Question

(***ONLY respond if you can address all questions. If not, please refrain from answering and let the next kind available expert address these conceptual questions. Thank you in advance).

1.) The difference between the total factory overhead cost in the flexible budget for the actual units produced and the amount of factory overhead cost applied to products using the standard overhead rate is called the factory overhead ______________:

Multiple Choice:

(A) Flexible-budget variance

(B) Production-volume variance

(C.) Total fixed cost variance

(D) Efficiency variance

(E.) Controllable variance

2.) If standard cost variances are allocated (i.e., prorated) to inventory and cost of goods sold (CGS) accounts at the end of a period, which of the following is correct?

Multiple Choice:

(A) Conceptually, the amount allocated to each account is based on the relative amount of the current period's standard cost in the end-of-period balance in each account.

(B) The resulting balances represent relative actual cost in each of the affected accounts.

(C.) There is a presumption that the net variance for the period is immaterial in amount.

(D) The amount allocated to inventories is generally larger than the amount allocated to CGS.

(E.) Adjusting journal entries for income tax effects will have to be made.

3.) Which of the following statement is true regarding choice of the denominator volume level in conjunction with the process of allocating fixed manufacturing costs to production?

Multiple Choice:

(A) The choice typically will affect end-of-period asset values, but not the production-volume variance for the period.

(B) The choice is important only if the company in question uses variable costing.

(C.) Under absorption (full) costing, this choice can affect reported profits for the period.

(D) This choice has no effect on the standard overhead cost-allocation rate.

(E.) The choice affects the standard overhead cost-allocation rate but not product cost.

4.) Some accountants would argue that any variances from standard costs, when such standards are current, should be written off to Cost of Goods Sold (or other income statement account). The principal conceptual rationale for this treatment is:

Multiple Choice:

(A) This is the treatment required currently under generally accepted accounting principles in the U.S.

(B) To allocate such variances (as the alternative treatment) implies that asset values on the balance sheet (i.e., inventories) contain the cost of inefficiencies.

(C.) The negligible effect this treatment has on total Cost of Goods Sold (or the Income Statement) for the period.

(D) The increased information and insight this procedure provides to management, for better managing operations.

(E.) Simplicity of application—this is an expedient method.

5.) An activity-based cost (ABC) driver applies factory overhead to products or services according to the:

Multiple Choice:

(A) Activity output as measured by the units produced.

(B) Activity level of hours of direct labor.

(C.) Resource demands/resource consumption of the firm's outputs (goods or services produced).

(D) Budgeted activity level for the period.

(E.) Standard machine hours allowed for good output produced during the period.

(***ONLY respond if you can address all questions. If not, please refrain from answering and let the next kind available expert address these conceptual questions. Thank you in advance).

Answer 1

1.) The difference between the total factory overhead cost in the flexible budget for the actual units produced and the amount of factory overhead cost applied to products using the standard overhead rate is called the factory overhead ______________:

Ans- Efficiency variance

2.) If standard cost variances are allocated (i.e., prorated) to inventory and cost of goods sold (CGS) accounts at the end of a period, which of the following is correct?

Ans- The amount allocated to inventories is generally larger than the amount allocated to CGS.

3.) Which of the following statement is true regarding choice of the denominator volume level in conjunction with the process of allocating fixed manufacturing costs to production?

Ans- The choice typically will affect end-of-period asset values, but not the production-volume variance for the period.

4.) Some accountants would argue that any variances from standard costs, when such standards are current, should be written off to Cost of Goods Sold (or other income statement account). The principal conceptual rationale for this treatment is:

Ans- To allocate such variances (as the alternative treatment) implies that asset values on the balance sheet (i.e., inventories) contain the cost of inefficiencies

5.) An activity-based cost (ABC) driver applies factory overhead to products or services according to the:

Ans- Resource demands/resource consumption of the firm's outputs (goods or services produced)