Question: Refer to the data in the preceding
Refer to the data in the preceding exercise. Use diagrams similar to those in Exhibits 11–6 and 11–8 to compute (1) the variable-overhead spending and efficiency variances, and (2) the fixed-overhead budget and volume variances. Data from preceding exercise: Starlight Glassware Company has the following standards and flexible-budget data. Standard variable-overhead rate ......................... $18.00 per direct-labor hour Standard quantity of direct labor .............................. 2 hours per unit of output Budgeted fixed overhead ..................................................................... $300,000 Budgeted output .............................................................................. 25,000 units Actual results for February are as follows: Actual output ...................................................................................... 20,000 units Actual variable overhead ........................................................................ $960,000 Actual fixed overhead .............................................................................. $291,000 Actual direct labor .............................................................................. 50,000 hours Exhibit 11-6: 
Exhibit 11-8: 
Transcribed Image Text:
(4)* Variable Overhead Applied (1) (3) Flexible Budget: Actual Variable Overhead Projected Variable Overhead Variable Overhead to Work in Process Actual Actual Actual Standard Standard Allowed Standard Standard Allowed Standard Activity Level x (AQ) Activity Level (AQ) Rate Rate Activity Level (SQ) Rate Activity Level (SQ) Rate (AVR) (SVR) (SVR) (SVR) 6,300 $5.50 per x process hour $5.00 per $5.00 per x process 6,300 6,000 6,000 $5.00 per process hours process hours process hour process hours process hours process hour hour $34,650 $31,500 $30,000 S30,000 $3,150 Unfavorable $1,500 Unfavorable Variable-overhead Variable-overhead No difference spending variance efficiency variance Actual varlable-overhead cost Actual process hours $34,650 6,300 "Actual variable-overhead rate (AVR) $5.50 tColumn (4) is not used to compute the varlances. It is included to point out that the flexible-budget amount for varlable overhead, $30,000, is the amount that will be applied to Work-in-Process Inventory for product-costing purposes. For varable overhead, columns (3) and (4) are always equal. (1) (2) Budgeted Fixed (3) Fixed Overhead Actual Fixed Applied to Overhead Overhead Work in Process Standard Standard Allowed Fixed Activity Overhead Level Rate 6,000 $2.00 per process hours process hour $16,100 $15,000 $12,000 $1,100 Unfavorable $3,000 Unfavorable" Fixed-overhead Fixed-overhead budget variance volume variance "Consistent with our discussion of the fiued-overhead volume varlance, some financial planning and analysis systems would designate a positive variance as "unfavorable."
> Think carefully about the overall mission and goals of your college or university. Required: 1. How does the task of building a balanced scorecard for an educational institution differ from that for a profit-seeking enterprise? 2. Design a simple balanc
> Elite Classic Clothes is a retailer that sells to professional women in the northeast. The firm leases space for stores in upscale shopping centers, and the organizational structure consists of regions, districts, and stores. Each region consists of two
> Chenango Can Company manufactures metal cans used in the food-processing industry. A case of cans sells for $25. The variable costs of production for one case of cans are as follows: Direct material .......................................................
> North American Industries is a diversified company whose products are marketed both domestically and internationally. The company’s major product lines are furniture, sports equipment, and household appliances. At a recent meeting of th
> Give one example of a plausible activity base to use in flexible budgeting for each of the following organizations: an insurance company, an express delivery service, a restaurant, and a state tax-collection agency.
> Draw a graph showing both budgeted and applied variable overhead. Explain why the graph appears as it does.
> Why are fixed-overhead costs sometimes called capacity-producing costs
> Distinguish between the control purpose and the product-costing purpose of standard costing and flexible budgeting.
> What is the conceptual problem of applying fixed production overhead as a product cost?
> Draw a graph showing budgeted and applied fixed overhead, and show an unfavorable (or positive) volume variance on the graph.
> Describe a common but misleading interpretation of the fixed-overhead volume variance. Why is this interpretation misleading?
> What is the correct interpretation of the fixed-overhead volume variance?
> Distinguish between the interpretations of the direct labor and variable-overhead efficiency variances.
> News Technology, Inc., manufactures computerized laser printing equipment used by newspaper publishers throughout North America. In recent years, the company’s market share has been eroded by stiff competition from Asian and European co
> What is the interpretation of the variable-overhead efficiency variance?
> What is the interpretation of the variable-overhead spending variance?
> How have advances in manufacturing technology affected overhead application?
> Distinguish between a columnar and a formula flexible budget
> Why are flexible overhead budgets based on activity measures, such as hours of process time, machine time, or direct-labor hours?
