Question

True-False

____1. Budgeted overhead cost rates can be expressed as an amount per unit of output or per unit of input.

____2. There is no fundamental difference between the budgeted variable-overhead cost rate per unit of input and the budgeted price of individual direct materials.

____3. The variable-overhead spending variance is unfavorable if the actual variable overhead cost rate per unit of input (the cost-allocation base) is greater than the budgeted variable overhead cost rate per unit of input.

____4. The variable overhead efficiency variance is computed similarly to the direct-labor efficiency variance, and the meaning and interpretation of these variances are basically the same.

____5. If variable overhead is under allocated, this means the flexible-budget variance for variable overhead is unfavorable.

____6. The total amount of budgeted fixed manufacturing overhead is affected by the production-denominator level chosen.

____7. The fixed manufacturing overhead cost per unit is inversely related to the production-denominator level.

____8. The production-volume variance is zero if actual output produced is equal to the production-denominator level.

____9.The production-volume variance is generally a good measure of the operating income forgone by having unused capacity.

____10. In 2-variance analysis of overhead costs, there is only one spending variance.

____11.Computing variances for fixed setup costs under an ABC system parallels the computation of variances for fixed overhead costs under a non-ABC system.

Answer 1

1. False, can be expressed as per unit of input

2. False, overhead cost include dilrect abour and variable overheads as well along with direct material in it

3. True, when actual is greater than what we budgeted than there is unfavourable variance

4. True,

Both the variable factory overhead efficiency variance and the direct labor efficiency variance will be in the same direction. The variable factory overhead efficiency variance will be favorable if the firm has a favorable direct labor efficiency variance and unfavorable if its direct labor efficiency variance is unfavorable.