Multiple Choice Questions

15.

Sulema, Inc. repairs and refinishes antique furniture. Manufacturing overhead at Sulema is
applied to production on the basis of standard direct labor-hours. Which overhead variance(s)
at Sulema would be unfavorably affected if the cost of solvents used to strip the old paint from
the furniture unexpectedly doubles in price?

A. variable overhead rate variance

B. variable overhead efficiency variance
C. fixed manufacturing overhead budget variance
D. fixed manufacturing overhead volume variance
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 10-03 Compute the variable manufacturing overhead rate and efficiency variances and explain their
significance.
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

App10A -1
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McGraw-Hill Education.

16.

When computing standard cost variances, the difference between actual and standard price
multiplied by actual quantity yields a(n):

A. combined price and quantity variance.

B. efficiency variance.
C. price or rate variance.
D. quantity variance.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 10-01 Compute the direct materials price and quantity variances and explain their significance.
Learning Objective: 10-02 Compute the direct labor rate and efficiency variances and explain their significance.
Learning Objective: 10-03 Compute the variable manufacturing overhead rate and efficiency variances and explain their
significance.
Source: CMA, adapted

17.

The fixed manufacturing overhead budget variance is:

A. the difference between budgeted fixed manufacturing overhead cost and actual fixed
manufacturing overhead cost.
B. the difference between actual fixed manufacturing overhead cost and applied fixed
manufacturing overhead cost.
C. the difference between budgeted fixed manufacturing overhead cost and applied fixed
manufacturing overhead cost.
D. the difference between fixed overhead at the planned level of activity and the flexible
budget for actual activity.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
App10A -2
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McGraw-Hill Education.

Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

18.

A volume variance is computed for:

A. both variable and fixed manufacturing overhead.

B. variable manufacturing overhead only.
C. fixed manufacturing overhead only.
D. direct labor costs as well as overhead costs.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

19.

Which of the following variances is generally the least significant from the standpoint of cost
control?

A. Materials price variance.

B. Labor efficiency variance.
C. Fixed manufacturing overhead volume variance.
D. Variable overhead rate variance.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

App10A -3
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McGraw-Hill Education.

20.

Traveller Corporation sells one product and uses a standard cost system. Last year the
overhead volume variance was zero. Which of the following is correct?

A. Actual variable manufacturing overhead cost was equal to standard variable manufacturing
overhead cost.
B. Total applied overhead was equal to total actual overhead.
C. The denominator activity was equal to actual activity.
D. The budgeted fixed costs were equal to the applied fixed costs.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

21.

The Santos Corporation made an error when selecting a denominator level of activity and
chose a much lower level than was realistic. This error would most likely result in a large:

A. favorable variable overhead efficiency variance.

B. favorable fixed manufacturing overhead budget variance.
C. favorable fixed manufacturing overhead volume variance.
D. unfavorable fixed manufacturing overhead budget variance.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

App10A -4
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McGraw-Hill Education.

22.

In a standard cost system, overhead is applied to production on the basis of:

A. the denominator hours chosen for the period.

B. the actual hours required to complete the actual output of the period.
C. the standard hours allowed to complete the actual output of the period.
D. the actual cost of fixed overhead during the period.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

23.

Dori Castings is a job order shop that uses a standard cost system. Manufacturing overhead
costs are applied on the basis of standard direct labor-hours. A volume variance will exist for
Dori in a month where:

A. production volume differs from sales volume.

B. actual direct labor-hours differ from standard hours allowed.
C. there is a budget variance in fixed manufacturing overhead costs.
D. the fixed manufacturing overhead applied to units of product on the basis of standard hours
allowed differs from the budgeted fixed manufacturing overhead.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Analyze
Difficulty: 3 Hard
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.
Source: CMA, adapted

App10A -5
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McGraw-Hill Education.

24.

Alex Corporation has a large underapplied overhead balance in the manufacturing overhead
account. This could be explained by:

A. an unfavorable volume variance, assuming all other variances are zero.

B. a favorable volume variance, assuming all other variances are zero.
C. standard hours allowed for the period's output being greater than denominator hours for
the period.
D. favorable total variance for overhead.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Analyze
Difficulty: 3 Hard
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

App10A -6
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McGraw-Hill Education.

25.

Coblentz Fabrication Corporation has a standard cost system in which it applies

manufacturing overhead to products on the basis of standard machine-hours (MHs) at $6.20
per MH. The company had budgeted its fixed manufacturing overhead cost at $40,000 for the
month. During the month, the actual total variable manufacturing overhead was $48,970 and
the actual total fixed manufacturing overhead was $43,000. The actual level of activity for the
period was 8,300 MHs. What was the total of the variable overhead rate and fixed
manufacturing overhead budget variances for the month?

A. $2,490 Favorable
B. $510 Favorable
C. $510 Unfavorable
D. $2,490 Unfavorable
Budget variance = Actual fixed overhead - Budgeted fixed overhead cost
= $43,000 - $40,000
= $3,000 U
Variable overhead rate variance = (AH AR) - (AH SR)
= $48,970 - (8,300 MHs $6.20 per MH)
= $48,970 - $51,460
= $2,490 F
Total variance = $3,000 U + $2,490 F = $510 U

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 10-03 Compute the variable manufacturing overhead rate and efficiency variances and explain their
significance.
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

App10A -7
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McGraw-Hill Education.

26.

Omary Corporation has a standard cost system in which it applies manufacturing overhead to
products on the basis of standard machine-hours (MHs). The company has provided the
following data for the most recent month:

What was the total of the variable overhead rate and fixed manufacturing overhead budget
variances for the month?

A. $1,520 Unfavorable
B. $3,180 Favorable
C. $4,820 Unfavorable
D. $6,340 Unfavorable
Budget variance = Actual fixed overhead - Budgeted fixed overhead cost
= $54,000 - $50,000
= $4,000 U
Variable overhead rate variance = (AH AR) - (AH SR)
= $31,980 - (4,100 MHs $7.60 per MH)
= $31,980 - $31,160
= $820 U
Total variance = $4,000 U + $820 U = $4,820 U

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium

App10A -8
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McGraw-Hill Education.

Learning Objective: 10-03 Compute the variable manufacturing overhead rate and efficiency variances and explain their
significance.
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

27.

Dexter Corporation uses a standard cost system and applies manufacturing overhead cost to
units of product on the basis of standard direct labor-hours (DLHs). Information on Dexter
Corporation's manufacturing overhead costs for last period is given below:

Given these data, the underapplied or overapplied overhead cost for the period would be:

A. $10,000 overapplied
B. $2,000 overapplied
C. $10,000 underapplied
D. $8,000 underapplied
Overhead applied = Predetermined overhead rate Standard hours allowed for the actual
output
= $4 per DLH 38,000 DLHs = $152,000
Overhead is overapplied by $2,000 because the actual overhead cost incurred was $150,000.

