Hilton_MAcc_Ch11_Solution

Hilton_MAcc_Ch11_Solution - CHAPTER 11 Flexible Budgeting...

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CHAPTER 11 Flexible Budgeting and the Management of Overhead and Support Activity Costs ANSWERS TO REVIEW QUESTIONS 11-1 A static budget is based on only one level of activity. A flexible budget allows for several different levels of activity. 11-2 The advantage of a flexible budget is that it is responsive to changes in the activity level. It enables a comparison between actual costs incurred at the actual level of activity and the standard allowed costs that should have been incurred at the actual level of activity. 11-17 The control purpose of a standard-costing system is to provide benchmarks against which to compare actual costs. Then management by exception is used to follow up on significant variances and take corrective action. The product-costing purpose of the standard-costing system is to determine the cost of producing goods and services. Product costs are needed for a variety of purposes in both managerial and financial accounting. SOLUTIONS TO EXERCISES EXERCISE 11-22 (20 MINUTES) 1. Variable-overhead spending variance = actual variable overhead – (AH × SVR) = $607,500 – (60,750 × $9.00) = $60,750 U 2. Variable-overhead efficiency variance = SVR(AH – SH) = $9.00(60,750 – 54,000*) = $60,750 U * SH = 54,000 hrs. = 13,500 cases × 4 hours per case 3. Fixed-overhead budget variance = actual fixed overhead – budgeted fixed overhead = $183,000 – $180,000 = $3,000 U
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4. Fixed-overhead volume variance = budgeted fixed overhead – applied fixed overhead = $180,000 – $162,000 = $18,000 (positive)** Applied fixed overhead = × hours allowed standard rate overhead fixed ned predetermi = 4) (13,500 4 15,000 $180,000 × × × = $162,000 **Consistent with the discussion in the text, we choose not to interpret the volume variance as either favorable or unfavorable. Some accountants would designate a positive volume variance as "unfavorable" and a negative volume variance as "favorable." EXERCISE 11-30 (10 MINUTES) 1. Flexible budgeted amounts, using activity-based flexible budget: a. Indirect material: $33,000 ($18,000 + $3,000 + $3,000 + $9,000) b. Utilities: $6,000 ($4,500 + $1,500) c. Inspection: $3,300 d. Test kitchen: $2,400 e. Material handling: $3,000 f. Total overhead cost: $64,800 ($45,000 + $7,800 + $2,400 + $3,000 + $6,600) 2. Variance for setup cost: a. Using the activity-based flexible budget: $1,000 F (actual cost minus flexible budget = $3,500 – $4,500) b. Using the conventional flexible budget: $500 U (actual cost minus flexible budget = $3,500 – $3,000) EXERCISE 11-31 (45 MINUTES) Budgeted fixed overhead. ................................................................... $ 25,000 Actual fixed overhead . ....................................................................... $ 32,500 a
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Budgeted production in units . ........................................................... 12,500
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Hilton_MAcc_Ch11_Solution - CHAPTER 11 Flexible Budgeting...

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