> Explain how an activity-based flexible budget differs from a conventional flexible budget.
> Bear Mountain Sled Company manufactures children’s snow sleds. The company’s performance report for December is as follows. The company uses sales variance analysis to explain the difference between budgeted and actua
> EuroGuide, Inc., publishes European Tour Guide Books in New York City. A monthly flexible overhead budget for the firm follows The planned monthly production is 6,400 guide books. The standard direct-labor allowance is .25 hours per book and overhead is
> Vancouver Scholastic Supply Company uses a standard-costing system. The firm estimates t hat it will operate its manufacturing facilities at 600,000 machine hours for the year. The estimate for total budgeted overhead is $1,500,000. The standard variable
> Ice Box Gourmet, Inc., produces containers of frozen food. During April, the company produced 725 cases of food and incurred the following actual costs. Variable overhead ..................................................................... $ 5,500 Fixed
> Altoona Valve Company’s planned production for the year just ended was 20,000 units. This production level was achieved, and 21,000 units were sold. Other data follow: Direct material used ............................................... $300,000 Direct l
> Albuquerque Wood Crafts, Inc., is a manufacturer of furniture for specialty shops throughout the southwest and has an annual sales volume of $24 million. The company has four major product lines: bookcases, magazine racks, end tables, and bar stools. Eac
> Williamsport Wheel and Axle, Inc., has an automated production process, and production activity is quantified in terms of machine hours. The company uses a standard-costing system. The annual static budget for 20x4 called for 6,000 units to be produced,
> Western A uto Parts Company manufactures replacement parts for automobile repair. The company recently installed a flexible manufacturing system (FMS), which has significantly changed the production process. The installation of the new FMS was not antici
> For each of the following independent Cases A and B, fill in the missing information. The company budgets and applies production-overhead costs on the basis of direct-labor hours. (U denotes unfavorable variance; F denotes favorable variance.) Case A
> EduSoft Corporation’s president, Mark Fletcher, was looking forward to seeing the p erformance reports for October because he knew the company’s sales for the month had exceeded budget by a considerable margin. EduSoft
> Vermont Sky T ours is a small sightseeing tour company based in Burlington, Vermont. The firm specializes in aerial tours of the New England countryside during September and October, when the fall color is at its peak. Until recently, the company had no
> LakeMaster Company manufactures outboard motors that are sold throughout the United States and Canada. The company uses a comprehensive budgeting process and compares actual results to budgeted amounts on a monthly basis. Each month, LakeMasterâ
> Valley View Hospital has an outpatient clinic. Jeffrey Harper, the hospital’s chief administrator, is very concerned about cost control and has asked that performance reports be prepared that compare budgeted and actual amounts for medical assistants, cl
> Midwest Ventilation, Inc., produces industrial ventilation fans. The company plans to manufacture 72,000 fans evenly over the next quarter at the following costs: direct material, $2,880,000; direct labor, $720,000; variable production overhead, $900,000
> Lackawanna Licorice Company uses a standard cost accounting system and applies production overhead to products on the basis of machine hours. The following information is available for the year just ended: Actual variable overhead: $166,320 Actual total
> Refer to the data given in the preceding exercise for Dolphin Company. Data from preceding exercise: 1. Production ......................................... 22,000 units Sales ................................................... 25,000 units 2. Produ
> Countrytime Studios is a r e cording studio in Nashville. The studio budgets and applies overhead costs on the basis of production time. Countrytime’s controller anticipates 10,000 hours of production time to be available during the year. The following o
> Wilmington Composites, Inc., developed its overhead application rate from the annual budget. The budget is based on an expected total output of 720,000 units requiring 3,600,000 machine hours. The company is able to schedule production uniformly througho
> Countrytime Studios is a recording studio in Nashville. The studio budgets and applies overhead costs on the basis of production time. Countrytime’s controller anticipates 10,000 hours of production time to be available during the year. The following ove
> Manitoba Paper Company packages paper for photocopiers. The company has developed standard overhead rates based on a monthly practical capacity of 90,000 direct-labor hours as follows: Standard costs per unit (one box of paper): Variable overhead (2 hour
> Kalamazoo Computer Accessory Company (KCAC) distributes keyboard trays to computer stores. The keyboard trays can be attached to the underside of a desk, effectively turning it into a computer table. The keyboard trays are purchased from a manufacturer t
> Refer to the data in Exercise 11–25 for Starlight Glassware Company. Prepare journal entries to: • Record the incurrence of actual variable overhead and actual fixed overhead. • Add variable and fixed overhead to Work-in-Process Inventory. • Close undera
> The controller for Rainbow Children’s Hospital, located in Munich, Germany, estimates that the hospital uses 25 kilowatt-hours of electricity per patient-day, and that the electric rate will be €.13 per kilowatt hour. The hospital also pays a fixed month
> You brought your work home one evening, and your nephew spilled his chocolate m ilk shake on the variance report you were preparing. Fortunately, knowing that overhead was applied based on machine hours, you were able to reconstruct the obliterated infor
> Refer to DCdesserts.com’s activity-based flexible budget in Exhibit 11–11. Suppose that the company’s activity in June is described as follows: Process hours ..........................................
