Rainbow Company
Rainbow Company uses a standard cost system for its production process. Rainbow Company applies
overhead based on direct labor hours. The following information is available for July:
Standard:
Direct labor hours per unit
Variable overhead per hour
Fixed overhead per hour
(based on 11,990 DLHs)
Actual:
Units produced
Direct labor hours
Variable overhead
Fixed overhead
2.20
$2.50
$3.00
4,400
8,800
$29,950
$42,300
75. Refer to Rainbow Company Using the four-variance approach, what is the variable overhead spending
variance?
a. $7,950 U
b. $25 F
c. $7,975 U
d. $10,590 U
ANS: A
Variable OH Spending Variance = Actual VOH - Budgeted VOH/Actual
= $(29,950 - 22,000)
= $7,950
DIF: Moderate
OBJ: 7-3
76. Refer to Rainbow Company Using the four-variance approach, what is the variable overhead
efficiency variance?
a. $9,570 F
b. $9,570 U
c. $2,200 F
d. $2,200 U
ANS: C
VOH Efficiency Variance = Budgeted OH/Actual - Budgeted OH/Standard
= (8,800 DLH * $2.50/DLH) - (4400 units*2.20 DLH/unit * $2.50)
= $(22,000 - 24,200)
= $2,200 F
DIF: Moderate
OBJ: 7-3
77.
Refer to Rainbow Company Using the four-variance approach, what is the fixed overhead
spending variance?
a. $15,900 U
b. $6,330 U
c. $6,930 U
d. $935 F
ANS: B
Fixed OH Spending Variance = Actual OH - Standard Fixed OH
This study source was downloaded by 100000847941064 from CourseHero.com on 06-29-2022 00:16:34 GMT -05:00
https://www.coursehero.com/file/46808773/Rainbow-Companypdf/
= $42,300 - (11,990 DLH’s * $3.00/DLH)
= $(42,300 - 35,970)
= $6,330 U
DIF: Moderate
OBJ: 7-3
78. Refer to Rainbow Company Using the four-variance approach, what is the volume variance?
a. $6,930 U
b. $13,260 U
c. $0
d. $2,640 F
ANS: A
Volume Variance = Budgeted OH/Standard Quantity - Standard Overhead Applied
=( 4,400 units * $2.50/hr*2.20 hrs/unit + $35,970)- (4,400 units*$5.50/hr*2.20 DLH/unit)
= $60,170 - $53,240
= $6,930 U
DIF: Moderate
OBJ: 7-3
79. Refer to Rainbow Company Using the three-variance approach, what is the spending variance?
a. $23,850 U
b. $23,850 F
c. $14,280 F
d. $14,280 U
ANS: D
Spending Variance = Actual Overhead - Budget OH/Actual Use
= $72,250 - ((8,800 hrs * $2.50/hr) + $35,970)
= $(72,250 - 57,970)
= $14,280 U
DIF: Moderate
OBJ: 7-3
80.
Refer to Rainbow Company Using the three-variance approach, what is the efficiency
variance?
a. $11,770 F
b. $2,200 F
c. $7,975 U
d. $5,775 U
ANS: B
Efficiency Variance = Budget OH/Actual Use - Budgeted OH/Standard Quantity - Standard
Overhead Applied
= ((8,800 hrs * $2.50/hr) + $35,970)-( 4,400 units * $2.50/hr*2.20 hrs/unit + $35,970)
= $(57,970 - 60,170)
= $2,200 F
DIF: Moderate
OBJ: 7-3
81. Refer to Rainbow Company Using the three-variance approach, what is the volume variance?
a. $13,260 U
b. $2,640 F
c. $6,930 U
d. $0
This study source was downloaded by 100000847941064 from CourseHero.com on 06-29-2022 00:16:34 GMT -05:00
https://www.coursehero.com/file/46808773/Rainbow-Companypdf/
ANS: C
Volume Variance = Budgeted OH/Standard Quantity - Standard Overhead Applied
=( 4,400 units * $2.50/hr*2.20 hrs/unit + $35,970)- (4,400 units*$5.50/hr*2.20 DLH/unit)
= $60,170 - $53,240
= $6,930 U
DIF: Moderate
OBJ: 7-3
82. Refer to Rainbow Company Using the two-variance approach, what is the controllable variance?
a. $21,650 U
b. $16,480 U
c. $5,775 U
d. $12,080 U
ANS: D
Controllable Variance = Actual Overhead - Budgeted Overhead Based on Standard Quantity
= $72,250.00 - ( 4,400 units * $2.50/hr*2.20 hrs/unit + $35,970)
= $(72,250- 60,170)
= $12,080 U
DIF: Moderate
OBJ: 7-3
83.
Refer to Rainbow Company Using the two-variance approach, what is the noncontrollable
variance?
a. $26,040 F
b. $0
c. $6,930 U
d. $13,260 U
ANS: C
Noncontrollable Variance = Budgeted OH/Standard Quantity - Standard Overhead Applied
=( 4,400 units * $2.50/hr*2.20 hrs/unit + $35,970)- (4,400 units*$5.50/hr*2.20 DLH/unit)
= $60,170 - $53,240
= $6,930 U
DIF: Moderate
OBJ: 7-3
84. Refer to Rainbow Company Using the one-variance approach, what is the total variance?
a. $19,010 U
b. $6,305 U
c. $12,705 U
d. $4,730 U
ANS: A
Total Variance = Actual Overhead - Applied Overhead
=$72,250 - (4,400 * 2.20 *($2.50 + $3.00))
=$72,250 - $53,240
=$19,010 U
DIF: Moderate
OBJ: 7-3
This study source was downloaded by 100000847941064 from CourseHero.com on 06-29-2022 00:16:34 GMT -05:00
https://www.coursehero.com/file/46808773/Rainbow-Companypdf/
Hazel Company uses activity-based costing. The company produces two products: coats and hats.
The annual production and sales volume of coats is 8,000 units and of hats is 6,000 units. There are
three activity cost pools with the following expected activities and estimated total costs:
Activity
Cost Pool
Activity 1
Activity 2
Activity 3
Estimated
Cost
$20,000
$37,000
$91,200
Expected
Activity
Coats
100
800
800
Expected
Activity
Hats
400
200
3,000
Total
500
1,000
3,800
87. Refer to Hazel Company. Using ABC, the cost per unit of coats is approximately:
a. $2.40
b. $3.90
ANS: C
Activity
1
2
3
c. $ 6.60
d. $10.59
Cost Allocation
$20,000 * 100/500 = $ 4,000 / 8,000
$37,000 * 800/1,000 = $29,600 / 8,000
$91,200 * 800/3,800 = $19,200 / 8,000
Total Cost per Unit
DIF: Difficult
Cost per Unit
$0.50
3.70
2.40
6.60
OBJ: 5-4
88. Refer to Hazel Company. Using ABC, the cost per unit of hats is approximately:
a. $2.40
b. $3.90
ANS: D
Activity
1
2
3
c. $12.00
d. $15.90
Cost Allocation
$20,000 * 400/500 = $ 16,000 / 6,000
$37,000 * 200/1,000 = $ 7,400/ 6,000
$91,200 * 3,000/3,800 = $72,000 / 6,000
Total Cost per Unit
DIF: Difficult
Cost per Unit
$2.67
1.23
12.00
15.90
OBJ: 5-4
This study source was downloaded by 100000847941064 from CourseHero.com on 06-29-2022 00:16:34 GMT -05:00
https://www.coursehero.com/file/46808773/Rainbow-Companypdf/
Powered by TCPDF (www.tcpdf.org)