Describe the standard cost system

Question

Question 1. The difference between the total actual overhead cost incurred during a period and budgeted total factory overhead for the actual quantity of the cost driver used to apply overhead is equal to the:

• Total overhead spending variance.

• Total overhead efficiency variance.

• Factory overhead production-volume variance.

• Total overhead rate variance.

• Total overhead variance.

Question 2. Which one of the following journal entries in a standard cost system would be used to apply factory overhead costs to production?

• A debit to the factory overhead account, at standard cost.

• A credit to the factory overhead account, at standard cost.

• A debit to WIP inventory, at actual cost.

• A credit to Finished Goods Inventory, at standard cost.

Question 3. The following budget data pertain to the Machining Department of Yolkenverst Co.:

Maximum Capacity = 60,000 Units

Machine Hours/Unit = 2.5 Hours

Variable Factory O/H = $ 3.60 Per Machine Hour

Fixed Factory O/H = $433,500

The company prepared the budget at 85% of the maximum capacity level. The department uses machine hours as the basis for applying standard factory overhead costs to production.

The standard fixed overhead application rate for the Machining Department is:

• $2.89 per machine hour.

• $3.40 per machine hour.

• $3.47 per machine hour.

• $4.08 per machine hour.

• $8.50 per machine hour.

Question 4. Electronic Component Company (ECC) is a producer of high-end video and music equipment. ECC currently sells its top of the line "ECC" DVD player for a price of $250. It costs ECC $210 to make the player. ECC's main competitor is coming to market with a new DVD player that will sell for a price of $220. ECC feels that it must reduce its price to $220 in order to compete. The sales and marketing department of ECC believes the reduced price will cause sales to increase by 15%. ECC currently sells 200,000 DVD players per year.

Irrespective of the competitor's price, what is EEC's required selling price if the target profit is 25% of sales and current costs cannot be reduced?

• $280.00.

• $292.50.

• $299.00.

• $308.50.

Question 5. Bonehead Co. has the following factory overhead costs:

Standard Overhead Applied to this Period's Production = $72,500

Flexible Budget for Overhead Based on Output (Units Produced) = 65,000

Total Budgeted Overhead in the Master (Static) Budget = 86,000

Actual Total Overhead Cost Incurred During the Period = 76,000

The total underapplied or overapplied factory overhead for Bonehead Co. for the period is:

• $4,000 underapplied.

• $7,000 overapplied.

• $10,000 overapplied.

• $11,000 underapplied.

• $14,000 underapplied.