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

App10A -9
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McGraw-Hill Education.

28.

Steinhagen Corporation applies manufacturing overhead to products on the basis of standard

machine-hours. Budgeted and actual overhead costs for the most recent month appear below:

The company based its original budget on 2,600 machine-hours. The company actually
worked 2,790 machine-hours during the month. The standard hours allowed for the actual
output of the month totaled 2,960 machine-hours. What was the overall fixed manufacturing
overhead volume variance for the month?

A. $5,148 Favorable
B. $5,148 Unfavorable
C. $2,717 Favorable
D. $2,717 Unfavorable

Predetermined overhead rate = Estimated total manufacturing overhead cost Estimated total
amount of the allocation base = $37,180 2,600 machine-hours = $14.30 per machine-hour
Volume variance = Budgeted fixed overhead cost - Fixed overhead applied to work in process
= $37,180 - (2,960 machine-hours $14.30 per machine-hour)
= $37,180 - $42,328
= $5,148 F

App10A -10
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McGraw-Hill Education.

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

App10A -11
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McGraw-Hill Education.

29.

Semaan Corporation applies manufacturing overhead to products on the basis of standard

machine-hours. Budgeted and actual overhead costs for the month appear below:

The company based its original budget on 2,700 machine-hours. The company actually
worked 2,960 machine-hours during the month. The standard hours allowed for the actual
output of the month totaled 3,030 machine-hours. What was the overall fixed manufacturing
overhead budget variance for the month?

A. $3,130 Unfavorable
B. $340 Unfavorable
C. $340 Favorable
D. $3,130 Favorable

Budget variance = Actual fixed overhead - Budgeted fixed overhead cost

= $30,060 - $30,400 = $340 F

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium

App10A -12
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McGraw-Hill Education.

Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

30.

Hairr Corporation bases its predetermined overhead rate on variable manufacturing overhead
cost of $9.50 per machine-hour and fixed manufacturing overhead cost of $947,672 per
period. If the denominator level of activity is 8,900 machine-hours, the predetermined
overhead rate would be:

A. $9.50
B. $115.98
C. $106.48
D. $950.00
Fixed component of predetermined overhead rate = Estimated total fixed manufacturing
overhead cost Estimated total amount of the allocation base
= $947,672 8,900 machine-hours = $106.48 per machine-hour
Predetermined overhead rate = $9.50 per machine-hour + $106.48 per machine-hour =
$115.98 per machine-hour

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

App10A -13
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McGraw-Hill Education.

31.

The Adlake Corporation makes and sells a single product and uses a standard cost system.
During October, the company budgeted $300,000 in manufacturing overhead cost at a
denominator activity of 20,000 machine-hours. At standard, each unit of finished product
requires 5 machine-hours. The following cost and activity were recorded during October:

The amount of overhead cost that the company applied to work in process for October was:

A. $279,300
B. $291,330
C. $294,000
D. $285,000
Predetermined overhead rate = Estimated total manufacturing overhead cost Estimated total
amount of the allocation base = $300,000 20,000 machine-hours = $15 per machine-hour
Overhead applied = Predetermined overhead rate Standard hours allowed for the actual
output
= $15 per machine-hour (3,800 units 5 machine-hours per unit)
= $15 per machine-hour (19,000 machine-hours)
= $285,000

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

App10A -14
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McGraw-Hill Education.

32.

Reidenbach Corporation applies manufacturing overhead to products on the basis of standard

machine-hours. The budgeted fixed manufacturing overhead cost for the most recent month
was $17,100 and the actual fixed manufacturing overhead cost for the month was $17,450.
The company based its original budget on 4,500 machine-hours. The standard hours allowed
for the actual output of the month totaled 4,810 machine-hours. What was the overall fixed
manufacturing overhead budget variance for the month?

A. $1,178 Unfavorable
B. $350 Unfavorable
C. $350 Favorable
D. $1,178 Favorable
Budget variance = Actual fixed overhead - Budgeted fixed overhead cost
= $17,450 - $17,100 = $350 U

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

App10A -15
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McGraw-Hill Education.

33.

Diseth Corporation applies manufacturing overhead to products on the basis of standard

machine-hours. The company bases its predetermined overhead rate on 5,300 machinehours. The company's total budgeted fixed manufacturing overhead is $12,720. In the most
recent month, the total actual fixed manufacturing overhead was $12,370. The company
actually worked 5,350 machine-hours during the month. The standard hours allowed for the
actual output of the month totaled 5,540 machine-hours. What was the overall fixed
manufacturing overhead volume variance for the month?

A. $350 Favorable
B. $120 Favorable
C. $120 Unfavorable
D. $576 Favorable
Fixed component of predetermined overhead rate = Estimated total fixed manufacturing
overhead cost Estimated total amount of the allocation base = $12,720 5,300 machinehours = $2.40 per machine-hour
Volume variance = Budgeted fixed overhead cost - Fixed overhead applied to work in process
= $12,720 - (5,540 machine-hours $2.40 per machine-hour)
= $12,720 - $13,296
= $576 F

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

App10A -16
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McGraw-Hill Education.

34.

Masek Corporation has a standard cost system in which it applies manufacturing overhead to
products on the basis of standard machine-hours (MHs). The company has provided the
following data for the most recent month:

What was the fixed manufacturing overhead budget variance for the month?

A. $2,360 Unfavorable
B. $1,000 Unfavorable
C. $2,360 Favorable
D. $1,000 Favorable
Budget variance = Actual fixed overhead - Budgeted fixed overhead cost
= $49,000 - $50,000
= $1,000 F

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

App10A -17
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McGraw-Hill Education.

35.

Pizzi, Inc. had the following fixed manufacturing overhead variances last year:

Pizzi uses machine-hours as an activity base for overhead and used 48,000 machine-hours as
the denominator activity level for the year. Total actual fixed manufacturing overhead was
$150,000. The actual number of machine-hours incurred were 50,000. What were Pizzi's
standard hours allowed for actual output?

A. 40,000
B. 42,000
C. 50,400
D. 52,500
Budget variance = Actual fixed overhead - Budgeted fixed overhead
$30,000 U = $150,000 - Budgeted fixed overhead
$30,000 = $150,000 - Budgeted fixed overhead
Budgeted fixed overhead = $150,000 - $30,000
Budgeted fixed overhead = $120,000
Fixed component of the predetermined overhead rate = $120,000 48,000 MHs = $2.50 per
MH
Volume variance = Fixed component of the predetermined overhead rate (Denominator
hours - Standard hours allowed for the actual output)
$6,000 F = $2.50 per MH (48,000 MHs - Standard hours allowed for the actual output)
-$6,000 = $2.50 per MH (48,000 MHs - Standard hours allowed for the actual output)
48,000 MHs - Standard hours allowed for the actual output = -$6,000 $2.50 per MH
48,000 MHs - Standard hours allowed for the actual output = -2,400 MHs
Standard hours allowed for the actual output = 48,000 MHs + 2,400 MHs
Standard hours allowed for the actual output = 50,400 MHs

App10A -18
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McGraw-Hill Education.