> Choose a city or state in the United States (or a Canadian city or province), and use the Internet to explore the annual budget for the governmental unit you selected. For example, you could check out the annual budget for Los Angeles at www.losangeles.c
> Dolphin Company manufactures two-person sailboats with a variable cost of $1,000. The sailboats sell for $1,750 each. Budgeted fixed manufacturing overhead for the most recent year was $11,000,000. Planned and actual production for the year were the same
> You recently received the following note from the production supervisor of the company where you serve as controller. “I don’t understand these crazy variable-overhead efficiency variances. My employees are very careful in their use of electricity and pr
> Refer to the data in Exercise 11–25 for Starlight Glassware Company. Draw graphs similar to those in Exhibit 11–7 (variable overhead) and Exhibit 11–9 (fixed overhead) to depict the overhead variances
> Starlight Glassware Company has the following standards and flexible-budget data. Standard variable-overhead rate ......................... $18.00 per direct-labor hour Standard quantity of direct labor .............................. 2 hours per unit of
> Outdoor Optics Company produces binoculars of two quality levels: field and professional. The field model requires four direct-labor hours, while the professional binoculars require six hours. The firm uses direct-labor hours as the activity level for fl
> Mankato Control Company, which manufactures electrical switches, uses a standard-costing system. The standard production overhead costs per switch are based on direct-labor hours and are as follows: Variable overhead (5 direct-labor hours @ $12.00 per ho
> The following data are the actual results for Marvelous Marshmallow Company for August. Actual output ..............................................................13,500 cases Actual variable overhead .............................................. $607,
> The following data pertain to Alexis Electronics for the month of April. Static Budget Actual Required: Compute the sales-price and sales-volume variances for April. Static Budget Actual Units sold 15,000 13,500 Sales revenue . $180,000 $155,250 Va
> Colonial Cookies, Inc., bakes cookies for retail stores. The company’s best-selling cookie is chocolate nut supreme which is marketed as a gourmet cookie and regularly sells for $8.00 per pound. The standard cost per pound of chocolate
> Your next-door neighbor recently began a new job as assistant controller for Conundrum Corporation. As her first assignment, she prepared a performance report for March. She was scheduled to present the report to management the next morning, so she broug
> Cerritos Circuitry manufactures electrical instruments for a variety of purposes. The following costs related to maintaining product quality were incurred in May. Training of quality-control inspectors ……â
> List six advantages of a standard-costing system.
> Describe how standard costs are used for product costing.
> Discuss several ways in which standard-costing systems should be adapted in today’s manufacturing environment.
> What is the interpretation of the direct-labor rate variance? What are some possible causes?
> Explain why the quantity purchased (PQ) is used in computing the direct-material purchase price variance, but the actual quantity consumed (AQ) is used in computing the direct-material price and quantity variances.
> What is the interpretation of the direct-material price variance and the direct-material purchase price variance?
> Distinguish between perfection and practical standards. Which type of standard is likely to produce the best motivational effects?
> Describe two methods of setting standards.
> List seven criticisms of standard costing in an advanced manufacturing environment.
