Chapter 8-3 Flashcards
the difference between actual variance overhead costs and flexible budget variable overhead amounts
variable overhead flexible budget variance
the difference between the actual quantity of the cost allocation base used and the budgeted quantity of the cost allocation base
variable overhead efficiency variance
the difference between the actual variable overhead cost rate and the budgeted variable overhead cost rate
variable overhead spending variance
highlights differences between actual costs and quantities versus budgeted costs and quantities for the actual output level of 10,000 jackets
flexible budget
$10,500 unfavorable for variable overhead flexible budget variance means what
indicates that the actual variable overhead exceeded the flexible budget amount by 10,500
- whether more machine hours were ysed than planned
- if workers were less skilled than expected in using machines
- if there was an increase in variable overhead costs, such as maintenance
possible questions behind an unfavorable variance
measures the efficiency in using the variable overhead resources
efficiency variance
measures the difference between the actual spending on variable overhead and the expected spending based on the flexible budget
spending variance
variance can be subdivided into
- efficiency variance
- spending variance
unfavorable variance of $15,000 under variable overhead efficiency variance indicates what
that more machine hours were used than budgeted, increasing potential variable overhead costs
$4500 favorable variance under variable overehead spending variance indicates what
the actual cost per unit is lower than the budgeted cost per unit
managers use variance analysis to
evaluate performance and learn for future improvements
- skillful negoiation by the purchasing manager
- market oversupply
- lower quality of inputs
potential causes for lower actual prices
- higher skill levels of workers
- better machine maintenance
- improved manufacturing processes
potential causes for efficient use of resources
a favorable variance is not always desirable why
could be a result from lower quality inputs, less skilled workers, etc.