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

36.

Tropiano Electronics Corporation has a standard cost system in which it applies manufacturing
overhead to products on the basis of standard machine-hours (MHs). The company had
budgeted its fixed manufacturing overhead cost at $62,100 for the month and its level of
activity at 3,200 MHs. The actual total fixed manufacturing overhead was $61,600 for the
month and the actual level of activity was 3,000 MHs. What was the fixed manufacturing
overhead budget variance for the month to the nearest dollar?

A. $3,381 Unfavorable
B. $500 Favorable
C. $500 Unfavorable
D. $3,381 Favorable
Budget variance = Actual fixed overhead - Budgeted fixed overhead cost
= $61,600 - $62,100
= $500 F

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

App10A -19
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McGraw-Hill Education.

37.

At the beginning of last year, Tari Corporation budgeted $300,000 of fixed manufacturing
overhead and chose a denominator level of activity of 600,000 machine-hours. At the end of
the year, Tari's fixed manufacturing overhead budget variance was $9,000 favorable. Its fixed
manufacturing overhead volume variance was $15,000 favorable. Actual direct labor-hours for
the year were 625,000. What was Tari's total standard machine-hours allowed for last year's
output?

A. 570,000
B. 630,000
C. 648,000
D. 656,250
Fixed component of the predetermined overhead rate = $300,000 600,000 machine-hours =
$0.50 per machine-hour
Volume variance = Fixed component of the predetermined overhead rate (Denominator
hours - Standard hours allowed for the actual output)
$15,000 F = $0.50 per machine-hour (600,000 machine-hours - Standard hours allowed for
the actual output)
-$15,000 = $0.50 per machine-hour (600,000 machine-hours - Standard hours allowed for
the actual output)
-$15,000 = $300,000 - ($0.50 per machine-hour Standard hours allowed for the actual
output)
$0.50 per machine-hour Standard hours allowed for the actual output = $300,000 + $15,000
$0.50 per machine-hour Standard hours allowed for the actual output = $315,000
Standard hours allowed for the actual output = $315,000 $0.50 per machine-hour
Standard hours allowed for the actual output = 630,000 machine-hours

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
App10A -20
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McGraw-Hill Education.

Difficulty: 3 Hard
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

38.

Denby Corporation applies manufacturing overhead to products on the basis of standard

machine-hours. Budgeted and actual fixed manufacturing overhead costs for the most recent
month appear below:

The company based its original budget on 6,400 machine-hours. The company actually
worked 6,710 machine-hours during the month. The standard hours allowed for the actual
output of the month totaled 6,540 machine-hours. What was the overall fixed manufacturing
overhead volume variance for the month?

A. $3,286 Favorable
B. $1,484 Unfavorable
C. $3,286 Unfavorable
D. $1,484 Favorable
Volume variance = Budgeted fixed overhead cost - Fixed overhead applied to work in process
Fixed component of predetermined overhead rate = Estimated total fixed manufacturing
overhead cost Estimated total amount of the allocation base = $67,840 6,400 machinehours = $10.60 per machine-hour
= $67,840 - (6,540 machine-hours $10.60 per machine-hour)
= $67,840 - $69,324
= $1,484 F

AACSB: Analytic
AICPA BB: Critical Thinking

App10A -21
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McGraw-Hill Education.

AICPA FN: Measurement

Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

39.

Bakos Corporation bases its predetermined overhead rate on variable manufacturing

overhead cost of $8.80 per machine-hour and fixed manufacturing overhead cost of $100,688
per period. If the denominator level of activity is 2,800 machine-hours, the variable component
in the predetermined overhead rate would be:

A. $44.76
B. $35.96
C. $43.52
D. $8.80
As given $8.80.

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

App10A -22
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McGraw-Hill Education.

40.

Acuff Corporation applies manufacturing overhead to products on the basis of standard

machine-hours. Budgeted and actual overhead costs for the most recent month appear below:

The company based its original budget on 6,200 machine-hours. The company actually
worked 6,560 machine-hours during the month. The standard hours allowed for the actual
output of the month totaled 6,420 machine-hours. What was the overall fixed manufacturing
overhead budget variance for the month?

A. $320 Favorable
B. $320 Unfavorable
C. $972 Favorable
D. $972 Unfavorable
Budget variance = Actual fixed overhead - Budgeted fixed overhead cost
= $27,720 - $27,400 = $320 U

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

App10A -23
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McGraw-Hill Education.

41.

Oldham Corporation bases its predetermined overhead rate on variable manufacturing

overhead cost of $4.00 per machine-hour and fixed manufacturing overhead cost of $87,822
per period. If the denominator level of activity is 4,100 machine-hours, the fixed component in
the predetermined overhead rate would be:

A. $25.42
B. $4.00
C. $21.42
D. $400.00
Fixed component of predetermined overhead rate = Estimated total fixed manufacturing
overhead cost Estimated total amount of the allocation base = $87,822 4,100 machinehours = $21.42 per machine-hour

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

App10A -24
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McGraw-Hill Education.

42.

Bruley Corporation applies manufacturing overhead to products on the basis of standard

machine-hours. The company's predetermined overhead rate for fixed manufacturing
overhead is $3.30 per machine-hour and the denominator level of activity is 3,500 machinehours. In the most recent month, the total actual fixed manufacturing overhead was $11,570
and the company actually worked 3,430 machine-hours during the month. The standard hours
allowed for the actual output of the month totaled 3,450 machine-hours. What was the overall
fixed manufacturing overhead volume variance for the month?

A. $66 Favorable
B. $231 Favorable
C. $231 Unfavorable
D. $165 Unfavorable
Volume variance = Budgeted fixed overhead cost - Fixed overhead applied to work in process
= (3,500 machine-hours $3.30 per machine-hour) - (3,450 machine-hours $3.30 per
machine-hour)
= $11,550 - $11,385
= $165 U

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

App10A -25
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McGraw-Hill Education.

Nitrol Corporation manufactures brass vases using a standard cost system with standard
machine-hours as the activity base for overhead. The following information relates to vase
production at Nitrol for last year:

The standard machine-hours per vase is 1.25. Last year Nitrol produced 84,000 vases.

43.

What was Nitrol's variable overhead rate variance for last year?

A. $1,000 Favorable
B. $1,060 Unfavorable
C. $2,060 Unfavorable
D. $9,500 Unfavorable
SR = $50,000 100,000 hours = $0.50 per hour
AH AR = $53,560
Variable overhead rate variance = (AH AR) - (AH SR)
= ($53,560) - (103,000 hours $0.50 per hour)
= $53,560 - $51,500
= $2,060 U

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 10-03 Compute the variable manufacturing overhead rate and efficiency variances and explain their
significance.

