

           

	Denominator activity level in machine-hours................	21,000
	Standard machine-hours allowed for actual output........	20,000
	Actual number of machine-hours incurred.....................	22,050

            What amount of total fixed manufacturing overhead cost did Ronda apply to production last year?

            A)      $837,900

            B)      $840,000

            C)      $926,100

            D)      $972,405

           

            Ans:  B     LO:  5; 6    

            Solution:

           

            Predetermined overhead rate =

$882,000 ÷ 21,000 denominator machine-hours = $42 per machine-hour

Fixed overhead applied to production =

20,000 standard hours × $42 per machine-hour = $840,000

      51. Blue Company's standards call for 2,500 direct labor-hours to produce 1,000 units. During May only 900 units were produced and the company worked 2,400 direct labor-hours. The standard hours allowed for May production would be:

            A)      2,500 hours

            B)      2,400 hours

            C)      2,250 hours

            D)      1,800 hours

           

            Ans:  C     LO:  5    

            Solution:

           

            Standard direct labor-hours per unit = 2,500 direct labor-hours ÷ 1,000 units

= 2.5 direct labor-hours per unit

Standard hours allowed = 2.5 direct labor hours per unit × 900 units

= 2,250 hours

      52. Diehl Company uses a standard cost system in which it applies manufacturing overhead to units of product on the basis of standard direct labor-hours. The company's total applied factory overhead was $315,000 last year when the company used 32,000 direct labor-hours as the denominator activity. If the variable factory overhead rate was $8 per direct labor-hour, and if 30,000 standard labor-hours were allowed for the output of the year, then the total budgeted fixed factory overhead for the year must have been:

            A)      $60,000

            B)      $80,000

            C)      $90,000

            D)      $100,000

           

            Ans:  B     LO:  5    

            Solution:

           

            Predetermined overhead rate = $315,000 ÷ 30,000 DLHs = $10.50 per DLH

Fixed portion of predetermined overhead rate

= Total predetermined overhead rate − Variable overhead rate

= $10.50 per DLH − $8.00 per DLH = $2.50 per DLH

Budgeted fixed overhead = 32,000 DLHs × $2.50 per DLH = $80,000

      53. The Marlow Company uses a standard cost system and applies manufacturing overhead to products on the basis of standard direct labor-hours. The denominator activity is set at 40,000 direct labor-hours per year. Budgeted fixed manufacturing overhead cost is $40,000 per year, and 0.5 direct labor-hours are required to manufacture one unit. The standard cost card would indicate fixed manufacturing overhead cost per unit to be:

            A)      $1.00

            B)      $2.00

            C)      $1.50

            D)      $0.50

           

            Ans:  D     LO:  5    

            Solution:

            Actual units produced = Total direct labor-hours ÷ Standard direct labor-hours per unit = 40,000 ÷ 0.5 = 80,000 units

            Fixed manufacturing overhead cost per unit = $40,000 ÷ 80,000 units = $0.50 per unit

      54. Bakos Corporation's abbreviated flexible budget for two levels of activity appears below:

		Cost Formula (per machine-hour)	Activity (in machine-hours)
			2,800	2,900
	Total variable overhead cost......	$8.80	$ 24,640	$ 25,520
	Total fixed overhead cost...........		100,688	100,688
	Total overhead cost....................		$125,328	$126,208

            If the denominator level of activity is 2,800 machine-hours, the variable element in the predetermined overhead rate would be:

            A)      $44.76

            B)      $35.96

            C)      $43.52

            D)      $8.80

           

            Ans:  D     LO:  5    

            Solution:

            Variable element = Total variable overhead cost ÷ Actual machine-hours

            = $24,640 ÷ 2,800 machine-hours = $8.80 per machine-hour

      55. Recht Corporation's summary flexible budget for two levels of activity appears below:

           

		Cost Formula (per machine-hour)	Activity (in machine-hours)
			1,200	1,300
	Total variable overhead cost......	$9.30	$ 11,160	$ 12,090
	Total fixed overhead cost...........		17,940	17,940
	Total overhead cost....................		$29,100	$30,030

            If the denominator level of activity is 1,200 machine-hours, the fixed element in the predetermined overhead rate would be:

            A)      $14.95

            B)      $930.00

            C)      $24.25

            D)      $9.30

           

