1) the Variable Overhead Flexible-Budget Variance Measures the Difference Between: 1) ______

1) The variable overhead flexible-budget variance measures the difference between: 1) ______
A) actual variable overhead costs and the static budget for variable overhead costs
B) actual variable overhead costs and the flexible budget for variable overhead costs
C) the static budget for variable overhead costs and the flexible budget for variable overhead costs
D) None of these answers is correct.

2) Practical capacity is the denominator-level concept that: 2) ______
A) reduces theoretical capacity for unavoidable operating interruptions
B) is the maximum level of operations at maximum efficiency
C) is based on the level of capacity utilization that satisfies average customer demand over periods generally longer than one year
D) is based on anticipated levels of capacity utilization for the coming budget period

3) To guide cost allocation decisions, the fairness or equity criterion is: 3) ______
A) the criterion often cited in government contracts
B) superior when the purpose of cost allocation is for economic decisions
C) used more frequently than the other criteria
D) the primary criterion used in activity-based costing

4) The support department allocation method that is the most widely used because of its simplicity is the: 4) ______
A) step-down method
B) reciprocal allocation method
C) direct allocation method
D) sequential allocation method

Problem ( 60 Points )

Harry's Electronics manufactures TVs and VCRs. During February, the following activities occurred:

TVs VCRs

Budgeted units sold 17,640 66,360

Budgeted contribution margin per unit $90 $156

Actual units sold 20,000 80,000

Actual contribution margin per unit $100 $158

Required:

Compute the following variances in terms of the contribution margin.

a. Determine the total sales-mix variance.

b. Determine the total sales-quantity variance.

c. Determine the total sales-volume variance.

a. TVs [(100,000 x 0.20) x $90] = $1,800,000

[(100,000 x 0.21) x $90] = 1,890,000

$ 90,000 unfavorable

VCRs [(100,000 x 0.80) x $156] = $12,480,000

(100,000 x 0.79) x $156] = 12,324,000

$ 156,000 favorable

Total sales-mix variance = $90,000 unfavorable + $156,000 favorable = $66,000 favorable.

b. TVs {[(100,000 – 84,000) x 0.21] x $90} = $ 302,400 favorable

VCRs {[(100,000 – 84,000) x 0.79] x $156} = 1,971,840 favorable

Total sales-quantity variance $2,274,240 favorable

c. Total sales-volume variance = $66,000 favorable + $2,274,240 favorable = $2,340,240 favorable