App10A -26
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McGraw-Hill Education.

44.

What was Nitrol's fixed manufacturing overhead volume variance for last year?

A. $2,500 Favorable
B. $7,500 Favorable
C. $12,500 Favorable
D. $40,000 Unfavorable
Fixed component of the predetermined overhead rate = $250,000 100,000 hours = $2.50 per
hour
Standard hours allowed for the actual output = 1.25 hours per unit 84,000 units = 105,000
hours
Volume variance = Fixed component of the predetermined overhead rate (Denominator
hours - Standard hours allowed for the actual output)
= $2.50 per hour (100,000 hours - 105,000 hours)
= $2.50 per hour (-5,000 hours)
= $12,500 F

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

App10A -27
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McGraw-Hill Education.

45.

What was Nitrol's total underapplied or overapplied overhead cost for last year?

A. $1,060 overapplied
B. $1,060 underapplied
C. $7,940 overapplied
D. $13,940 overapplied
Standard overhead cost per hour = ($50,000 + $250,000) 100,000 hours = $3 per hour
Standard overhead cost applied = $3 per hour (1.25 hours per vase 84,000 vases) = $3
per hour 105,000 hours = $315,000
Total overhead cost incurred = $53,560 + $247,500 = $301,060
Overhead overapplied = $315,000 - $301,060 = $13,940

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 10-03 Compute the variable manufacturing overhead rate and efficiency variances and explain their
significance.
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

The Dillon Corporation makes and sells a single product. Overhead costs are applied on the
basis of standard direct labor-hours. The standard cost card shows that 5 direct labor-hours
are required per unit. The Dillon Corporation had the following budgeted and actual data for
March:

App10A -28
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McGraw-Hill Education.

46.

The variable overhead rate variance for March is:

A. $4,900 U
B. $11,060 U
C. $14,700 U
D. $17,300 U
AH AR = $140,500
SR = $123,200 154,000 hours = $0.80 per hour
Variable overhead rate variance = (AH AR) - (AH SR)
= ($140,500) - (161,800 hours $0.80 per hour)
= $140,500 - $129,440
= $11,060 U

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 10-03 Compute the variable manufacturing overhead rate and efficiency variances and explain their
significance.

App10A -29
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McGraw-Hill Education.

47.

The variable overhead efficiency variance for March is:

A. $12,400 F
B. $6,160 U
C. $12,400 U
D. $6,160 F
Standard hours per unit = 154,000 hours 30,800 units = 5 hours per unit
SH = 33,900 units 5 hours per unit = 169,500 hours
SR = $123,200 154,000 hours = $0.80 per hour
Variable overhead efficiency variance = (AH - SH) SR
= (161,800 hours - 169,500 hours) $0.80 per hour
= (-7,700 hours) $0.80 per hour
= $6,160 F

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 10-03 Compute the variable manufacturing overhead rate and efficiency variances and explain their
significance.

App10A -30
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McGraw-Hill Education.

48.

The fixed manufacturing overhead budget variance for March is:

A. $900 F
B. $3,900 F
C. $3,000 U
D. $7,750 F
Budget variance = Actual fixed overhead - Budgeted fixed overhead
= $80,000 - $77,000
= $3,000 U

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

App10A -31
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McGraw-Hill Education.

49.

The fixed manufacturing overhead volume variance for March is:

A. $7,750 F
B. $7,750 U
C. $1,550 F
D. $3,900 U
Fixed component of the predetermined overhead rate = $77,000 154,000 hours = $0.50 per
hour
Standard hours allowed for the actual output = 5.00 hours per unit 33,900 units = 169,500
hours
Fixed overhead applied to work in process = $0.50 per hour 169,500 hours = $84,750
Volume variance = Budgeted fixed overhead - Fixed overhead applied to work in process
= $77,000 - $84,750
= $7,750 F

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

Derf Corporation uses a standard cost system in which it applies manufacturing overhead on
the basis of standard direct labor-hours. Two direct labor-hours are required for each unit
produced. The denominator activity was set at 9,000 units. Manufacturing overhead was
budgeted at $135,000 for the period; 20 percent of this cost was fixed. The 17,200 hours
worked during the period resulted in production of 8,500 units. Variable manufacturing
overhead cost incurred was $108,500 and fixed manufacturing overhead cost was $28,000.

App10A -32
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McGraw-Hill Education.

50.

The variable overhead rate variance for the period was:

A. $5,300 Unfavorable
B. $1,200 Unfavorable
C. $6,300 Unfavorable
D. $6,500 Unfavorable
SR = (0.8 $135,000) (9,000 units 2 hours per unit) = $108,000 18,000 hours = $6 per
hour
AH AR = $108,500
Variable overhead rate variance = (AH AR) - (AH SR)
= ($108,500) - (17,200 hours $6 per hour)
= $108,500 - $103,200
= $5,300 U

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 10-03 Compute the variable manufacturing overhead rate and efficiency variances and explain their
significance.
Source: CMA, adapted

App10A -33
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McGraw-Hill Education.

51.

The variable overhead efficiency variance for the period was:

A. $5,300 Unfavorable
B. $1,200 Unfavorable
C. $1,500 Unfavorable
D. $6,500 Unfavorable
SR = (0.8 $135,000) (9,000 units 2 hours per unit) = $108,000 18,000 hours = $6 per
hour
SH = 8,500 units 2.00 hours per unit = 17,000 hours
Variable overhead efficiency variance = (AH - SH) SR
= (17,200 hours - 17,000 hours) $6 per hour
= (200 hours) $6 per hour
= $1,200 Us

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 10-03 Compute the variable manufacturing overhead rate and efficiency variances and explain their
significance.
Source: CMA, adapted

App10A -34
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McGraw-Hill Education.

52.

The fixed manufacturing overhead budget variance for the period was:

A. $6,300 Unfavorable
B. $2,500 Unfavorable
C. $1,500 Unfavorable
D. $1,000 Unfavorable
Budget variance = Actual fixed overhead - Budgeted fixed overhead
= $28,000 - $27,000
= $1,000 U

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.
Source: CMA, adapted

App10A -35
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McGraw-Hill Education.

53.

The fixed manufacturing overhead volume variance for the period was:

A. $750 Unfavorable
B. $2,500 Unfavorable
C. $1,500 Unfavorable
D. $1,000 Unfavorable
Fixed component of the predetermined overhead rate = (0.2 $135,000) (9,000 units 2
hours per unit) = $27,000 18,000 hours = $1.50 per hour
Standard hours allowed for the actual output = 2.00 hours per unit 8,500 units = 17,000
hours
Volume variance = Fixed component of the predetermined overhead rate (Denominator
hours - Standard hours allowed for the actual output)
= $1.50 per hour (18,000 hours - 17,000 hours)
= $1.50 per hour (1,000 hours)
= $1,500 U

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.
Source: CMA, adapted

App10A -36
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McGraw-Hill Education.