            Ans:  A     LO:  5    

            Solution:

            Fixed element = Total fixed overhead ÷ Actual machine-hours

            = $17,940 ÷ 1,200 machine-hours = $14.95 per machine-hour

      56. Billa Corporation's abbreviated flexible budget for two levels of activity appears below:

		Cost Formula (per machine-hour)	Activity (in machine-hours)
			4,600	4,700
	Total variable overhead cost......	$11.70	$ 53,820	$ 54,990
	Total fixed overhead cost...........		341,596	341,596
	Total overhead cost....................		$395,416	$396,586

            If the denominator level of activity is 4,700 machine-hours, the predetermined overhead rate would be:

            A)      $11.70

            B)      $72.68

            C)      $84.38

            D)      $1,170.00

           

            Ans:  C     LO:  5    

            Solution:

            Predetermined overhead rate = Total overhead cost ÷ Actual machine-hours

            = $396,586 ÷ 4,700 machine-hours = $84.38 per machine-hour

      57. At the beginning of last year, Monze Corporation budgeted $600,000 of fixed manufacturing overhead and chose a denominator level of activity of 100,000 direct labor-hours. At the end of the year, Monze's fixed overhead budget variance was $8,000 unfavorable. Its fixed overhead volume variance was $21,000 favorable. Actual direct labor-hours for the year were 96,000. What was Monze's actual fixed overhead for last year?

            A)      $563,000

            B)      $579,000

            C)      $608,000

            D)      $592,000

           

            Ans:  C     LO:  6    

            Solution:

            Fixed overhead budget variance

            = Actual fixed overhead cost − Budgeted fixed overhead cost

            = Actual fixed overhead cost − $600,000 = $8,000 U

            Actual fixed overhead = $8,000 + $600,000 = $608,000

      58. Mclellan Corporation applies manufacturing overhead to products on the basis of standard machine-hours. Budgeted and actual overhead costs for the month appear below:

           

		Original Budget	Actual Costs
	Variable overhead costs:
	Supplies......................................	$ 9,760	$10,200
	Indirect labor..............................	42,090	43,720
	Fixed overhead costs:
	Supervision.................................	14,500	14,350
	Utilities.......................................	5,200	4,740
	Factory depreciation...................	7,400	7,510
	Total overhead cost.......................	$78,950	$80,520

            The company based its original budget on 6,100 machine-hours. The company actually worked 6,480 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 6,370 machine-hours. What was the overall fixed overhead budget variance for the month?

            A)      $500 favorable

            B)      $500 unfavorable

            C)      $1,570 favorable

            D)      $1,570 unfavorable

           

            Ans:  A     LO:  6    

            Solution:

            Budget variance = Actual fixed overhead cost − Budgeted fixed overhead cost

            = ($14,350 + $4,740 + $7,510) − ($14,500 + $5,200 + $7,400)

            = $26,600 − $27,100 = $500 F

      59. Songster Corporation applies manufacturing overhead to products on the basis of standard machine-hours. Budgeted and actual overhead costs for the most recent month appear below:

           

		Original Budget	Actual Costs
	Fixed overhead costs:
	Supervision....................	$14,100	$13,650
	Utilities...........................	5,300	5,060
	Factory depreciation.......	7,200	7,470
	Total overhead cost...........	$26,600	$26,180

            The company based its original budget on 3,500 machine-hours. The company actually worked 3,700 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 3,820 machine-hours. What was the overall fixed overhead budget variance for the month?

            A)      $2,432 favorable

            B)      $2,432 unfavorable

            C)      $420 favorable

            D)      $420 unfavorable

           

            Ans:  C     LO:  6    

            Solution:

            Budget variance = Actual fixed overhead cost − Budgeted fixed overhead cost

            = $26,180 − $26,600 = $420 F

      60. Maertz Corporation applies manufacturing overhead to products on the basis of standard machine-hours. The budgeted fixed overhead cost for the most recent month was $10,890 and the actual fixed overhead cost for the month was $10,540. The company based its original budget on 3,300 machine-hours. The standard hours allowed for the actual output of the month totaled 3,240 machine-hours. What was the overall fixed overhead budget variance for the month?

