ACC3303 Final Exam With Complete Solutions
Overhead costs are a major part of costs for most companies — more than 50% of all
costs for some companies. - ANSWER True
At the start of the budget period, management will have made most decisions regarding
the level of variable costs to be incurred. - ANSWER False; fixed costs
One way to manage both variable and fixed overhead costs is to eliminate
nonvalue-adding activities. - ANSWER True
In a standard costing system, the variable-overhead rate per unit is generally expressed
as a standard cost per output unit. - ANSWER True
For calculating the cost of products and services, a standard costing system does not
have to keep track of actual costs. - ANSWER True
The budget period for variable-overhead costs is typically less than 3 months. -
ANSWER False; 12 months
A favorable variable overhead spending variance can be the result of paying lower
prices than budgeted for variable overhead items such as energy. - ANSWER True
The variable overhead efficiency variance is computed in a different way than the
efficiency variance for direct-cost items. - ANSWER False; same way as the efficiency
variance for direct-cost items
The variable overhead flexible-budget variance measures the difference between
standard variable overhead costs and flexible-budget variable overhead costs. -
ANSWER False; between the actual variable overhead costs and the flexible-budget
variable-overhead costs
The variable overhead efficiency variance measures the efficiency with which the
cost-allocation base is used. - ANSWER True
The variable overhead efficiency variance can be interpreted the same way as the
efficiency variance for direct-cost items. - ANSWER False; The interpretations are
different. The variable overhead efficiency variance focuses on the quantity of
allocation-base used, while the efficiency variance for direct-cost items focuses on the
quantity of materials and labor-hours used.
An unfavorable variable overhead efficiency variance indicates that variable overhead
costs were wasted and inefficiently used. - ANSWER False; the company used more than
planned of the cost-allocation base
Causes of a favorable variable overhead efficiency variance might include using
lower-skilled workers than expected. - ANSWER False; higher-skilled workers
,For fixed overhead costs, the flexible-budget amount is always the same as the
static-budget amount. - ANSWER True
The fixed overhead flexible-budget variance is the difference between actual fixed
overhead costs and the fixed overhead costs in the flexible budget. - ANSWER True
There is never an efficiency variance for fixed costs. - ANSWER True
All unfavorable overhead variances decrease operating income compared to the
budget. - ANSWER True
A favorable fixed overhead flexible-budget variance indicates that actual fixed costs
exceeded the lump-sum amount budgeted. - ANSWER False; actual fixed costs less than
the lump-sum amount
Caution is appropriate before interpreting the production-volume variance as a measure
of the economic cost of unused capacity. - ANSWER True
The production-volume variance arises whenever the actual level of the denominator
differs from the level used to calculate the budgeted fixed overhead rate. - ANSWER
True
The lump sum budgeted for fixed overhead will always be the same amount for the static
budget and the flexible budget. - ANSWER True
A favorable production-volume variance arises when manufacturing capacity planned
for is not used. - ANSWER False; unfavorable
Managers should use unitized fixed manufacturing overhead costs for planning and
control. - ANSWER False; should not utilize
Both financial and nonfinancial performance measures are key inputs when evaluating
the performance of managers. - ANSWER True
In the journal entry that records overhead variances, the manufacturing overhead
allocated accounts are closed. - ANSWER True
Variance analysis of fixed nonmanufacturing costs, such as distribution costs, can also
be useful when planning for capacity. - ANSWER True
Variance analysis of fixed overhead costs is also useful when a company uses
activity-based costing. - ANSWER True
An unfavorable fixed setup overhead spending variance could be due to higher lease
costs of new setup equipment. - ANSWER True
A favorable variable setup overhead efficiency variance could be due to actual
setup-hours exceeding the setup-hours planned for the units produced. - ANSWER
False; unfavorable
,Overhead costs have been increasing due to all of the following EXCEPT
a. increased automation.
b. more complexity in distribution processes.
c. tracing more costs as direct costs with the help of technology.
d. product proliferation. - ANSWER c. tracing more costs as direct costs with the help
of technology.
Effective planning of variable overhead costs means that a company performs those
variable overhead costs that primarily add value
a. for the current shareholders.
b. for the customer using the products or services.
c. for plant employees.
d. for major suppliers of component parts. - ANSWER b. for the customer using the
products or services.
Variable overhead costs include
a. plant-leasing costs.
b. the plant manager's salary.
c. depreciation on plant equipment.
d. machine maintenance. - ANSWER d. machine maintenance.
Fixed overhead costs include
a. the cost of sales commissions.
b. property taxes paid on plant facilities.
c. energy costs.
d. indirect materials. - ANSWER b. property taxes paid
, Effective planning of fixed overhead costs includes all EXCEPT
a. planning day-to-day operational decisions.
b. eliminating nonvalue-added costs.
c. planning to be efficient.
d. choosing the appropriate level of capacity. - ANSWER a. planning day-to-day
operational decisions.
Effective planning of variable overhead includes all EXCEPT
a. choosing the appropriate level of capacity.
b. eliminating nonvalue-adding costs.
c. redesigning products to use fewer resources.
d. redesigning the plant layout for more efficient processing. - ANSWER a. choosing the
appropriate level of capacity.
Choosing the appropriate level of capacity
a. is a key strategic decision.
b. may lead to loss of sales if overestimated.
c. may lead to idle capacity if underestimated.
d. can be all of the above. - ANSWER a. is a key strategic decision.
The MAJOR challenge when planning fixed overhead
a. is calculating total costs.
b. is calculating the cost-allocation rate.
c. is choosing the appropriate level of capacity.
d. is choosing the appropriate planning period. - ANSWER c. is choosing the
appropriate level of capacity.