Vette Tie Corporation has developed the following manufacturing overhead standards to use
in applying overhead to the production of its hand-painted silk ties. Manufacturing overhead at
Vette is applied to production on the basis of standard direct labor-hours (DLHs).

The above standards were based on an expected annual volume of 60,000 ties. The actual
results for last year were as follows:

54.

What was Vette's variable overhead rate variance?

A. $2,800 Unfavorable
B. $13,200 Favorable
C. $16,000 Favorable
D. $68,000 Unfavorable
AH AR = $880,000
Variable overhead rate variance = (AH AR) - (AH SR)
= ($880,000) - (64,000 hours $14.00 per hour)
= $880,000 - $896,000
= $16,000 F

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 10-03 Compute the variable manufacturing overhead rate and efficiency variances and explain their
App10A -37
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McGraw-Hill Education.

significance.

55.

What was Vette's fixed manufacturing overhead budget variance?

A. $1,600 Unfavorable
B. $3,000 Favorable
C. $13,000 Unfavorable
D. $17,600 Unfavorable
Budget variance = Actual fixed overhead - Budgeted fixed overhead
= $525,000 - $528,000
= $3,000 F

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

App10A -38
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McGraw-Hill Education.

56.

What total amount of manufacturing overhead cost (variable and fixed) did Vette apply to the
58,000 ties produced during the year?

A. $1,276,000
B. $1,403,600
C. $1,421,200
D. $1,452,000
Standard overhead cost per unit = $15.40 per unit + $8.80 per unit = $24.20 per unit
Standard overhead cost applied = $24.20 per unit 58,000 units = $1,403,600

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 10-03 Compute the variable manufacturing overhead rate and efficiency variances and explain their
significance.
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

App10A -39
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McGraw-Hill Education.

Pohl Corporation uses a standard cost system in which manufacturing overhead is applied on
the basis of standard machine-hours. For June, the company's manufacturing overhead
flexible budget showed the following total budgeted costs at a denominator activity level of
20,000 machine-hours:

During June, 17,000 machine-hours were used to complete 13,000 units of product, and the
following actual total overhead costs were incurred:

At standard, each unit of finished product requires 1.4 hours of machine time.

App10A -40
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McGraw-Hill Education.

57.

The total predetermined overhead rate per machine-hour for June was:

A. $2.57 per machine-hour

B. $1.30 per machine-hour
C. $2.80 per machine-hour
D. $3.15 per machine-hour
Predetermined overhead rate = Estimated total manufacturing overhead Estimated total
amount of the allocation base = ($16,000 + $10,000 + $20,500 + $9,500) 20,000 machinehours
= $56,000 20,000 machine-hours = $2.80 per machine-hour

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

App10A -41
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McGraw-Hill Education.

58.

The variable overhead rate variance for maintenance cost for June was

A. $1,020 F
B. $1,020 U
C. $3,230 F
D. $3,230 U
SR = $16,000 20,000 machine-hours = $0.80 per machine-hour
Variable overhead rate variance = (AH AR) - (AH SR)
= $14,620 - (17,000 machine-hours $0.80 per machine-hour)
= $14,620 - $13,600
= $1,020 U

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 10-03 Compute the variable manufacturing overhead rate and efficiency variances and explain their
significance.

App10A -42
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McGraw-Hill Education.

59.

The variable overhead efficiency variance for utilities cost for June was

A. $400 F
B. $400 U
C. $600 F
D. $600 U
SH = 13,000 units 1.4 machine-hours per unit = 18,200 machine-hours
SR = ($10,000) 20,000 machine-hours = $0.50 per machine-hour
Variable overhead efficiency variance = (AH - SH) SR
= (17,000 machine-hours - 18,200 machine-hours) $0.50 per machine-hour
= (-1,200 machine-hours) $0.50 per machine-hour
= $600 F

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 10-03 Compute the variable manufacturing overhead rate and efficiency variances and explain their
significance.

App10A -43
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McGraw-Hill Education.

60.

The fixed manufacturing overhead budget variance (in total) for June was:

A. $3,230 F
B. $3,230 U
C. $1,180 F
D. $1,180 U
Budget variance = Actual fixed overhead - Budgeted fixed overhead cost
= ($19,320 + $9,500) - ($20,500 + $9,500)
= $28,820 - $30,000
= $1,180 Fs

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

A manufacturing company uses a standard costing system in which standard machine-hours

(MHs) is the measure of activity. Data from the company's flexible budget for manufacturing
overhead are given below:

The following data pertain to operations for the most recent period:

App10A -44
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McGraw-Hill Education.

61.

The predetermined overhead rate per MH is closest to:

A. $17.91 per MH
B. $18.59 per MH
C. $18.00 per MH
D. $18.50 per MH
Variable overhead + Fixed overhead = $35,075 + $77,775
Predetermined overhead rate = Estimated total manufacturing overhead Estimated total
amount of the allocation base = $112,850 6,100 MHs = $18.50 per MH

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 10-03 Compute the variable manufacturing overhead rate and efficiency variances and explain their
significance.

App10A -45
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McGraw-Hill Education.

62.

The overhead applied to products during the period was closest to:

A. $112,850
B. $113,415
C. $116,550
D. $110,889
Variable overhead + Fixed overhead = $35,075 + $77,775
Predetermined overhead rate = Estimated total manufacturing overhead Estimated total
amount of the allocation base = $112,850 6,100 MHs = $18.50 per MH
Overhead applied = Predetermined overheard rate Standard hours allowed for the actual
output
= $18.50 per MH 5,994 MHs = $110,889

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 10-03 Compute the variable manufacturing overhead rate and efficiency variances and explain their
significance.

App10A -46
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McGraw-Hill Education.

63.

The variable overhead rate variance for the period was closest to:

A. $315 U
B. $1,465 F
C. $1,465 U
D. $315 F
SR = $35,075 6,100 MHs = $5.75 per MH
AH AR = $36,540
Labor rate variance = (AH AR) - (AH SR)
= $36,540 - (6,300 MHs $5.75 per MH)
= $36,540 - $36,225
= $315 U

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 10-03 Compute the variable manufacturing overhead rate and efficiency variances and explain their
significance.

App10A -47
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McGraw-Hill Education.

64.

The variable overhead efficiency variance for the period is closest to:

A. $300 F
B. $1,465 U
C. $1,760 U
D. $1,775 U
Variable overhead efficiency variance = (AH - SH) SR
= (6,300 MHs - 5,994 MHs) $5.75 per MH
= (306 MHs) $5.75 per MH
= $1,759.50 U

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 10-03 Compute the variable manufacturing overhead rate and efficiency variances and explain their
significance.

