Ch 8 Flashcards
Standard costing, 2 purposes with equations?
1 Costing system that traces direct costs to output produced:
(standard price or/ rate) x
(standard quantities of inputs for actual outputs produced)
2 allocates overhead (for actual outputs produced):
(Standard overhead cost rate) x
(standard quantities of allocation bases)
How does planning for fixed overhead costs differ from planning for variable overhead costs?
Timing
Fixed is budgeted ahead of time, and variable is day to day
Management decisions
4 steps of computing Budgeted variable overhead cost-allocation rates?
1 choose period to be used for the budget
2 select cost-allocation bases to use in allocating
Variable overhead costs
3 identify variable overhead costs associated with
Each cost allocation base
4 compute rate per unit of each cost-allocation base
Used to allocate variable overhead costs to output produced
Budgeted variable overhead cost rate per output unit equation?
Budgeted variable overhead cost rate per output unit =
(budgeted input allowed per output unit) X
(budgeted variable overhead cost rate per input unit)
What are the 4 steps for developing the budgeted fixed overhead rates?
1 choose period to be used for the budget
2 select cost-allocation bases to use in allocating
Fixed overhead costs
3 identify fixed overhead costs associated with
Each cost allocation base
4 compute rate per unit of each cost-allocation base
Used to allocate fixed overhead costs to output produced
Denominator level, production-denominator level?
# of machine-hours is the denominator in the budgeted fixed Overhead rate computation
Production- denominator level = in manufacturing settings
Budgeted fixed overhead cost per unit of cost allocation base equation?
Budgeted fixed O H cost per unit of cost allocation base =
(budgeted total costs in fixed O H cost pool)/
(budgeted totally quantity of cost allocation base)
Budgeted fixed overhead cost per output unit equation?
Budgeted fixed O H cost per output unit =
(budgeted quantity cost-allocation base allowed per output unit)
X
(budgeted fixed O H cost per unit of cost allocation base)
Variable overhead flexible budget variance equation?
Variable O H flexible budget variance =
Actual costs incurred) - (flexible budget amount
Variable overhead efficiency variance equation?
Variable (V) O H efficiency variance =
[(actual Q of V O H cost allocation base
used for actual output)
- (budgeted Q of V O H cost allocation base
allowed for actual output)]
X budgeted V O H cost per unit of cost allocation base
Variable overhead spending variance equation?
Variable overhead spending variance =
(actual V O H cost per unit of cost allocation base
- budgeted V O H cost per unit of cost allocation base) X
(actual Q V O H cost allocation base used for actual output)
Fixed overhead flexible budget variance equation?
Fixed overhead flexible-budget variance =
Actual costs incurred) - (flexible budget amount
When there is no efficiency variance, the fixed overhead spending variance equals?
Fixed O H flexible budget variance
Production volume variance AKA Denominator-level variance equation?
Production volume variance =
(budgeted F O H)
- (F O H allocated for actual output units produced)
How do variance calculations for variable overhead and fixed overhead differ?
V O H has no production volume variance
F O H has no efficiency variance
4 variance analysis?
When all overhead variances are presented together
Operating income volume variance equation?
Operating income volume variance =
Static budget operating income) - (budgeted operating income
Sales volume variance equation?
Sales volume variance =
(operating income volume variance)
+ (production volume variance)
3 steps to prepare a flexible budget for materials handling labor costs?
1 Using budgeted batch size, calculate # of batches that
Should have been used to produce actual output
2 using budgeted materials handling labor hours per batch
Calculate # materials handling labor hours that should
Have been used
3 using budgeted cost per materials handling labor hour,
Calculate flexible budget amount for materials handling
Labor hours
How do managers plan variable overhead costs and fixed overhead costs?
Planning V and F O H costs involves undertaking only
Activities that add value
and being efficient in setting up those activities
What variances can be calculated for variable overhead costs?
OH efficiency and OH Spending variance
What variances can be calculated for the fixed overhead costs?
Spending variance AKA flexible budget variance
And production-volume variance
What is the most detailed way a company can reconcile actual overhead incurred with the amount allocated during the period?
4-variance analysis
What is the relationship btw sales volume variance and production volume variance?
Production volume variance is component of sales volume var
Production volume var + operating income var comprise
Of sales volume variance
How can variance analysis be used in activity based costing system?
Using output and input measures for an activity
A 4-variance analysis can be conducted
