 Show 8-1 CHAPTER 8 FLEXIBLE BUDGETS, OVERHEAD COST VARIANCES, AND MANAGEMENT CONTROL 8-1 Effective planning of variable overhead costs involves: 1.Planning to undertake only those variable overhead activities that add value for customers using the product or service, and 2. Planning to use the drivers of costs in those activities in the most efficient way. 8-2 At the start of an accounting period, a larger percentage of fixed overhead costs are locked-in than is the case with variable overhead costs. When planning fixed overhead costs, a company must choose the appropriate level of capacity or investment that will benefit the company over a long time. This is a strategic decision. 8-3 The key differences are how direct costs are traced to a cost object and how indirect costs are allocated to a cost object: Actual prices × Actual inputs used Standard prices × Standard inputs allowed for actual output × Actual inputs used Standard indirect cost-allocation rate × Standard quantity of cost-allocation base allowed for actual output 8-4 Steps in developing a budgeted variable-overhead cost rate are 1.Choose the period to be used for the budget. 2.Select the cost-allocation bases to use in allocating variable overhead costs to the output produced. 3.Identify the variable overhead costs associated with each cost-allocation base. 4.Compute the rate per unit of each cost-allocation base used to allocate variable overhead costs to output produced. 8-5 Two factors affect the spending variance for variable manufacturing overhead: a.price changes of individual inputs (such as energy and indirect materials) included in variable overhead relative to budgeted prices b.percentage changein the actual quantity used of individual items included in variable overhead cost pool, relative to the percentage change in the quantity of the cost driver of the variable overhead cost pool 8-6 Possible reasons for a favorable variable-overhead efficiency variance include: •Workers are more skillful in using machines than budgeted. •Production scheduler was able to schedule jobs better than budgeted, resulting in lower-than-budgeted machine-hours. •Machines operated with fewer slowdowns than budgeted. •Machine time standards were overly lenient. Which of the following statements about variable overhead variances is correct?
Q: Which of the following is NOT true? Multiple Choice An activity variances describes the… A: Activity Variance The term which are used in the costing techniques which describes as difference… Q: If a purchasing manager is able to buy direct materials required in the manufacturing of a product… A: Total direct material variance: Total direct material variance is the result of difference between… Q: Which one of the following would not explain an adverse direct labor efficiency variance? Group of… A: Lets understand some basic of direct labor efficiency variance. Direct labor efficiency variance is… Q: Which one of the following would not explain an adverse direct labor efficiency variance? A. A… A: Direct labor efficiency variance-Adverse An adverse labor rate variance means higher labor costs… Q: Which of the following is a possible cause of an unfavorable material quantity variance? A) paying… A: Variance refers to a change between the expected value and the actual result. This term is usually… Q: Which of the following statements is incorrect with regards to production variances? Select… A: Production variance refers to form of measure which is used to compute the cost of production of… Q: Variable manufacturing overhead is applied to products on the basis of standard direct labor-hours.… A: Labor efficiency variance = (Actual hours worked - Standard hours allowed)*Standard labor rate per… Q: Which of the following statements about variances is false? If actual direct material price is… A: Variance analysis is comparing the actual and standard figures and finding the differences or… Q: Why Fixed Overhead Volume Variance is said to be a favorable variance when the actual output is more… A: Fixed overhead volume variance is the difference between Applied fixed overhead and Budgeted Fixed… Q: which of the following is a possible cause of an unfavorable labor efficiency variance? A. hiring… A: The difference between the Standard labour Cost for actual hours worked and actual wages paid is… Q: An unfavorable materials quantity variance occurs when the actual quantity used in production is… A: Note no. 1 Standard data is calculated by considering budgeted data and using actual data.… Q: Which of the following variances cannot occur together during the same accounting period? Select… A: Cost Accounting: It is the process of collecting, recording, analyzing the cost, summarizing cost,… Q: A favorable direct materials price variance and an unfavorable direct materials quantity variance… A: Direct Material Price Variance = Actual Quantity Purchased x (Standard Price - Actual Price) If… Q: Why can undue emphasis on labor efficiency variances lead to excess inventories? A: Labour Efficiency variation tests the willingness to use resources in line with standards. This… Q: An unfavorable labor efficiency variance is created when: Please explain why I seen answers for both… A: Labour efficiency variance measures how much efficient the labour is in managing its efficiency in… Q: The materials cost variance report for Nickols Inc. indicates a large favorable materials price… A: Material Price Variance Material Price variance is defined as the difference between Actual price… Q: An unfavorable labor efficiency variance is created when: Please explain why I seen answers for both… A: Variance in labour costs means difference in budgeted cost of labour with actual cost of labour.… Q: An unfavorable labor efficiency variance is created when: Please explain why I seen answers for both… A: Formula to compute labour efficiency variance is as follows: Labour efficiency variance =(Standard… Q: Which of the following statements is false? Standard costs (e.g., how much should be paid for… A: Statement 1 is true, because standard costs are considered as benchmarks for measuring performance. Q: Which of the following is not a reason standard costs are separated into two components?