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Cost Accounting 101 Practice Test: Flexible Budgets, Overhead Cost Variances, and Management Control
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Overhead cost variance is the difference between the actual and budgeted overhead costs allocated to products or services. It can indicate how well a company is managing its resources, controlling its costs, and pricing its products or services.  Overhead cost variance is made up of four variances: Variable overhead rate variance, Variable overhead efficiency variance, Fixed overhead spending variance, and Volume variance.  To calculate the overall overhead cost variance, subtract the standard overhead costs from the actual overhead costs. If the standard overhead cost is higher than the... Show more
Cost Accounting 101 Practice Test: Flexible Budgets, Overhead Cost Variances, and Management Control
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25 Questions

1. An unfavorable variable overhead efficiency variance indicates that:
2. For fixed overhead costs, the flexible-budget amount is always the same as the static-budget amount.
3. The planning of fixed overhead costs does NOT differ from the planning of variable overhead costs.
4. A $5,000 unfavorable flexible-budget variance indicates that:
5. The fixed overhead flexible-budget variance is the difference between actual fixed overhead costs and the fixed overhead costs in the flexible budget.
6. The variable overhead efficiency variance is computed ________ and interpreted ________ the direct-cost efficiency variance.
7. Fixed costs for the period are by definition a lump sum of costs that remain unchanged and therefore the fixed overhead spending variance is always zero.
8. The variable overhead flexible-budget variance can be further subdivided into the:
9. The variable overhead efficiency variance is computed in a different way than the efficiency variance for direct-cost items.
10. An unfavorable variable setup overhead efficiency variance could be due to actual setup-hours exceeding the setup-hours planned for the units produced.
11. The fixed overhead efficiency variance is the difference between actual fixed overhead costs and fixed overhead costs in the flexible budget.
12. Generally Accepted Accounting Principles require that unitized fixed manufacturing costs be used for:
13. Variance analysis of fixed overhead costs is also useful when a company uses activity-based costing.
14. When machine-hours are used as an overhead cost-allocation base, a rush order resulting in unplanned overtime that used less-skilled workers on the machines would most likely contribute to reporting a(n):
15. An unfavorable production-volume variance:
16. For calculating the costs of products and services, a standard costing system:
17. At the end of the fiscal year, the fixed overhead spending variance is always prorated among work-in-process control, finished goods control, and cost of goods sold on the basis of the fixed overhead allocated to these accounts.
18. A favorable fixed overhead spending variance might indicate that:
19. When machine-hours are used as a cost-allocation base, the item most likely to contribute to an unfavorable production-volume variance is:
20. The variable overhead efficiency variance measures the efficiency with which the cost-allocation base is used.
21. Under activity-based costing, the flexible-budget amount equals the static-budget amount for fixed overhead costs.
22. A favorable production-volume variance indicates that the company:
23. Overhead costs are a major part of costs for most companiesmore than 50% of all costs for some companies.
24. In a standard costing system, a cost-allocation base would most likely be:
25. When machine-hours are used as an overhead cost-allocation base, the most likely cause of a favorable variable overhead spending variance is:

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