Thumbinater
May 31, 2009, 04:11 PM
Study Appendix 13. Consider the following data regarding factory overhead:
... Variable... Fixed
Budget for actual hours of input... $45,000... $70,000
Applied... 41,000... 64,800
Budget for standard hours allowed
for actual output achieved..?
Actual incurred... 48,500... 68,500
Using the above data, fill in the following blanks with the variance amounts. Use F for favorable or U for unfavorable for each variance.
... Total Overhead... Variable... Fixed
1. Spending variance... ______... _____... ______
3. Production-volume variance... ______... ______... ______
4. Flexible-budget variance... ______... ______... ______
5. Underapplied overhead... ______... ______... ______
Appendix 13: Comparisons of Production-Volume Variance with
Other Variances
The only new variance introduced in this chapter is the production-volume variance, which arises because fixed-overhead accounting must serve two masters: the control-budget purpose and the product-costing purpose. Let’s examine this variance in perspective by using the approach originally demonstrated in Exhibit 8-9. The results of the approach appear in Exhibit 13-11, which deserves your careful study, particularly the two footnotes. Please ponder the exhibit before reading on.
Exhibit 13-12 graphically compares the variable- and fixed-overhead costs analyzed in Exhibit
13-11. Note how the control-budget line and the product-costing line (the applied line) are superimposed in the graph for variable overhead but differ in the graph for fixed overhead.
Underapplied or overapplied overhead is always the difference between the actual overhead incurred and the overhead applied. An analysis may then be made:
Accounting Vocabulary
underapplied overhead = flexible-budget variance + production-volume variance
for variable overhead = $30,000+0=$30,000
for fixed overhead = $70,000+$100,000=$170,000
... Variable... Fixed
Budget for actual hours of input... $45,000... $70,000
Applied... 41,000... 64,800
Budget for standard hours allowed
for actual output achieved..?
Actual incurred... 48,500... 68,500
Using the above data, fill in the following blanks with the variance amounts. Use F for favorable or U for unfavorable for each variance.
... Total Overhead... Variable... Fixed
1. Spending variance... ______... _____... ______
3. Production-volume variance... ______... ______... ______
4. Flexible-budget variance... ______... ______... ______
5. Underapplied overhead... ______... ______... ______
Appendix 13: Comparisons of Production-Volume Variance with
Other Variances
The only new variance introduced in this chapter is the production-volume variance, which arises because fixed-overhead accounting must serve two masters: the control-budget purpose and the product-costing purpose. Let’s examine this variance in perspective by using the approach originally demonstrated in Exhibit 8-9. The results of the approach appear in Exhibit 13-11, which deserves your careful study, particularly the two footnotes. Please ponder the exhibit before reading on.
Exhibit 13-12 graphically compares the variable- and fixed-overhead costs analyzed in Exhibit
13-11. Note how the control-budget line and the product-costing line (the applied line) are superimposed in the graph for variable overhead but differ in the graph for fixed overhead.
Underapplied or overapplied overhead is always the difference between the actual overhead incurred and the overhead applied. An analysis may then be made:
Accounting Vocabulary
underapplied overhead = flexible-budget variance + production-volume variance
for variable overhead = $30,000+0=$30,000
for fixed overhead = $70,000+$100,000=$170,000