Predetermined Overhead Rates and Overhead
Analysis in a
Standard Costing System
Predetermined Overhead
Rates and Overhead
Analysis in a Standard
Costing System
, True / False Questions
1. 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 manufacturing overhead volume variance
will NOT necessarily occur in a month in which production volume differs from sales volume.
True False
2. The fixed manufacturing overhead volume variance is more meaningful than the budget variance for cost
control purposes.
True False
3. 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
overapplied for the period.
True False
4. If all four of Argo Corporation's overhead variances are favorable, Argo's overhead will be underapplied.
True False
5. 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 manufacturing overhead budget variance.
True False
6. The higher the denominator activity level used to compute the predetermined overhead rate, the lower
the predetermined overhead rate.
True False
7. An unfavorable volume variance means that a firm operated at an activity level that was below the
activity level planned for the period.
, True False
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. A fixed manufacturing overhead volume variance
will NOT necessarily occur in a month in which the fixed manufacturing overhead applied to units of
product on the basis of standard hours allowed differs from the budgeted fixed manufacturing overhead.
True False
9. A fixed manufacturing overhead volume variance occurs as the result of a difference between the
denominator level of activity (in hours) and the standard hours allowed for the actual output of the
period.
True False
10.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 manufacturing overhead volume variance
will NOT necessarily occur in a month in which there is a fixed manufacturing overhead budget variance.
True False
11.In a standard costing system where the denominator activity for the predetermined overhead rate is labor-
hours, overhead costs are applied to work in process on the basis of the standard labor-hours allowed for
the actual output.
True False
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.
True False
13.A favorable volume variance means that the company operated at an activity level greater than that
planned for the period.
True False
14.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 manufacturing overhead volume variance.
True False
, Multiple Choice Questions
Analysis in a
Standard Costing System
Predetermined Overhead
Rates and Overhead
Analysis in a Standard
Costing System
, True / False Questions
1. 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 manufacturing overhead volume variance
will NOT necessarily occur in a month in which production volume differs from sales volume.
True False
2. The fixed manufacturing overhead volume variance is more meaningful than the budget variance for cost
control purposes.
True False
3. 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
overapplied for the period.
True False
4. If all four of Argo Corporation's overhead variances are favorable, Argo's overhead will be underapplied.
True False
5. 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 manufacturing overhead budget variance.
True False
6. The higher the denominator activity level used to compute the predetermined overhead rate, the lower
the predetermined overhead rate.
True False
7. An unfavorable volume variance means that a firm operated at an activity level that was below the
activity level planned for the period.
, True False
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. A fixed manufacturing overhead volume variance
will NOT necessarily occur in a month in which the fixed manufacturing overhead applied to units of
product on the basis of standard hours allowed differs from the budgeted fixed manufacturing overhead.
True False
9. A fixed manufacturing overhead volume variance occurs as the result of a difference between the
denominator level of activity (in hours) and the standard hours allowed for the actual output of the
period.
True False
10.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 manufacturing overhead volume variance
will NOT necessarily occur in a month in which there is a fixed manufacturing overhead budget variance.
True False
11.In a standard costing system where the denominator activity for the predetermined overhead rate is labor-
hours, overhead costs are applied to work in process on the basis of the standard labor-hours allowed for
the actual output.
True False
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.
True False
13.A favorable volume variance means that the company operated at an activity level greater than that
planned for the period.
True False
14.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 manufacturing overhead volume variance.
True False
, Multiple Choice Questions
