The Euro Company Wants to Compare the Performance of Three

question 25

Multiple Choice

The Euro Company wants to compare the performance of three business units. All the business units produce the same product with similar output per month. The company uses a flexible budget to plan and control manufacturing overhead costs. Overhead costs are applied to products on the basis of direct labour-hours. The standard cost card shows that 5 direct labour-hours are required per unit of product. Phelps Company had the following budgeted and actual data for March: $\begin{array}{lll}&\text { Actual }&\text { Budgeted }\\ \text { Units produced } & 11,000 & 10,000 \\\text { Directlabour-hours } & 65,000 & 60,000 \\\text { Variable overhead costs } & £ 84,000 &£ 80,000 \\\text { Fiked overhead costs } & £ 44,000 &£ 40,000\end{array}$
$\text { *Represents the denom inator activity for the month. }$
German Business Unit
$\begin{array}{lll}&\text { Actual }&\text { Budgeted }\\ \text { Units produced } & 11,000 & 10,000 \\\text { Directlabour-hours } & 65,000 & 60,000 \\\text { Variable overhead costs } & £ 84,000 &£ 80,000 \\\text { Fiked overhead costs } & £ 44,000 &£ 40,000\end{array}$
$\text { *Represents the denom inator activity for the month. }$
French Business Unit
$\begin{array}{lll}&\text { Actual }&\text { Budgeted }\\ \text { Units produced } & 11,000 & 10,000 \\\text { Directlabour-hours } & 65,000 & 60,000 \\\text { Variable overhead costs } & £ 84,000 &£ 80,000 \\\text { Fiked overhead costs } & £ 44,000 &£ 40,000\end{array}$
$\text { *Represents the denom inator activity for the month. }$
- The variable overhead spending variance for March for the Italian Business Unit is

• A)£ 2,667 favourable.
• B)£ 6,666 unfavourable.
• C)£1,000 unfavourable.
• D)£1,200 unfavourable.

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Definitions:

Common Area Costs

Expenses associated with the maintenance and repair of shared spaces in a property, often divided among tenants or owners.

Floor Area

The total square footage of all floors within a building, including any basements or mezzanines.

Prorated Basis

An adjustment made based on dividing something proportionally, such as payments or charges, over a specified period.

Profit-Sharing Bonus

A type of incentive given to employees, typically as part of their compensation package, where they receive a share of the company's profits.