Cost Accounting (Overhead Variance) Flashcards
What is Unfavorable variable overhead efficiency variance?
Variable efficiency variance consists of manufacuring expense direct material and direct labor. Variable overhead does have unquie number of hours so the direct labor hours is used as the activity driver. Standard hours allowed is the number that shiould be used for the actual production. Budgeted hours is provided to calc the Standard VOH rate and also be used for the predetermined rate.
To calc the unfavaorable variable overhead efficiency variance we need to know the difference between the Actual Direct labor hours and the standard direct labor hours and multiplied the Standard VOH rate/hour. Standard direct labor hour is not usually given so to calc that we need to knoiw the actual production units mutiplied by the standard hours of manufacauring. Next step we also need to know and calc the budgeted labor hours to calc the VOH rate/hour. To calc the budgted labor hours we need to know the production budget units of output mutiplied by the standard hours of manufacuring. Finally, we need to calc the VOH rate/hour to calc that we need to know the Total overhead budgeted and divide it by the Total budget labor hours which provides us the Total OH rate/hour Next we minus the Fixed Overhead by the Total budgeted labor hour which will provide us a total for VOH rate/hour. We subract the difference between the actual and standard and multiply that by the VOH rate to the get the variance overhead efficiency
When the actual hours exceed the standard hours the variance is unfavaorable
What is the fixed overhead spending variance? How to calc?
Fixed overhead spending variance is essentially the indirect manufacuring costs. FOH Variance consist of both the spending variance and production volume efficiency variance.
To calc the Fixed overhead variance you need know the difference between the actual fixed overhead and budgeted fixed overhead. When the actual fixed overhead costs is more than the budgeted fixed overhead cost then the variance is “Unfavorable” and when the actual is more than the standard then the variance is “Favorable”
What is the variable overhead efficiency variance? How to calc it?
Variable overhead efficiency is the manafacuring expense for production which uses Direct labor, Direct material. It also consist of VOH variance efficiency and spending variance. Overhead uses the Direct labor as it
To calc the variable overhead efficiency variance you need to know the difference between Actual direct labor hours and the standard direct labor hours multiplied by the variable overhead rate. When the standard hours exceeds the actual hours we get a variance of “Favorable” which is beneficial for the business. If the actual exceeds the standard then the variance is “Unfavorable”
What is flexible budget variance? How to calc it?
Flexible budget variance is the difference between the actual cost and the cost based on the Standard variable overhead cost
to calc flexible budget variance we need to know the difference between the actual cost and the flexible budget variance. When the actual cost exceeds the flexible budget variance then we have a variance of “Unfavaorable” When the actual is less than the flexible budget variance we will have a variane of “favorable”
Variable overhead efficiency variance is calc by knowing the difference between standard cost and the flexible budget cost
So for an example the standard cost would have been budget forcast production of 20,000 units x overhead rate of $10 per unit = 200,000. Next we would need to calc the flexible budget cost of 19,000 units x overhead rate of $10 per unit = 190,000. 200,000 - 190,000 = 10,000. The variance in this problem would be “favorable” because the actual flexible budget cost is less than the standard cost.
What is variable efficiency variance? How to calc it?
Variable efficiency variance uses the (Direct labor hours) as the rates used for actual and standard hours allowed. Variance efficiency variance uses the actual direct labor hours and the standard labor hours allowed.
To calc the variable efficiency variance we use the actual direct labor hours and the standard labor hours. When calc the actual and standard (direct labor hours). The actual DLH is (GIVEN) 2,100 hours x 2 per direct labor hour = 4,100. Next we need to calc and know the standard hours allowed (Actual 19,000 x 0.1 hour per frame so the actual number of frame is used 1900. 1900 x 2 per DLH and we got 3800 is the standard DLH allowed. The difference between the actual 4100 - Standard 3800 = 400 unfavorable. This would be Unfavorable because the actual number exceeds the standard DLH allowed.
What is OH and how to calc it?