65.

The fixed manufacturing overhead budget variance for the period is closest to:

A. $900 F
B. $452 F
C. $3,734 F
D. $3,450 U
Budget variance = Actual fixed overhead - Budgeted fixed overhead cost
= $76,875 - $77,775 = $900 F

AACSB: Analytic

App10A -48
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McGraw-Hill Education.

AICPA BB: Critical Thinking

AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

66.

The fixed manufacturing overhead volume variance for the period is closest to:

A. $1,359 U
B. $2,550 F
C. $3,902 U
D. $1,352 U
Fixed component of predetermined overhead rate = Estimated total fixed manufacturing
overhead cost Estimated total amount of the allocation base = $77,775 6,100 MHs =
$12.75 per MH
Volume variance = Budgeted fixed overhead cost - Fixed overhead applied to work in process
= $77,775 - (5,994 MH $12.75 per MH)
= $77,775 - $76,423.50
= $1,351.50 U

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

App10A -49
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McGraw-Hill Education.

Cuda Manufacturing Corporation uses a standard cost system with machine-hours (MHs) as
the activity base for overhead. The following information relates to Cuda's operations last year:

67.

What was Cuda's variable overhead rate variance?

A. $6,000 Unfavorable
B. $15,000 Favorable
C. $20,000 Unfavorable
D. $21,000 Favorable
AH AR = $370,000
Variable overhead rate variance = (AH AR) - (AH SR)
= ($370,000) - (52,000 MHs $7 per MH)
= $370,000 - $364,000
= $6,000 U

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 10-03 Compute the variable manufacturing overhead rate and efficiency variances and explain their
significance.

App10A -50
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McGraw-Hill Education.

68.

What was Cuda's fixed manufacturing overhead budget variance?

A. $9,000 Favorable
B. $15,000 Unfavorable
C. $45,000 Favorable
D. $45,000 Unfavorable
Budget variance = Actual fixed overhead - Budgeted fixed overhead
= $615,000 - (50,000 MHs $12 per MH)
= $615,000 - $600,000
= $15,000 U

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

69.

What total amount of manufacturing overhead cost (variable and fixed) did Cuda apply to
production?

A. $950,000
B. $985,000
C. $988,000
D. $1,045,000
Manufacturing overhead cost applied = 55,000 MHs ($7 per MH + $12 per MH)
= 55,000 MHs ($19 per MH) = $1,045,000

AACSB: Analytic

App10A -51
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McGraw-Hill Education.

AICPA BB: Critical Thinking

AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 10-03 Compute the variable manufacturing overhead rate and efficiency variances and explain their
significance.
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

The Claus Corporation makes and sells a single product and uses standard costing. During
January, the company actually used 8,700 direct labor-hours (DLHs) and produced 3,000 units
of product. The standard cost card for one unit of product includes the following:
Variable factory overhead: 3.0 DLHs @ $4.00 per DLH.
Fixed factory overhead: 3.0 DLHs @ $3.50 per DLH.
For January, the company incurred $22,000 of actual fixed manufacturing overhead costs and
recorded a $875 favorable volume variance.

App10A -52
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McGraw-Hill Education.

70.

The denominator level of activity in direct labor-hours (DLHs) used by Claus in setting the
predetermined overhead rate for January is:

A. 9,500 DLHs
B. 9,250 DLHs
C. 8,750 DLHs
D. 10,500 DLHs
Volume variance = Fixed component of the predetermined overhead rate (Denominator
hours - Standard hours allowed for the actual output)
$875 F = $3.50 per DLH [Denominator hours - (3.0 DLHs per unit 3,000 units)]
-$875 = $3.50 per DLH [Denominator hours - (3.0 DLHs per unit 3,000 units)]
-$875 = $3.50 per DLH [Denominator hours - (9,000 DLHs)]
-$875 = ($3.50 per DLH Denominator hours) - $31,500
$3.50 per DLH Denominator hours = $31,500 - $875
$3.50 per DLH Denominator hours = $30,625
Denominator hours = $30,625 $3.50 per DLH = 8,750 DLHs

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

App10A -53
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McGraw-Hill Education.

71.

The fixed manufacturing overhead cost used to compute the predetermined overhead rate
was:

A. $31,500
B. $30,625
C. $32,375
D. $33,250
Fixed overhead applied to work in process = $3.50 per DLH 3.0 DLHs per unit 3,000 units
= $31,500
Volume variance = Budgeted fixed overhead - Fixed overhead applied to work in process
$875 F = Budgeted fixed overhead - $31,500
-$875 = Budgeted fixed overhead - $31,500
Budgeted fixed overhead = $31,500 - $875 = $30,625

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

App10A -54
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McGraw-Hill Education.

A manufacturer of playground equipment uses a standard costing system in which standard

machine-hours (MHs) is the measure of activity. Data from the company's flexible budget for
manufacturing overhead are given below:

The following data pertain to operations for the most recent period:

72.

The predetermined fixed manufacturing overhead rate is closest to:

A. $12.24 per MH
B. $13.55 per MH
C. $13.87 per MH
D. $11.96 per MH
Predetermined overhead rate = Budgeted total overhead Denominator level of activity
= $40,650 3,000 MHs = $13.55 per MH

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

App10A -55
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McGraw-Hill Education.

73.

The fixed manufacturing overhead applied to products during the period is closest to:

A. $40,650
B. $42,981
C. $41,600
D. $46,070
Predetermined overhead rate = Budgeted total overhead Denominator level of activity
= $40,650 3,000 MHs = $13.55 per MH
Fixed manufacturing overhead applied = Predetermined overheard rate Standard hours
allowed for the actual output = $13.55 per MH 3,172 MHs = $42,980.60

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

74.

The fixed manufacturing overhead budget variance for the period is closest to:

A. $4,470 U
B. $950 U
C. $2,790 F
D. $1,381 U
Budget variance = Actual fixed overhead - Budgeted fixed overhead cost
= $41,600 - $40,650 = $950 U

AACSB: Analytic

App10A -56
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McGraw-Hill Education.

AICPA BB: Critical Thinking

AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

75.

The fixed manufacturing overhead volume variance for the period is closest to:

A. $2,256 F
B. $2,331 F
C. $3,089 U
D. $5,420 F
Predetermined overhead rate = Budgeted total overhead Denominator level of activity
= $40,650 3,000 MHs = $13.55 per MH
Volume variance = Budgeted fixed overhead cost - Fixed overhead applied to work in process
= $40,650 - (3,172 MHs $13.55 per MH)
= $40,650 - $42,980.60
= $2,330.60 F

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

App10A -57
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McGraw-Hill Education.

The Murray Corporation uses a standard cost system in which it applies manufacturing
overhead on the basis of standard direct labor-hours (DLHs). The company recorded the
following activity and cost data for May:

76.

