Standard Costing Flashcards
What are Overhead Costs?
Costs that cannot be traced to a cost object as they are common to serval cost objects.
What are Variable Costs?
Costs that vary directly & proportionately with activity.
What are Fixed Costs?
Costs that are dependent on activity (salaries of managers/depreciation).
What are Fixed OH under Marginal Costing?
When using MC, treat FC as period expenses.
Only concerned with difference in expected expenditure (budgeted) and actual expenditure.
Fixed Overhead Expenditure Variance.
What is Standard Absorption Costing?
This is predetermined Fixed Overhead Rate, often based on standard hrs.
Regulations require value inventories at full absorption manufacturing costs, so FOH must be allocated to products and included in closing inventory valuations.
Formula for POHR:
Annual budgeted fixed overhead / annual budgeted activity.
Application of Manufacturing OH:
POHR applied to each unit of output. Could over/under-absorb OH by making more/less than we thought we needed.
Need to account for Fixed Overhead Expenditure Variance and the difference between what we incurred and what the we have absorbed.
What makers up Total Fixed OH Variance?
Expenditure Variance + Volume Variance
What is Expenditure Variance?
Component of Total Fixed OH Variance.
= Expected Expenditure (budgeted) - Actual Expenditure Incurred.
What is Volume Variance?
Budgeted Amount of Volume Made - Actual Amount Made
What is Standard Variable Costing?
- Variable OH variance and Fixed OH expenditure calculated.
- Fixed Manufacturing OH charged as expense in period, not allocated to products.
What is Standard Absorption Costing?
- Variable OH variance, Total Fixed OH and expenditure and volume variances are calculated.
- Fixed OH allocated to products using POHR.
Total Fixed OH Variances =
Expenditure Variance + Volume Variance
Expenditure Variance =
Actual Expenditure different to budgeted expenditure
Volume Variance =
Actual production different to budgeted production