OH cost consist of multiple indirect costs both variable and fixed each with distint cost driver. OH cost isn’t easily designed. OH costs are applied to jobs during using predetermined OH Rate. OH rate is measured on estimated or budgeted machine hours or direct labor hours since actual cost aren’t known.
To calc the OH costs applied OH is compared to actual OH which now known. First we will need to know the fixed OH rate and the Variable OH rate that will help us in getting the “total OH Rate” Fixed OH rate is calc by getting the estimated fixed OH cost / labor hours 25,000 / 20,000 = 1.25. Variable OH rate estimated variable OH cost/ labor hours 50,000 / 20,000 2.50 Total Oh rate = 3.75
Next we calc for applied OH which would be “Total OH rate” x estimated job hours 3.75 x 1,500 = 5,625
Direct material and. direct labor are easily assigned OH isn’t
What is unfavorable variable overhead efficiency variance? How to calc?
Unfavorable variable overhead efficiency variance is essentially the difference between the actual hours at standard rate and the standard hours at standard rate
To calc the variance overhead efficiency we need to calc the difference between the actual hours worked and the standard hours allowed. The actual hours worked (DLH) is usually given in the problem. For the standard hours allowed (DLH) we need to calc it. We use the (units produced) which is 5000 x 2 (Standard direct manufacuring labor hours per unit) = 10,000 and the difference between the actual and standard is 500. Next we will multiplied that by the Actual DLH 10,500 x 3 Standard rate per hour = 31,500. We also multiply the standard DLH 10,000 x 3 Standard rate per hour = 30,000. Finally, the difference between the actual DLH 31,500 - Standard DLH 30,000 = 1,500. So since the actual hours total exceed the standard the variance is “Unfavorable”
Side notes remember that when you calc the efficiency variance we are using the DLH for the actual hours and the standard hours. Also since it’s OH we use DLH
What is the production volume variance? How to calc it?
Fixed Overhead production volume variance is the difference between the “Budgeted fixed overhead and the applied fixed overhead cost.
To calc the Fixed Overhead production volume variance we need to know the difference between the Budgeted fixed overhead and the applied fixed overhead cost. The budgeted fixed overhead is usually given in the problem. So for this problem the Budgeted is 20,000. Now to calc the applied fixed overhead we need to get the actual of 19,000 number of frames manufactured x 1 per unit = 19,000 we will get a difference of 1,000. The variance for this problem would be “Unfavorable” since the Budgeted is greate than the applied fixed overhead.
For the production volume we are calc the number of frames manufactured
Also, if we need to calc the “Total fixed overhead variance” we can calc that by knowing the difference between the “actual fixed overhead” and the “Applied fixed overhead”. Furthermore we can calc “Fixed overhead variance, we need to know the difference between “Actual fixed overhead” and the “Budgeted fixed overhead”
A production supervisor has the least control of which of following standard costing variances?
The Overhead volume because production supervisor don’t have control over fixed overhead costs or budgeted production.
What is Total overhead (OH) spending variance? How to calc it?
Total overhead spending variance focuses on variable overhead variances and the fixed overhead variance.
To calc the total overhead spending variance we need to first calc the variable overhead variance. To get the variable overhead variance we need to calc the difference between actual hours at actual rates and actual hours at standard rate (Flexible budgeted OH). So the actual hours is given in the problem and we will be using the actual overhead incurred variable which is 85,000. Next we will get the Variable overhead standard hours allowed which would be 80,000. The difference would be 5,000 and the variance would be “Unfavorable” Next we will need to calc the “Fixed overhead variances here we need to know the difference between actual hours and the budgeted hours. So the actual hours rate was 27,000 and the Budgeted hours at standard rate is 25,000 and the difference is 2,000 “Unfavorable because the actual hours exceeds the standard hours.
How is variable overhead spending variance? How to calc?
Variable overhead spending variance is the difference between actual variable overhead abd Actual hours at standard rate
Variable overhead spending variance is the difference between the Actual variable overhead cost and Actual hours at standard rate”. For the standard rate we would use the DHL but niot for this problem. So the actual variable overhead cost is calculated by “Actual process hours” 25 multiplied by 8 “Actual variable overhead rate” = 200. Next we will calc the actual hours at standard rate which can be calc by “Standard process hours” multiplied by the “Standard variable overhead rate” 10 = 250.