In a standard costing system, a cost-allocation base would MOST likely be
Overhead costs are a major part of costs for most companies — more than 50% of all
costs for some companies. - ANSWER True
At the start of the budget period, management will have made most decisions regarding
the level of variable costs to be incurred. - ANSWER False; fixed costs
One way to manage both variable and fixed overhead costs is to eliminate
nonvalue-adding activities. - ANSWER True
In a standard costing system, the variable-overhead rate per unit is generally expressed
as a standard cost per output unit. - ANSWER True
For calculating the cost of products and services, a standard costing system does not
have to keep track of actual costs. - ANSWER True
The budget period for variable-overhead costs is typically less than 3 months. -
ANSWER False; 12 months
A favorable variable overhead spending variance can be the result of paying lower
prices than budgeted for variable overhead items such as energy. - ANSWER True
The variable overhead efficiency variance is computed in a different way than the
efficiency variance for direct-cost items. - ANSWER False; same way as the efficiency
variance for direct-cost items
The variable overhead flexible-budget variance measures the difference between
standard variable overhead costs and flexible-budget variable overhead costs. -
ANSWER False; between the actual variable overhead costs and the flexible-budget
variable-overhead costs
The variable overhead efficiency variance measures the efficiency with which the
cost-allocation base is used. - ANSWER True
The variable overhead efficiency variance can be interpreted the same way as the
efficiency variance for direct-cost items. - ANSWER False; The interpretations are
different. The variable overhead efficiency variance focuses on the quantity of
allocation-base used, while the efficiency variance for direct-cost items focuses on the
quantity of materials and labor-hours used.
An unfavorable variable overhead efficiency variance indicates that variable overhead
costs were wasted and inefficiently used. - ANSWER False; the company used more than
planned of the cost-allocation base
Causes of a favorable variable overhead efficiency variance might include using
lower-skilled workers than expected. - ANSWER False; higher-skilled workers
,For fixed overhead costs, the flexible-budget amount is always the same as the
static-budget amount. - ANSWER True
The fixed overhead flexible-budget variance is the difference between actual fixed
overhead costs and the fixed overhead costs in the flexible budget. - ANSWER True
There is never an efficiency variance for fixed costs. - ANSWER True
All unfavorable overhead variances decrease operating income compared to the
budget. - ANSWER True
A favorable fixed overhead flexible-budget variance indicates that actual fixed costs
exceeded the lump-sum amount budgeted. - ANSWER False; actual fixed costs less than
the lump-sum amount
Caution is appropriate before interpreting the production-volume variance as a measure
of the economic cost of unused capacity. - ANSWER True
The production-volume variance arises whenever the actual level of the denominator
differs from the level used to calculate the budgeted fixed overhead rate. - ANSWER
True
The lump sum budgeted for fixed overhead will always be the same amount for the static
budget and the flexible budget. - ANSWER True
A favorable production-volume variance arises when manufacturing capacity planned
for is not used. - ANSWER False; unfavorable
Managers should use unitized fixed manufacturing overhead costs for planning and
control. - ANSWER False; should not utilize
Both financial and nonfinancial performance measures are key inputs when evaluating
the performance of managers. - ANSWER True
In the journal entry that records overhead variances, the manufacturing overhead
allocated accounts are closed. - ANSWER True
Variance analysis of fixed nonmanufacturing costs, such as distribution costs, can also
be useful when planning for capacity. - ANSWER True
Variance analysis of fixed overhead costs is also useful when a company uses
activity-based costing. - ANSWER True
An unfavorable fixed setup overhead spending variance could be due to higher lease
costs of new setup equipment. - ANSWER True
A favorable variable setup overhead efficiency variance could be due to actual
setup-hours exceeding the setup-hours planned for the units produced. - ANSWER
False; unfavorable
,Overhead costs have been increasing due to all of the following EXCEPT
a. increased automation.
b. more complexity in distribution processes.
c. tracing more costs as direct costs with the help of technology.
d. product proliferation. - ANSWER c. tracing more costs as direct costs with the help
of technology.
Effective planning of variable overhead costs means that a company performs those
variable overhead costs that primarily add value
a. for the current shareholders.
b. for the customer using the products or services.
c. for plant employees.
d. for major suppliers of component parts. - ANSWER b. for the customer using the
products or services.
Variable overhead costs include
a. plant-leasing costs.
b. the plant manager's salary.
c. depreciation on plant equipment.
d. machine maintenance. - ANSWER d. machine maintenance.
Fixed overhead costs include
a. the cost of sales commissions.
b. property taxes paid on plant facilities.
c. energy costs.
d. indirect materials. - ANSWER b. property taxes paid
, Effective planning of fixed overhead costs includes all EXCEPT
a. planning day-to-day operational decisions.
b. eliminating nonvalue-added costs.
c. planning to be efficient.
d. choosing the appropriate level of capacity. - ANSWER a. planning day-to-day
operational decisions.
Effective planning of variable overhead includes all EXCEPT
a. choosing the appropriate level of capacity.
b. eliminating nonvalue-adding costs.
c. redesigning products to use fewer resources.
d. redesigning the plant layout for more efficient processing. - ANSWER a. choosing the
appropriate level of capacity.
Choosing the appropriate level of capacity
a. is a key strategic decision.
b. may lead to loss of sales if overestimated.
c. may lead to idle capacity if underestimated.
d. can be all of the above. - ANSWER a. is a key strategic decision.
The MAJOR challenge when planning fixed overhead
a. is calculating total costs.
b. is calculating the cost-allocation rate.
c. is choosing the appropriate level of capacity.
d. is choosing the appropriate planning period. - ANSWER c. is choosing the
appropriate level of capacity.
In a standard costing system, a cost-allocation base would MOST likely be