The amount of fixed manufacturing overhead cost that was used to compute the fixed
component of the predetermined overhead rate was:

A. $54,135
B. $60,150
C. $59,465
D. $57,600
Fixed component of the predetermined overhead rate = Budgeted fixed overhead
Denominator level of activity
$0.90 per DLH = Budgeted fixed overhead cost 64,000 DLHs
Budgeted fixed overhead cost = $0.90 per DLH 64,000 DLHs = $57,600

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

App10A -58
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McGraw-Hill Education.

77.

The amount of fixed manufacturing overhead cost applied during May was:

A. $52,535
B. $54,135
C. $36,090
D. $50,400
Fixed manufacturing overhead cost applied to work in process = 40,100 units 1.5 DLHs per
unit $0.90 per DLH = $54,135

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

App10A -59
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McGraw-Hill Education.

78.

The fixed manufacturing overhead budget variance for May was:

A. $8,000 F
B. $8,000 U
C. $1,600 F
D. $1,600 U
Fixed component of the predetermined overhead rate = Budgeted fixed overhead
Denominator level of activity
$0.90 per DLH = Budgeted fixed overhead cost 64,000 DLHs
Budgeted fixed overhead cost = $0.90 per DLH 64,000 DLHs = $57,600
Budget variance = Actual fixed overhead - Budgeted fixed overhead cost
= $56,000 - $57,600 = $1,600 F

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

An outdoor barbecue grill manufacturer has a standard costing system based on standard
direct labor-hours (DLHs) as the measure of activity. Data from the company's flexible budget
for manufacturing overhead are given below:

The following data pertain to operations for the most recent period:

App10A -60
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McGraw-Hill Education.

79.

The fixed manufacturing overhead budget variance for the period is closest to:

A. $166 U
B. $422 F
C. $585 F
D. $1,400 U
Budget variance = Actual fixed overhead - Budgeted fixed overhead cost
= $28,295 - $26,895
= $1,400 U

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

App10A -61
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McGraw-Hill Education.

80.

The fixed manufacturing overhead volume variance for the period is closest to:

A. $978 F
B. $993 F
C. $163 F
D. $815 F
Fixed component of the predetermined overhead rate = $26,895 3,300 hours = $8.15 per
DLH
Volume variance = Budgeted fixed overhead cost - Fixed overhead applied to work in process
= $26,895 - (3,420 DLHs $8.15 per DLH)
= $26,895 - $27,873
= $978 F

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

The Forbes Corporation uses a standard cost system in which overhead costs are applied to
products on the basis of standard direct labor-hours (DLHs). The following data applied to the
company's activities for June:

App10A -62
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McGraw-Hill Education.

81.

The fixed component of the predetermined overhead rate for June is:

A. $3.00 per DLH

B. $3.23 per DLH
C. $3.78 per DLH
D. $3.46 per DLH
Budget variance = Actual fixed overhead - Budgeted fixed overhead
$11,450 U = $161,450 - Budgeted fixed overhead
$11,450 = $161,450 - Budgeted fixed overhead
Budgeted fixed overhead = $161,450 - $11,450
Budgeted fixed overhead = $150,000
Fixed component of the predetermined overhead rate = Estimated fixed overhead cost
Estimated total amount of the allocation base = $150,000 50,000 DLHs = $3 per DLH

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

App10A -63
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McGraw-Hill Education.

82.

The volume variance for June is:

A. $44,954 Unfavorable
B. $39,000 Favorable
C. $39,000 Unfavorable
D. $44,954 Favorable
Budget variance = Actual fixed overhead - Budgeted fixed overhead
$11,450 U = $161,450 - Budgeted fixed overhead
$11,450 = $161,450 - Budgeted fixed overhead
Budgeted fixed overhead = $161,450 - $11,450
Budgeted fixed overhead = $150,000
Fixed component of the predetermined overhead rate = Estimated fixed overhead cost
Estimated total amount of the allocation base = $150,000 50,000 DLHs = $3 per DLH
Volume variance = Fixed component of the predetermined overhead rate (Denominator
hours - Standard hours allowed for the actual output)
= $3 per DLH [50,000 DLHs - (21,000 units 3 DLHs per unit)]
= $3 per DLH [50,000 DLHs - (63,000 DLHs)]
= $3 per DLH [-13,000 DLHs]
= $39,000 F

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

App10A -64
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McGraw-Hill Education.

The Murray Corporation makes and sells a single product. The company recorded the
following activity and cost data for May:

The fixed component of the predetermined overhead rate is $0.95 per direct labor-hour.

83.

The fixed manufacturing overhead used to calculate the predetermined overhead rate was:

A. $64,125
B. $67,500
C. $68,400
D. $70,275
$0.95 per DLH = Fixed manufacturing overhead 72,000 DLHs
Fixed manufacturing overhead = $0.95 per DLH 72,000 DLHs
Fixed manufacturing overhead = $68,400

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

App10A -65
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McGraw-Hill Education.

84.

The amount of fixed manufacturing overhead cost applied to work in process during May was:

A. $61,725
B. $62,700
C. $42,750
D. $64,125
Fixed manufacturing overhead cost applied to work in process = $0.95 per DLH 1.5 DLHs
per unit 45,000 units = $64,125

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

App10A -66
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McGraw-Hill Education.

85.

The fixed manufacturing overhead budget variance for May was:

A. $2,400 U
B. $2,400 F
C. $6,000 U
D. $6,000 F
$0.95 per DLH = Fixed manufacturing overhead 72,000 DLHs
Fixed manufacturing overhead = $0.95 per DLH 72,000 DLHs
Fixed manufacturing overhead = $68,400
Budget variance = Actual fixed overhead - Budgeted fixed overhead
= $66,000 - $68,400 = $2,400 F

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

The following data for February has been provided by Gillard Corporation.

App10A -67
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McGraw-Hill Education.

86.

The budget variance for February is:

A. $7,440 F
B. $7,440 U
C. $1,140 F
D. $1,140 U
Budget variance = Actual fixed overhead - Budgeted fixed overhead
= $69,960 - $68,820
= $1,140 U

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

App10A -68
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McGraw-Hill Education.

87.

The volume variance for February is:

A. $5,580 F
B. $5,580 U
C. $7,440 U
D. $7,440 F
Fixed component of the predetermined overhead rate = $68,820 3,700 hours = $18.60 per
hour
Volume variance = Fixed component of the predetermined overhead rate (Denominator
hours - Standard hours allowed for the actual output)
= $18.60 per hour (3,700 hours - 4,000 hours)
= $18.60 per hour (-300 hours)
= $5,580 F

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

Odonell Corporation estimates that its variable manufacturing overhead is $11.20 per
machine-hour and its fixed manufacturing overhead is $563,640 per period.

App10A -69
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McGraw-Hill Education.

