• University of Minnesota, Duluth

• ACCT 3201

Cost Accounting: A Managerial Emphasis, 16e (Horngren) Chapter 8 Flexible Budgets, Overhead Cost Variances, and Management Control 8.1 Objective 8.1 1) Compared to variable overhead costs planning, fixed overhead cost planning has an additional strategic issue beyond undertaking only essential activities and efficient operations. That additional requirement is best described as: A) focusing on the highest possible quality B) increasing the linearity between total costs and volume of production C) choosing the appropriate level of capacity that will benefit the company in the long-run D) identifying essential value-adding activities Answer: C Diff: 2 Objective: 1 AACSB: Analytical thinking 2) Effective planning of variable overhead costs means that managers must A) increase the expenditures in the variable overhead budgets B) focus on activities that add value for the customer and eliminate nonvalue-added activities C) increase the linearity between total costs and volume of production D) identify the product advertising requirements and factor those into the variable overhead budget Answer: B Diff: 1 Objective: 1 AACSB: Analytical thinking 3) Which of the following is a true statement of energy costs? A) Energy costs are not controllable B) Strategies to reduce energy costs will not impact variable cost budgets. C) Energy costs are a fixed cost of doing business for a manufacturer. D) Energy costs are a growing component of variable overhead costs. Answer: D Diff: 2 Objective: 1 AACSB: Analytical thinking 4) Fixed overhead costs include ________. A) the cost of sales commissions B) Leasing of machinery used in a factory C) energy costs D) indirect materials Answer: B Diff: 1 Objective: 1 AACSB: Analytical thinking 5) Effective planning of fixed overhead costs includes ________. A) planning day-to-day operational decisions B) eliminating value-added costs C) determining which products are to be produced D) choosing the appropriate level of investment in productive assets Answer: D Diff: 2 Objective: 1 AACSB: Analytical thinking 6) Effective planning of variable overhead costs includes ________. A) choosing the appropriate level of investment B) eliminating value-added costs C) redesigning products or processes to use fewer resources D) reorganizing management structure Answer: C Diff: 2 Objective: 1 AACSB: Analytical thinking 7) Most of the decisions determining the level of fixed overhead costs to be incurred will be made ________. A) by the end of a budget period B) by the middle of a budget period C) on a day-to-day ongoing basis D) at the start of a budget period Answer: D Diff: 1 Objective: 1 AACSB: Analytical thinking 8) The major challenge when planning fixed overhead is ________. A) calculating total costs B) calculating the cost-allocation rate C) choosing the appropriate level of capacity D) choosing the appropriate planning period Answer: C Diff: 1 Objective: 1 AACSB: Analytical thinking 9) An effective plan for variable overhead costs will eliminate activities that do not add value. Answer: TRUE Diff: 1 Objective: 1 AACSB: Analytical thinking