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CHAPTER 8 QUIZ SOLUTIONS

Answer the following questions using the information below:


Christine Corporation manufactures baseball uniforms and uses budgeted machine-hours to allocate
variable manufacturing overhead. The following information pertains to the company's manufacturing
overhead data:
Budgeted output units
Budgeted machine-hours
Budgeted variable manufacturing overhead costs for 10,000 units

10,000 units
15,000 hours
$180,000

Actual output units produced


Actual machine-hours used
Actual variable manufacturing overhead costs

9,000 units

14,000 hours
$171,000

Before starting the solutions, try to get some basic #s ready that you
will need anyway: First look for actual cost, given in red, also actual
hours are given in bold blue.
Next you need BQ and BR: Notice that the question says that the
company planned to use 15,000 hours for 10,000 units, so how many
hours per unit? 15,000/10,000=1.5 hour per unit. NOW comes the
most crucial part- flexing this number for actual output. Given that the
company actually made only 9,000 units, how many hours would the
flexible budget have? 9000 units X 1.5 hour allowed per unit=13,500
hours.
Similarly, if they allowed 180,000 for 15,000 hours, the rate per hour
must be 180,000/15,000Hours = $12?hour. Now you have BQ* and
BR ready.
1. What is the flexible-budget amount for variable manufacturing overhead?
A) $162,000
B) $171,000
C) $190,000
D) None of these answers is correct.

Answer: A
Explanation: Flexible budget = Budgeted input quantity allowed for

actual output x budgeted rate or BQ* X BR = 13,500 X $12=162,000


2. 2. What is the flexible-budget variance for variable manufacturing overhead?
A) $9,000 favorable
B) $9,000 unfavorable
C) zero
D) None of these answers is correct.

Answer: B

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Explanation: FBV is the difference between actual costs and FB:


Actual variable overhead was $171,000( Given)
Flexible-budget , you just calculated in part 1= 162,000
Flexible-budget variance = 171,000 162,000 = $9,000 U

Not to confuse you, but there is another way to get to the correct #s in
this problem: Since the company allows 180,000 for 10,000 units,
how much would be allowed for actual output of 9,000 units?
180,000/10,000 X 9,000= 162,000. So you can solve both the
problems using this method, but wil get into trouble if the question
asked for Spending and efficiency Var. Since then you would need
BR, which is not apparent in this method of solving but is clear in the
first method.
Can you calculate Spending and Efficiency Var. For this problem?
Sebastian Company, which manufactures electrical switches, uses a standard cost system
and carries all inventories at standard. The standard manufacturing overhead costs per
switch are based on direct labor hours and are shown below:
Variable overhead (5 hours @ $12 per direct manufacturing labor hour) $ 60
Fixed overhead (5 hours @ $15* per direct manufacturing labor hour)
75
Total overhead per switch
$135
*Based on capacity of 200,000 direct manufacturing labor hours per month.
The following information is available for the month of December:
46,000 switches were produced although 40,000 switches were scheduled to be
produced. 225,000 direct manufacturing labor hours were worked
at a total cost of $5,625,000. Variable manufacturing overhead costs

were $2,750,000. Fixed manufacturing overhead costs were


$3,050,000.
Once again, before starting the solutions, try to get some basic #s
ready that you will need anyway: First look for actual cost, given in
red, also actual hours are given in bold blue.
Next you need BQ and BR: Notice that the question says that the
company planned to use 5 hours per unit, so in this problem per
unit # is already given, unlike the first problem where total #s were
given and you had to calculate per unit #.
NOW comes the most crucial part- flexing this number for actual
output. Given that the company actually made 46,000 units, how
many hours would the flexible budget have? 46000 units X 5 hour
allowed per unit=230,000 hours.
In this problem the Budgeted Rate is already given( $12 per hour

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for Variable and $15 per hour for fixed), unlike the first problem
where total #s were given and you had to calculate the rate.
. Now you have BQ* and BR ready.
AQ X AR
AQ X BR
BQ* X BR
225,000 HRS X AR
225,000 X $12
230,000 X $12
= 2750,000
= 2700,000
2760,000

3. The variable overhead spending variance for December was


a.
$50,000 U.
b.
$350,000 U.
c.
$10,000 F.
d.
$60,000 F.

