Chapter 11 Flexible Budgets and Overhead Analysis True/False Questions 1. A key feature of a flexible budget is that actual results can be compared to budgeted costs at the same level of activity. Ans: True 2. Direct would generally be a better measure of activity for a flexible budget than direct labor cost. Ans: True 3. In a flexible budget, when the activity declines, the variable costs per unit also declines. Ans: False 4. costs should not be included in a flexible budget because they do not change when the level of activity changes. Ans: False 5. To assess how well a production manager has controlled costs, actual costs should be compared to what the costs should have been for the planned level of production. Ans: False 6. The overhead spending variance is not affected by excessive usage or waste of overhead materials. Ans: False 7. The variable overhead efficiency variance provides a measure of how efficiently the activity base which underlies the flexible budget is being utilized in production. Ans: True 8. A company has a standard cost system in which fixed and variable manufacturing overhead costs are applied to products on the basis of direct labor-hours. The company's choice of the denominator level of activity affects the fixed overhead volume variance. Ans: True LO: 5; 6 9. The higher the denominator activity level used to compute the predetermined overhead rate, the higher the predetermined overhead rate.
Chapter 11 Flexible Budgets and Overhead Analysis True/False Questions 1. A key feature of a flexible budget is that actual results can be compared to budgeted costs at the same level of activity. Ans: True 2. Direct would generally be a better measure of activity for a flexible budget than direct labor cost. Ans: True 3. In a flexible budget, when the activity declines, the variable costs per unit also declines. Ans: False 4. costs should not be included in a flexible budget because they do not change when the level of activity changes. Ans: False 5. To assess how well a production manager has controlled costs, actual costs should be compared to what the costs should have been for the planned level of production. Ans: False 6. The overhead spending variance is not affected by excessive usage or waste of overhead materials. Ans: False 7. The variable overhead efficiency variance provides a measure of how efficiently the activity base which underlies the flexible budget is being utilized in production. Ans: True 8. A company has a standard cost system in which fixed and variable manufacturing overhead costs are applied to products on the basis of direct labor-hours. The company's choice of the denominator level of activity affects the fixed overhead volume variance. Ans: True LO: 5; 6 9. The higher the denominator activity level used to compute the predetermined overhead rate, the higher the predetermined overhead rate.
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