What is the over/applied overhead? How to calc it?
Overhead consists of manufacuring expenses that applied to customer through product cost. Also, if the overhead cost is less than the OH applied the difference is essentially profit creating a favorable variance.
To calc the over.applied overhead variance we need to get the difference between actual fixed overhead, budgeted fixed overhead, and applied fixed overhead. So first for the actual fixed overhead which is mentioned on the problem and it states the “the actual overhead and machine hours incurred” 275,000. Budgeted fixed overhead hours which is 16,000 and the standard rate isn’t mentioned on the problem so we need to calc it. To calc the standard rate we will divide 260,000/16,000 = 16.25 standard rate. Next we multiplied the 16,000 budgeted hours by 16.25 standard rate with a total of 260,000. Next we need to calc the applied fixed overhead which is 20,000 hours multiplied by 16.25 = 325,000. so first we would get the difference for the “Fixed overhead spending variance which is actual 275,000 - bugted overhead 260,000 = 15,000 and the variance is “Unfavorable” Next we need to get the difference for “Fixed overhead production volume variance” Budgeted fixed is 260,000 and the applied fixed overhead is 325,000. The difference 65,000. 15,000 and the 65,000 = 50,000 Favorable
What is variable factory overhead variance? How to calc it?
Variable factory overhead variance is the variable overhead spending variance and variable overhead efficiency variance.
To calc the variable factory variance we need to calc the “variable overhead spending variance” and the variable overhead efficiency variance”
Step 1 we need to calc the spending variance. So first we need the actual variable overhead cost and the actual hours at standard rate. The acutal cost is given in the problem which is “actual variable factory overhead” 475,000 next we need to obtain the actual hours at standard rate. In this example we have “actual unit production” of 15,000 units next we multiply that by the standard unit cost per hour which is 30 - 3 “standard fixed factory overhead per hour” and we get standard rate of 27.00 per hour. Next we multiply the actual units production multilpied by the standard rate of 27 which gives us a total of 405,000. Next we subtract the 475,000 - 405,000 = 70,000 spending variance.
Step 2. we need to get the efficiency variance. We need to get the difference between the “actual hours at standard rate” and “Standard variable overhead cost” From the previous step we already know the “actual hours at standard rate” which is 405,000 and we only need to calc the “standard variable overhead cost” To calc the standard variable overhead cost” we need to the “standard hours allowed” which is 20,000 we multiply the standard rate from the previous problem and which was 27 and we multiply the 20,000 x 27 = which gives us a total of 540,000 standard variable overhead cost
Final step we need to get the difference between the “actual variable overhead cost” which we calc on “Step 1” 475,000 and the “standard variable overhead cost” of 540,000 we get a difference of 65,000 and the variance is “favaroble” because the actual is less than the standard cost
What is variable overhead spending variance? How to calc it?
The Variable overhead spending variance is the difference between actual total cost and the standard total cost.
To calc the spending variance we step 1 need to get the actual variable cost of hour of 4500 x actual cost per hour 8 = 36,000 actual variable total cost.
Step 2 we need to calc the total standard cost. From the previous step we gort the actual cost of hour which was 4500 and next we will multiply that by 7.50 and we got total of standard cost of 33,750.
Finally, The difference between the actual cost of 36,000 and the standard cost of 33,750 we get a total of 2,250. The variance would be unfavorable because actual cost exceeds the standard cost
What are the variable overhead spending variance? How to calc?
Variable overhead spending variance is calc by the difference between the actual total cost and the standard total cost. 1 Step we need to calc the actual total cost which would be “actual process hours” 25 x “actual variable overhead rate” 8 = 200 actual total cost. Step 2 we need to calc the “standard process hours” 20 multiply by 10 “standard variable overhead rate” = 250. The difference between the actual and the standard would be 50. The variance would be favorable because actual is less than the standard cost so that would make the variance “favorable”