            A)      $198 unfavorable

            B)      $350 unfavorable

            C)      $198 favorable

            D)      $350 favorable

           

            Ans:  D     LO:  6    

            Solution:

            Budget variance = Actual fixed overhead cost − Budgeted fixed overhead cost

            = $10,540 − $10,890 = $350 F

      61. Lossing Corporation applies manufacturing overhead to products on the basis of standard machine-hours. Budgeted and actual overhead costs for the most recent month appear below:

		Original Budget	Actual Costs
	Variable overhead costs:
	Supplies......................................	$11,220	$10,670
	Indirect labor..............................	8,670	8,030
	Fixed overhead costs:
	Supervision.................................	5,610	5,940
	Utilities.......................................	8,160	7,990
	Factory depreciation...................	39,780	39,950
	Total overhead cost.......................	$73,440	$72,580

            The company based its original budget on 5,100 machine-hours. The company actually worked 4,800 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 4,980 machine-hours. What was the overall fixed overhead volume variance for the month?

            A)      $3,150 unfavorable

            B)      $3,150 favorable

            C)      $1,260 unfavorable

            D)      $1,260 favorable

           

            Ans:  C     LO:  6    

            Solution:

           

            Fixed portion of predetermined overhead rate

= Total budgeted fixed overhead ÷ Budgeted machine-hours

= ($5,610 + $8,160 + $39,780) ÷ 5,100 MHs

= $53,550 ÷ 5,100 MHs = $10.50 per MH

Volume variance = $10.50 per MH × (5,100 MHs − 4,980 MHs)

= $10.50 per MH × 120 MHs = $1,260 U

      62. Hoag Corporation applies manufacturing overhead to products on the basis of standard machine-hours. Budgeted and actual fixed overhead costs for the most recent month appear below:

           

		Original Budget	Actual Costs
	Fixed overhead costs:
	Supervision.................................	$ 9,880	$ 9,970
	Utilities.......................................	4,160	4,440
	Factory depreciation...................	21,320	21,190
	Total fixed overhead cost..............	$35,360	$35,600

            The company based its original budget on 2,600 machine-hours. The company actually worked 2,280 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 2,080 machine-hours. What was the overall fixed overhead volume variance for the month?

            A)      $4,352 favorable

            B)      $4,352 unfavorable

            C)      $7,072 unfavorable

            D)      $7,072 favorable

           

            Ans:  C     LO:  6    

            Solution:

           

            Predetermined overhead rate = Total overhead ÷ Budgeted hours

= $35,360 ÷ 2,600 MHs = $13.60 per MH

Volume variance = $13.60 per MH × (2,600 MHs − 2,080 MHs)

= $13.60 per MH × 520 MHs = $7,072 U

      63. Merone Corporation applies manufacturing overhead to products on the basis of standard machine-hours. The company bases its predetermined overhead rate on 2,300 machine-hours. The company's total budgeted fixed manufacturing overhead is $5,060. In the most recent month, the total actual fixed manufacturing overhead was $4,660. The company actually worked 2,200 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 2,320 machine-hours. What was the overall fixed overhead volume variance for the month?

            A)      $220 unfavorable

            B)      $400 favorable

            C)      $44 favorable

            D)      $220 favorable

           

            Ans:  C     LO:  6    

            Solution:

           

            Predetermined overhead rate = Total overhead ÷ Budgeted hours

= $5,060 ÷ 2,300 MHs = $2.20 per MH

Volume variance = $2.20 per MH × (2,300 MHs − 2,320 MHs)

= $2.20 per MH × 20 MHs = $44 F

Rodarta Corporation applies manufacturing overhead to products on the basis of standard machine-hours. The company's predetermined overhead rate for fixed manufacturing overhead is $1.20 per machine-hour and the denominator level of activity is 6,600 machine-hours. In the most recent month, the total actual fixed manufacturing overhead was $8,340 and the company actually worked 6,400 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 6,480 machine-hours. What was the overall fixed overhead volume variance for the month?

            A)      $240 favorable

            B)      $144 unfavorable

            C)      $240 unfavorable

            D)      $96 favorable

           

            Ans:  B     LO:  6    

            Solution:

           

            Volume variance = $1.20 per MH × (6,600 MHs − 6,480 MHs)

= $1.20 per MH × 120 MHs = $144 U