… A: Standard cost: In the accounting records, the term standard cost refers to the practice of… Q: What effect, if any, would you expect poor-quality materials to hare on direct labor variances? A: Direct labor variance arises due to the differences in the actual and budgeted rates of wage or… Q: nt(s) is/are true regarding standard costs and cost variances? i. they can be… A: Standard costing and Cost variance are inter linked to each other as one helps in evaluation… Q: Which of the following would produce a labor rate variance? A. Poor quality materials causing… A: The correct option is B. Q: To reconcile budgeted profit to actual profit under marginal costing, which variances must be… A: Marginal Costing is a method of costing, where the marginal cost, the variable cost is charged to… Q: What effect, if any, would you expect purchasing poor-quality materials to have on direct labour… A: Direct labor variance arises due to the differences in the actual and budgeted rates of wage or… Q: Which of the following is a possible cause of an unfavorable material price variance? A. purchasing… A: Material price variance exists when the actual purchase price is different from the standard… Q: Based on the above information, the variable manufacturing overhead rate variance is? A: Formula: Variable manfacturing overhead Rate Variance= Standard Rate- Actual Rate×Actual Hours of… Q: If production is more or less than the standard volume, is it possible that no flexible-budget or… A: Definition: Production-Volume Variance: It reports that amount which is the result of the… Q: What is a materials quantity variance? Describe this in your own words. Writing a formula is not a… A: Material cost variance arises when there is difference in standard cost of materials and actual cost… Q: What is a materials quantity variance? Describe this in your own words. Writing a formula is not a… A: Material quantity variance is the difference between the actual cost of material used and the… Q: A favorable overhead spending variance means that:a. Overhead has been overapplied.b. Overhead has… A: The right answer is option a. Overhead has been overapplied. Q: Would a production manager be equally responsible for anunfavorable materials price variance and an… A: Click to see the answer Q: Determine the direct materials quantity and direct labor time variances. Round your per unit… A: To calculate variance direct materials quantity the following formula can be used Statement finding… Q: (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and… A: Concepts and reason Variance analysis: Variance analysis is the process of analyzing the difference… Q: Write in detail the possible causes of each of the following variance. Direct materials price and… A: Variances: A cost variance is a difference between the actual expenses incurred and the standard… Q: The performance evaluation of a cost center is typically based on its a. sales volume variance. b.… A: Click to see the answer Q: (1) Compute the direct materials price and quantity variances. (Indicate the effect of each variance… A: Solution: Direct material quantity variance is also called as direct material usage or efficiency… Q: variable factory overhead controllable variance? A: Variable factory overhead variance = Standard hours required for actual production *Standard rate… Q: A production volume variance will exists when: Production volume differs from the sales volume.… A: Fixed overhead production volume variance is calculated as: = Fixed overhead per unit basis the… Q: Compute the flexible- budget variance, the spending variance, and the efficiency variance for… A: Variable Cost: The cost which fluctuates on the basis of the output level produced. The variable… Q: Compute the direct materials price variance and the direct materials quantity variance. (Inc… A: Click to see the answer Knowledge Booster Learn more about Need a deep-dive on the concept behind this application? Look no further. 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Recommended textbooks for you Managerial Accounting: The Cornerstone of Busines... ISBN:9781337115773 Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger Publisher:Cengage Learning Principles of Cost Accounting ISBN:9781305087408 Author:Edward J. Vanderbeck, Maria R. Mitchell Publisher:Cengage Learning Cornerstones of Cost Management (Cornerstones Ser... ISBN:9781305970663 Author:Don R. Hansen, Maryanne M. Mowen Publisher:Cengage Learning Principles of Accounting Volume 2 ISBN:9781947172609 Author:OpenStax Publisher:OpenStax College Survey of Accounting (Accounting I) ISBN:9781305961883 Author:Carl Warren Publisher:Cengage Learning Managerial Accounting ISBN:9781337912020 Author:Carl Warren, Ph.d. Cma William B. Tayler Publisher:South-Western College Pub Managerial Accounting: The Cornerstone of Busines... ISBN:9781337115773 Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger Publisher:Cengage Learning Principles of Cost Accounting ISBN:9781305087408 Author:Edward J. Vanderbeck, Maria R. Mitchell Publisher:Cengage Learning Cornerstones of Cost Management (Cornerstones Ser... ISBN:9781305970663 Author:Don R. Hansen, Maryanne M. Mowen Publisher:Cengage Learning Principles of Accounting Volume 2 ISBN:9781947172609 Author:OpenStax Publisher:OpenStax College Survey of Accounting (Accounting I) ISBN:9781305961883 Author:Carl Warren Publisher:Cengage Learning Managerial Accounting ISBN:9781337912020 Author:Carl Warren, Ph.d. Cma William B. Tayler Publisher:South-Western College Pub What is the variable overhead rate variance?The variable overhead rate variance, also known as the spending variance, is the difference between the actual variable manufacturing overhead and the variable overhead that was expected given the number of hours worked.
What will cause the variable overhead efficiency variance?Variable overhead efficiency variance is a measure of the difference between the actual costs to manufacture a product and the costs that the business entity budgeted for it. Thus, it can arise from a difference in productive efficiency.
How is the variable overhead rate variance calculated?Variable overhead spending variance = AH × (AR – SR)
AH = Actual hours worked during the period. AR = Actual variable overhead rate rate. SR = Standard variable overhead rate (i.e., variable portion of predetermined overhead rate)
How is the variable overhead rate variance calculated quizlet?The variable overhead efficiency variance is calculated as the difference between actual direct labor hours used versus standard (budgeted) direct labor hours allowed, multiplied by the standard variable overhead rate.
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The variable overhead rate variance is caused by the sum between which of the following?
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