Appendix 9A - Appendix 9A Predetermined Overhead Rates and...

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Appendix 9A - Predetermined Overhead Rates and Overhead Analysis in a Standard Costing System Appendix 9A Predetermined Overhead Rates and Overhead Analysis in a Standard Costing System True / False Questions 1. The fixed manufacturing overhead budget variance and the fixed manufacturing overhead volume variance taken together explain the difference between the actual fixed manufacturing overhead cost incurred and the fixed manufacturing overhead cost applied to production. True False 2. 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 fixed manufacturing overhead volume variance. True False 3. The fixed portion of the predetermined overhead rate is used for product costing purposes and has no significance in terms of cost control. True False 4. The denominator activity represents the actual level of activity recorded for a period. 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 amount of overhead that the company would apply to finished production would ordinarily be the actual direct labor- hours times the predetermined overhead rate per direct labor-hour. True False 6. If all four of Argo Corporation's overhead variances are favorable, Argo's overhead will be overapplied. True False Appendix 9A-1
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Appendix 9A - Predetermined Overhead Rates and Overhead Analysis in a Standard Costing System 7. The fixed manufacturing overhead budget variance is more meaningful than the volume variance for cost control purposes. True False 8. If the standard hours allowed for the actual output of the period is greater than the denominator level of activity (in hours), then the overhead budget variance will be unfavorable. True False 9. The volume variance represents the difference between actual fixed manufacturing overhead costs and budgeted fixed manufacturing overhead costs. True False 10. One cause of an unfavorable overhead volume variance would be increases in cost for fixed manufacturing overhead items. True False 11. The volume variance provides a measure of the utilization of plant facilities. True False 12. If the denominator activity used to compute the predetermined overhead rate is equal to the standard activity allowed for the actual output of the period, then there is no volume variance. True False 13. If the denominator activity (in hours) used to compute the predetermined overhead rate is equal to the actual activity (in hours) for the period, then there is no volume variance. True False Appendix 9A-2
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Appendix 9A - Predetermined Overhead Rates and Overhead Analysis in a Standard Costing System 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. A fixed
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