> Refer to your solution for the preceding problem regarding Mc Cartney Company. Required: 1. Prepare journal entries to record all of the events listed for McCartney Company during July. Specifically, these journal entries should reflect the following ev
> The following costs were incurred by Akasaka Metals Company to maintain the quality of its products. 1. Operating an X-ray machine to detect faulty welds, 99,000 yen 2. Repairs of products sold last year, 103,000 yen 3. Cost of rewelding faulty joints, 1
> Huron Chalk Company manufactures sidewalk chalk which it sells online by the box at $25 per unit. Huron uses an actual costing system, which means that the actual costs of direct material, direct labor, and manufacturing overhead are entered into work-in
> The Chicago Youth Association (CYA) and the Palmer Athletic Club (PAC) are each considering purchasing a van. The CYA is a not‐for‐profit organization serving at‐risk inner‐city youth. It operates a center that provides after‐school tutoring, counseling,
> A town privatized its sanitation department, selling all its plant and equipment to a private corporation. The corporation agreed to hire most of the department’s managers and other employees and was given an exclusive franchise, for a limited number of
> In preparing its budget proposals, a city’s budget committee initially estimated that total revenues would be $120 million and total expenditures would be $123 million. In light of the balanced budget requirements that the city has to meet, the committee
> Suppose that you live on a street adjoining the college in which you are taking this course. 1. List all the governments (e.g., state, county, city) that have jurisdiction over the residents or property of that street. 2. Indicate why it may be difficult
> The financial statements that follow were adapted from those of the University of Arizona. Both the statement of changes in fund balances and the notes to the statements have been omitted. Moreover, the statements show only the combined â€
> Go to the following websites and answer the questions. a. Visit the GASB website (www.gasb.org) 1. What is the GASB? 2. What is the mission of GASB? 3. Based on GASB’s White Paper, Why Governmental Accounting and Financial Reporting Is and Should Be Dif
> Select the best answer. 1. Rule 203 of the AICPA’s Code of Professional Conduct pertains to a. CPAs’ independence b. Authorities designated to establish accounting standards c. Standards of competency d. Solicitation of new clients by a CPA 2. Which of
> In what key ways does the FASB influence generally accepted accounting principles for governments?
> Why are measures of “service efforts and accomplishments” of more concern for government and not‐for‐profits than for businesses?
> Why has it proven especially difficult to establish accounting principles to satisfy all three elements of GASB’s first objective of financial reporting in a single statement of revenue and expenditures or a balance sheet?
> What is the significance for financial reporting of a government’s power to levy a tax? How does it affect the government’s overall fiscal strength?
> Why is it difficult to develop accounting principles that are appropriate for governments within the same category (e.g., cities, counties) and even more difficult to develop them for governments within different categories?
> What is the significance for financial reporting of the many restrictions that are placed on a government’s resources?
> Why may the “matching concept” be less relevant for governments and not‐for‐profits than for businesses?
> What is meant by “interperiod equity,” and what is its consequence for financial reporting?
> Why is the budget a far more important document for both governments and not‐for‐profits than for businesses?
> Select the best answer. 1. The traditional business model of accounting is inadequate for governments and not‐for‐profit organizations primarily because businesses differ from governments and not‐for‐profit organizations in that a. They have different m
> What is the defining distinction between for‐profit businesses and not‐for‐profit entities, including governments? What are the implications of this distinction for financial reporting?
> Why is it more difficult to distinguish between internal and external users in governments than in businesses?
> This chapter has set forth several distinguishing features of state and local governments, the federal government, not‐for‐profit organizations, and businesses. Presently there are separate standard‐setting boards for state and local governments (the Gov
> Unquestionably, constituents of both governments and not‐for‐profits are no less interested in what the organization has accomplished than they are in financial data, such as revenues and expenses. How can you justify an accounting model and the resultan
> The Burnet County Road Authority was established as a separate government to maintain county highways. The road authority was granted statutory power to impose property taxes on county residents to cover its costs, but it is required to balance its budge
> A city engages in the transactions that follow. For each transaction, indicate the amount of revenue or expenditure that it should report in 2017. Assume first that the main objective of the financial statements is to enable users to assess budgetary com
> Assume that you are a loan officer of a bank. A local church is seeking a $4 million, 20‐year loan to construct a new classroom building. Church officers submit a comprehensive financial report that was audited by a reputable CPA firm. In summary form (t
> The statement of net position (i.e., a balance sheet) of a midsized city reports outstanding debt of $1,200,000,000. The city has a population of 800,000. The city is about to adopt the provisions of a new GASB pronouncement that changes the way defined
> Public officials, it is often charged, promote measures intended to make the government “look good” in the short term but that may be deleterious in the long term. Assume that the following actions, designed to increase a reported surplus, were approved
> A city operates a computer service department. The department maintains and repairs the computers of all other city departments, billing them for each job performed. The billing rates are established to cover the repair service’s full c
> How and why might the importance of the budget affect generally accepted accounting principles for external (general‐purpose) reports?
> You probably have never imagined the possibility of being an accountant who could have a direct impact on improving global ecosystems. Accountants who work for Ecotour Expeditions, Inc., an ecotourism company, might manage accounting details for guest ai
> You are responsible for preparing all of the journal entries for Regional Financial Services. You have correctly prepared the following entry for financial services provided on December 15: Your boss has asked you to change the date from December 15 to
> You work as an accounting clerk. You have received the following information supplied by a client, S. Winston, from the client’s bank statement, the client’s tax returns, and a variety of other July documents. The clie
