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Aurora applies overhead at a rate of $9 per direct labor hour, of which $4 is variable overhead. The budgeted fixed overhead was $400,000 and the budgeted direct labor hours were 80,000. Using separate overhead rates is appropriate when departments differ in their labor or machine intensity. Activity-based costing, compared to a single overhead rate, provides better information for planning and control.

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464 views2 pages

12

Aurora applies overhead at a rate of $9 per direct labor hour, of which $4 is variable overhead. The budgeted fixed overhead was $400,000 and the budgeted direct labor hours were 80,000. Using separate overhead rates is appropriate when departments differ in their labor or machine intensity. Activity-based costing, compared to a single overhead rate, provides better information for planning and control.

Uploaded by

Carlo Paras
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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26. Aurora applies overhead at $9 per direct labor hour of which $4 is variable overhead.

Budgeted direct labor hours were 80,000. Budgeted


fixed overhead was
a. $320,000
b. $400,000.
c. $720,000.
d. none of the above.

a 27. Which is a good reason to use separate overhead rates?


a. Some departments are labor-intensive, some are machine-intensive.
b. Labor rates vary considerably among departments.
c. The resulting overhead rates are all about the same.
d. All jobs require about the same percentage of time in all departments.

c 28. In contrast to a company that uses a single overhead rate, one that uses activity-based costing
a. will have higher product costs than one using a single overhead rate.
b. cannot compute budget variances.
c. will incur additional costs for recordkeeping.
d. must have a preponderance of fixed overhead costs.

a 29. Which of the following is a sign of poor cost control?


a. A high unfavorable budget variance.
b. A high unfavorable volume variance.
c. High underapplied overhead.
d. High overapplied overhead.

c 30. Hoyt Company applies overhead at $4 per direct labor hour. In March Hoyt incurred overhead of $96,000. Underapplied overhead was
$4,000. How many direct labor hours did Hoyt work?
a. 25,000
b. 24,000
c. 23,000
d. 22,000

d 31. A company using activity-based overhead rates


a. will usually have higher budget variances than one using a single rate.
b. will usually have higher volume variances than one using a single rate.
c. cannot compute fixed and variable components of overhead cost.
d. should have better information for planning and control than one using a single rate.

a 32. Daly had a $9,000 favorable volume variance, a $7,500 unfavorable variable overhead spending variance, and $6,000 total overapplied
overhead. The fixed overhead budget variance was
a. $4,500 favorable.
b. $8,000 favorable.
c. $4,500 unfavorable.
d. $8,000 unfavorable.

d 33. Acme had a $6,000 favorable fixed overhead budget variance, a $2,500 unfavorable variable overhead spending variance, and $1,000 total
overapplied overhead. The volume variance was
a. $4,500 overapplied.
b. $4,500 underapplied.
c. $2,500 overapplied.
d. $2,500 underapplied.

b 34. Waldorf had a $10,000 unfavorable fixed overhead budget variance, a $6,000 unfavorable variable overhead spending variance, and a
$2,000 favorable volume variance. The total overhead was
a. $14,000 overapplied.
b. $14,000 underapplied.
c. $18,000 overapplied.
d. $18,000 underapplied.

a 35. Bacon had a $18,000 unfavorable volume variance, a $5,000 unfavorable fixed overhead budget variance, and $12,000 total underapplied
overhead. The variable overhead spending variance was
a. $11,000 favorable.
b. $1,000 favorable.
c. $11,000 unfavorable.
d. $23,000 unfavorable.

d 36. Gonzalez Company uses the equation $520,000 + $2 per direct labor hour to budget manufacturing overhead. Gonzalez has budgeted
150,000 direct labor hours for the year. Actual results were 150,000 direct labor hours and $817,500 total manufacturing overhead.
The total overhead applied for the year is
a. $300,000.
b. $520,000.
c. $817,500.
d. $820,000.

a 37. Gonzalez Company uses the equation $520,000 + $2 per direct labor hour to budget manufacturing overhead. Gonzalez has budgeted
150,000 direct labor hours for the year. Actual results were 150,000 direct labor hours and $817,500 total manufacturing overhead.
The total overhead variance for the year is
a. $2,500 favorable.
b. $12,500 favorable.
c. $2,500 unfavorable.
d. some other number.

c 38. Bonds Company uses the equation $300,000 + $1.75 per direct labor hour to budget manufacturing overhead. Bonds has budgeted 125,000
direct labor hours for the year. Actual results were 110,000 direct labor hours, $297,000 fixed overhead, and $194,500 variable
overhead. The total overhead variance for the year is
a. $2,000.
b. $3,000.
c. $47,000.
d. $48,000.

a 39. Bonds Company uses the equation $300,000 + $1.75 per direct labor hour to budget manufacturing overhead. Bonds has budgeted 125,000
direct labor hours for the year. Actual results were 110,000 direct labor hours, $297,000 fixed overhead, and $194,500 variable
overhead. The variable overhead spending variance for the year is
a. $2,000.
b. $3,000.
c. $47,000.
d. $48,000.

b 40. Bonds Company uses the equation $300,000 + $1.75 per direct labor hour to budget manufacturing overhead. Bonds has budgeted 125,000
direct labor hours for the year. Actual results were 110,000 direct labor hours, $297,000 fixed overhead, and $194,500 variable
overhead. The fixed overhead budget variance for the year is
a. $2,000.
b. $3,000.
c. $47,000.
d. $48,000.

d 41. Bonds Company uses the equation $300,000 + $1.75 per direct labor hour to budget manufacturing overhead. Bonds has budgeted 125,000
direct labor hours for the year. Actual results were 110,000 direct labor hours, $297,000 fixed overhead, and $194,500 variable
overhead. The fixed overhead volume variance for the year is
a. $2,000.
b. $3,000.
c. $47,000.
d. $48,000.

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