Spending variance is the difference between the actual costs and


actual input x budgeted rate. Actual costs are given at 2750,000
Actual inputs x budgeted rate is (225,000 Hours x 12= 2700,000) =
50,000U since actual costs were higher:
Standard 225,000 DLH $12
Actual
VOH Spending variance

$2,700,000
2,750,000
$ 50,000 U

4. The variable manufacturing overhead efficiency variance for December was


a.
$50,000 U.
b.
$350,000 U.
c.
$10,000 F.
d.
$60,000 F.

Efficiency Variance is the difference between the Actual Input quantity


x budgeted price and the Flexible Budget.
Step 1: Actual inputs x budgeted rate is (225,000 Hours x 12=
2700,000)
Step 2: Flexible Budget = SQ* X SR = 230,000 X 12 = 2760,000
Efficiency Variance = 60,000F, favorable, since hours allowed for
actual output in flexible budget were higher than we actually spent.
Standard 46,000 switches 5 DLH/switch
Actual DLH
VOH Efficiency variance

230,000
225,000
5,000 $12 = $60,000 F

5. The total variable manufacturing overhead variance was


a. $10.000 F.
b. $10,000 U.
c. $110,000 U.

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d. $110,000 F.
5.

Flexible budget variance for VOH is the combination of question 4


and 5.
Total variable overhead variance = $50,000 U + $60,000 F = $10,000 F
6. The fixed manufacturing overhead spending variance for December was
a.
$450,000 F.
b.
$400,000 F.
c.
$50,000 U.
d.
$775,000 F.

let us have the model ready for fixed costs:


actual fixed costs are given at 3050,000
static budget says the rate is $15/hour,based on 200,000 hours. so
the amount budgeted must be :
RATE = MOH AMOUNT/ BUDGETED HOURS
$15 = X/200,000, SO MOH AMOUNT MUST BE = 3000,000
APPLIED OH: as in the variable model, the company would allow
5 hours per unit for 46,000 units, so 5 x 46,000= 230,000 HOURS

ACTUAL
STATIC
APPLIED
3050,000
3000,000
230,000 X $15= 3450,000
Budgeted fixed OH 200,000 DLH $15/DLH =
Actual fixed OH
FOH Spending variance

$3,000,000
3,050,000
50,000 U

7. The fixed overhead production-volume variance for December was


a.
$450,000 F.
b.
$400,000 F.
c.
$50,000 U.
d.
$775,000 F.
Budgeted DLH
200,000
Allocated 46,000 5
230,000
30,000 15 = 450,000 F
8. What amount should be credited to the Allocated Manufacturing Overhead Control account
for the month of December?
a.
$6,210,000
b.
$5,800,000
c.
$5,760,000
d.
$5,700,000

This problem wants to know how much total MOH was applied. since

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you know that fixed applied is hours allowed for actual output times
the BR, you can use the same logic for variable costs too:
230,000 (15 + 12) = $6,210,000
Answer the following questions using the information below:
Roberson Corporation manufactured 30,000 ice chests during September. The overhead cost-allocation
base is $11.25 per machine-hour. The following variable overhead data pertain to September:
Production
Machine-hours
Variable overhead cost per machine-hour:

Actual
30,000 units
15,000 hours
$11.00

Budgeted
24,000 units
10,800 hours
$11.25

BY NOW, YOU SHOULD KNOW THIS REALLY WELL: YOU ONLY NEED TO
CALCULATE BQ*: IF THE COMPANY ALLOWED 10,800 HOURS FOR 24,000
UNITS, HOW MUCH WILL BE ALLOWED FOR 30,000 UNITS?
(10,800/24,000) X 30,000 = 13,500 HOURS

AQ X AR

AQ X BR

15,000 HRS X $11


= 165,000

15,000 X $11.25
= 168,750

BQ* X BR
13,500 X $11.25
=151,875

9. What is the flexible-budget amount?


A) $121,500
B) $151,875
C) $165,000
D) $168,750

Answer: B
Explanation: B) 30,000 (10,800/24,000) $11.25 = $151,875
9.

10. What is the variable overhead efficiency variance?


A) $3,750 favorable
B) $16,875 unfavorable
C) $13,125 unfavorable
D) $30,375 unfavorable

Answer: B
Explanation: B) 168,750 151, 875=
[15,000 - (30,000 10,800/24,000) mh] $11.25 = $16,875 unfavorable
10.

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