CHAPTER 8: FLEXIBLE BUDGETS, VARIANCES, AND MANAGEMENT CONTROL: II TRUE/FALSE 1. Overhead costs are a major part of costs for most companies more than 50% of all – costs for some companies. True Answer: 2. At the start of the budget period, management will have made most decisions regarding the level of variable costs to be incurred. False Answer: At the start of the budget period, management will have made most decisions regarding the level of costs to be incurred. fixed 3. One way to manage both variable and fixed overhead costs is to eliminate activities. True Answer: 4. In a standard costing system, the variable-overhead rate per unit is generally expressed as a standard cost per output unit. True Answer: 5. For calculating the cost of products and services, a standard costing system does not have to keep track of actual costs. True Answer: 6. The budget period for variable-overhead costs is typically less than 3 months. False Answer: The budget period for variable-overhead costs is typically 12 months. 7. A favorable variable overhead spending variance can be the result of paying lower prices than budgeted for variable overhead items such as energy. True Answer: 8. The variable overhead efficiency variance is computed in a different way than the efficiency variance for direct-cost items. Answer: The variable overhead efficiency variance is computed the same way as the efficiency variance for direct-cost items.
CHAPTER 8: FLEXIBLE BUDGETS, VARIANCES, AND MANAGEMENT CONTROL: II TRUE/FALSE 1. Overhead costs are a major part of costs for most companies – more than 50% of all costs for some companies. Answer: True 2. At the start of the budget period, management will have made most decisions regarding the level of variable costs to be incurred. Answer: False At the start of the budget period, management will have made most decisions regarding the level of fixed costs to be incurred. 3. One way to manage both variable and fixed overhead costs is to eliminate activities. Answer: True 4. In a standard costing system, the variable-overhead rate per unit is generally expressed as a standard cost per output unit. Answer: True 5. For calculating the cost of products and services, a standard costing system does not have to keep track of actual costs. Answer: True 6. The budget period for variable-overhead costs is typically less than 3 months. Answer: False The budget period for variable-overhead costs is typically 12 months. 7. A favorable variable overhead spending variance can be the result of paying lower prices than budgeted for variable overhead items such as energy. Answer: True 8. The variable overhead efficiency variance is computed in a different way than the efficiency variance for direct-cost items. Answer: The variable overhead efficiency variance is computed the same way as the efficiency variance for direct-cost items.
Ch07%20Flexible%20Budget%20Variance%20and%20Mangement%20Control%20Test-2.docx