Flexible budget and activity based costing test bank

1. Under the two-variance approach, the volume variance is computed by subtracting ____ based
on standard input allowed for the production achieved from budgeted overhead.
a. applied overhead
b. actual overhead
c. budgeted fixed overhead plus actual variable overhead
d. budgeted variable overhead

2. The overhead variance calculated as total budgeted overhead at the actual input production level
minus total budgeted overhead at the standard hours allowed for actual output is the
a. efficiency variance.
b. spending variance.
c. volume variance.
d. budget variance.

3. In a just-in-time inventory system,

a. practical standards become ideal standards.
b. ideal standards become expected standards.
c. variances will not occur because of the zero-defects basis of JIT.
d. standard costing cannot be used.

4. A company using very tight (high) standards in a standard cost system should expect that
a. no incentive bonus will be paid.
b. most variances will be unfavorable.
c. employees will be strongly motivated to attain the standards.
d. costs will be controlled better than if lower standards were used.

D Company uses an activity-based costing system in which there

are three activity cost pools. The company has provided the following data concerning its costs
and its activity-based costing system:

Costs:
Manufacturing overhead .......... P400,000
Selling and admin. Expenses ..... P200,000
Total ......................... P600,000
Distribution of resource consumption:

Activity Cost Pools

Order Customer
Size Support Other Total
Manufacturing overhead ........... 35% 55% 10% 100%
Selling and admin. Expense ....... 50% 30% 20% 100%

The "other" activity cost pool consists of the costs of idle capacity and organization-
sustaining costs.
Flexible budget and activity based costing test bank

You have been asked to complete the first-stage allocation of the costs to the activity cost
pools.

How much cost, in total, would be allocated in the first-stage allocation to the
Order Size activity cost pool?
a. P210,000.
b. P240,000.
c. P300,000.
d. P255,000.

How much cost, in total, would be allocated in the first-stage allocation to the
Customer Support activity cost pool?
a. P255,000.
b. P180,000.
c. P330,000.
d. P280,000.

How much cost, in total should NOT be allocated to orders and products in the
second stage of the allocation process if the activity-based costing system is
used for internal decision-making?
a. P0.
b. P60,000.
c. P80,000.
d. P120,000.