88.

If the denominator level of activity is 6,000 machine-hours, the variable component in the
predetermined overhead rate would be:

A. $93.94 per machine-hour

B. $11.20 per machine-hour
C. $105.14 per machine-hour
D. $103.60 per machine-hour
$11.20 per machine-hour (given)

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

89.

If the denominator level of activity is 6,000 machine-hours, the fixed component in the
predetermined overhead rate would be:

A. $1,120.00 per machine-hour

B. $11.20 per machine-hour
C. $93.94 per machine-hour
D. $105.14 per machine-hour
Fixed component of the predetermined overhead rate = Estimated total fixed manufacturing
overhead Denominator level of activity = $563,640 6,000 machine-hours = $93.94 per
machine-hour

AACSB: Analytic
AICPA BB: Critical Thinking

App10A -70
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McGraw-Hill Education.

AICPA FN: Measurement

Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

90.

If the denominator level of activity is 6,100 machine-hours, the predetermined overhead rate
would be:

A. $11.20 per machine-hour

B. $1,120.00 per machine-hour
C. $92.40 per machine-hour
D. $103.60 per machine-hour
Predetermined overhead rate = Estimated total manufacturing overhead Denominator level
of activity
= [$563,640 + ($11.20 per machine-hour 6,100 machine-hours)] 6,100 machine-hours
= [$563,640 + $68,320] 6,100 machine-hours
= $631,960 6,100 machine-hours
= $103.60 per machine-hour

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

Tillinghast Corporation estimates that its variable manufacturing overhead is $9.60 per
machine-hour and its fixed manufacturing overhead is $14,630 per period.

App10A -71
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McGraw-Hill Education.

91.

If the denominator level of activity is 1,000 machine-hours, the variable component in the
predetermined overhead rate would be:

A. $22.90 per machine-hour

B. $14.63 per machine-hour
C. $24.23 per machine-hour
D. $9.60 per machine-hour
$9.60 per machine-hour (given)

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

92.

If the denominator level of activity is 1,000 machine-hours, the fixed component in the
predetermined overhead rate would be:

A. $24.23 per machine-hour

B. $14.63 per machine-hour
C. $960.00 per machine-hour
D. $9.60 per machine-hour
Fixed component of the predetermined overhead rate = Estimated fixed overhead
Denominator level of activity = $14,630 1,000 machine-hours = $14.63 per machine-hour

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
App10A -72
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McGraw-Hill Education.

Difficulty: 1 Easy
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

93.

If the denominator level of activity is 1,100 machine-hours, the predetermined overhead rate
would be:

A. $960.00 per machine-hour

B. $9.60 per machine-hour
C. $13.30 per machine-hour
D. $22.90 per machine-hour
Predetermined overhead rate = Estimated total manufacturing overhead Denominator level
of activity
= [$14,630 + ($9.60 per machine-hour 1,100 machine-hours] 1,100 machine-hours
= [$14,630 + $10,560] 1,100 machine-hours
= $25,190 1,100 machine-hours
= $22.90 per machine-hour

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

Saffold Corporation has provided the following data for December.

App10A -73
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McGraw-Hill Education.

94.

The budget variance for December is:

A. $10,050 U
B. $6,540 U
C. $6,540 F
D. $10,050 F
Budget variance = Actual fixed overhead - Budgeted fixed overhead
= $284,730 - $274,680
= $10,050 U

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

App10A -74
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McGraw-Hill Education.

95.

The volume variance for December is:

A. $6,540 F
B. $6,540 U
C. $16,350 F
D. $16,350 U
Volume variance = Fixed component of the predetermined overhead rate (Denominator
hours - Standard hours allowed for the actual output)
= $32.70 per hour (8,400 hours - 8,900 hours)
= $32.70 per hour (-500 hours)
= $16,350 F

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

App10A -75
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McGraw-Hill Education.

A furniture manufacturer uses a standard costing system in which standard machine-hours

(MHs) is the measure of activity. Data from the company's flexible budget for manufacturing
overhead are given below:

The following data pertain to operations for the most recent period:

96.

The predetermined overhead rate is closest to:

A. $21.90 per hour

B. $21.80 per hour
C. $21.16 per hour
D. $21.26 per hour
Predetermined overhead rate = Budgeted total overhead Denominator level of activity
= ($31,845 + $40,425) 3,300 hours
= $72,270 3,300 hours
= $21.90 per hour

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

App10A -76
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McGraw-Hill Education.

97.

The overhead applied to products during the period was closest to:

A. $74,460
B. $72,270
C. $67,408
D. $71,955
Predetermined overhead rate = Budgeted total overhead Denominator level of activity
= ($31,845 + $40,425) 3,300 hours
= $72,270 3,300 hours
= $21.90 per hour
Overhead applied = Predetermined overhead rate Standards hours allowed for the actual
output
= $21.90 per hour 3,078 hours
= $67,408.20

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

App10A -77
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McGraw-Hill Education.

98.

The fixed manufacturing overhead budget variance for the period is closest to:

A. $2,675 U
B. $1,450 F
C. $3,691 F
D. $1,270 F
Budget variance = Actual fixed overhead - Budgeted fixed overhead cost
= $38,975 - $40,425
= $1,450 F

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

App10A -78
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McGraw-Hill Education.

99.

The fixed manufacturing overhead volume variance for the period is closest to:

A. $2,720 U
B. $1,225 F
C. $2,811 U
D. $3,945 U
Fixed component of the predetermined overhead rate = $40,425 3,300 hours = $12.25 per
hour
Volume variance = Budgeted fixed overhead cost - Fixed overhead applied to work in process
= $40,425 - (3,078 hours $12.25 per hour)
= $40,425 - $37,705.50
= $2,719.50 U

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

Homer Corporation has a standard cost system in which manufacturing overhead is applied on
the basis of standard machine-hours. The company has provided the following data
concerning its manufacturing overhead costs for last year:

App10A -79
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McGraw-Hill Education.

100.

The fixed manufacturing overhead budget variance was:

A. $200 F
B. $400 U
C. $300 F
D. $240 U
Budget variance = Actual fixed overhead - Budgeted fixed overhead
= $3,800 - $4,000
= $200 F

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

App10A -80
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McGraw-Hill Education.

101.

The volume variance was:

A. $200 F
B. $400 U
C. $300 F
D. $240 U
Fixed component of the predetermined overhead rate = Estimated total fixed manufacturing
overhead cost Estimated total amount of the allocation base = $4,000 1,000 hours = $4
per hour
Volume variance = Fixed component of the predetermined overhead rate (Denominator
hours - Standard hours allowed for the actual output)
= $4 per hour (1,000 hours - 900 hours)
= $4 per hour (100 hours)
= $400 U

AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 10A-04 Compute and interpret the fixed overhead budget and volume variances.

App10A -81
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McGraw-Hill Education.