Section B Manufacturing Input Variances Although the actual production level exceeded the budgeted production level, the actual fixed overhead cost incurred did not increase because of the increased production, since the cost is fixed. The total fixed cost was spread over a greater number of units, and that is favorable. However, the actual fixed overhead cost incurred was higher than had been budgeted (though not due to the increased production), and that was unfavorable. The total variable overhead variance of $(330,000) Favorable plus the total fixed overhead variance of $1,000,000 Unfavorable is equal to the total overhead variance we calculated at the beginning of this example of $670,000 Unfavorable. Question 62: The total fixed overhead variance is the: a) Measure of the lost profits from the lack of sales volume. b) Amount of the underapplied or overapplied fixed overhead costs. c) Potential cost reduction that can be achieved from better cost control. d) Measure of production inefficiency. (CMA Adapted) Question 63: Variable overhead is applied on the basis of standard direct labor hours. If the direct labor efficiency variance is unfavorable, the variable overhead efficiency variance will be: a) Favorable. b) Unfavorable. c) The same amount as the labor efficiency variance. d) Indeterminable because it is not related to the labor efficiency variance. (CMA Adapted)
Posted on: Sat, 19 Jul 2014 10:04:52 +0000
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