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Chapter 9

The document contains two practice questions from an accounting textbook chapter. Question 1 asks to calculate the total overhead budget for 10,000 hours using data from a flexible budget for 20,000 hours showing variable overhead of $3 per hour and fixed overhead of $2.50 per hour. Question 2 provides budgeted and actual cost data for a manufacturer and asks to calculate the dollar amount and whether the variance from the flexible budget is favorable or unfavorable.

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Marc Kub
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292 views4 pages

Chapter 9

The document contains two practice questions from an accounting textbook chapter. Question 1 asks to calculate the total overhead budget for 10,000 hours using data from a flexible budget for 20,000 hours showing variable overhead of $3 per hour and fixed overhead of $2.50 per hour. Question 2 provides budgeted and actual cost data for a manufacturer and asks to calculate the dollar amount and whether the variance from the flexible budget is favorable or unfavorable.

Uploaded by

Marc Kub
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Accounting 2102 Farmer Chapter 9 Practice Question 1 A flexible budget for 20,000 hours revealed variable manufacturing overhead

of $3 per hour and fixed manufacturing overhead of $2.50 per hour. Assume 10,000 hours is within the relevant range, calculate the total overhead budget for 10,000 hours.

Question 2 The production team for Take Eight, Inc., a manufacturer of pillow top mattresses, recently prepared a manufacturing cost budget for an output of 50,000 mattresses, as follows: Direct Materials $100,000 Direct Labor 50,000 Variable 75,000 Overhead Fixed Overhead 100,000 Actual costs incurred during the production of 60,000 mattresses were; direct materials, $110,000; direct labor, $60,000; variable overhead, $100,000; and fixed overhead, $97,000. If Take Eight evaluated performance by the use of a flexible budget, determine the dollar amount of the variance and if the variance is favorable or unfavorable.

Accounting 2102 Farmer Chapter 9 Practice Question 1 VC 10,000 x 3 = $30,000 FC 20,000 x 2.50 = $50,000 Total overhead budget = $30,000 + 50,000 = 80,000 Question 2 variable manu costs = ($100,000+$50,000+$75,000)/50,000 mattresses = $4.50/mattress Actual at an output of 60,000 = ($110,000+$60,000+$100,000+$97,000) = $367,000 Budgeted at an output of 60,000 = $4.50/mattress x 60,000 mattresses + $100,000 = $370,000 actual cost is less than budgeted cost . . . so the variance is favorable in the amount of $3,000

Accounting 2102 Farmer Chapter 9 Practice 1. WWW, Inc. manufactures flying broomsticks. Using its static budget, WWW estimates $400,000 in total overhead costs when 20,000 units are produced and sold. The total overhead cost structure is estimated to be 30% variable costs and 70% fixed costs. What would be the budgeted total overhead cost according to a flexible budget if 24,000 units are expected to be produced and sold? a. $384,000. b. $400,000. c. $424,000. d. $464,000. e. Unable to determine from the information given. 2. Put Your Blinders On, Inc.s flexible budget cost formula for supplies, a variable overhead cost, is $2.94 per unit of output. The company's flexible budget performance report for last month showed a $4,998 favorable variance for supplies. During that month, 11,900 units were produced. Budgeted activity for the month was 12,300 units. The actual costs incurred for supplies per unit of output must have been closest to: a. $2.03. b. $2.10. c. $2.52. d. $2.94. e. $4.25.

Accounting 2102 Farmer Chapter 9 Practice

1.

c.

totalMOH variable30% fixed70% variableperunit totalfixed

$400,000 $120,000 $280,000 $6 $280,000 MOH=$6(units)+ $280,000 $ 424,000 actual $ 29,988 variance $4,998F

costformula estimatefor 24,000 2. c. flexiblebudget =$2.94x11,900

actualcost/output=actualcostperunit ofoutput $ 2.52

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