Chapter 11 Flexible Budgets and Overhead Analysis

Chapter 11 Flexible Budgets and Overhead Analysis - Chapter...

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Chapter 11 Flexible Budgets and Overhead Analysis 554 Garrison, Managerial Accounting 12th Edition True/False Questions 1. Fixed costs should not be included in a flexible budget since such costs are not likely to be controllable by managers. Answer: False Level: Medium LO: 1 2. It is not important that the activity base and overhead costs be causally related when developing a flexible budget. Answer: False Level: Easy LO: 1 3. The activity base for a flexible budget should usually be expressed in units of activity rather than in dollars. Answer: True Level: Easy LO: 1 4. The static budget should be used primarily to determine whether cost control is being maintained. Answer: False Level: Easy LO: 1 5. A company that wants to report both spending and efficiency variances for overhead must compute budget allowances for both the actual amount of activity that occurred and the standard level of activity allowed for the level of output achieved. Answer: True Level: Medium LO: 4 6. Responsibility for the overhead efficiency variance should be assigned to whoever is responsible for control of the activity base underlying the flexible budget. Answer: True Level: Easy LO: 4 7. A favorable variable overhead efficiency variance indicates that overhead has been used efficiently. Answer: False Level: Medium LO: 4
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Flexible Budgets and Overhead Analysis Garrison, Managerial Accounting, 12th Edition 555 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. The company's choice of the denominator level of activity has no effect on the fixed overhead budget variance. Answer: True Level: Medium LO: 5,6 9. In a standard cost system, overhead is applied on the basis of the actual level of activity rather than the standard level of activity allowed for the output of a period. Answer: False Level: Medium LO: 5 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. The company's choice of the denominator level of activity has no effect on the fixed portion of the predetermined overhead rate. Answer: False Level: Easy LO: 5 11. The budget variance for fixed overhead represents the difference between actual fixed overhead costs incurred and the amount of fixed overhead applied to work in process. Answer: False Level: Medium LO: 6 12. There can be no volume variance for variable overhead. Answer: True Level: Medium LO: 6 13. An unfavorable volume variance means that a company operated at an activity level greater than that planned for the period. Answer: False Level: Medium LO: 6 14. The volume variance for fixed overhead is an activity-related variance based on the difference between the denominator level of activity and the standard level of activity allowed for the output of a period. Answer: True
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Chapter 11 Flexible Budgets and Overhead Analysis - Chapter...

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