Chapter 8 (To Students) - Flexible Budgets Overhead Cost...

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Flexible Budgets, Overhead Cost Variances, and Management Control
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1. Explain the similarities and differences in planning variable and fixed overhead costs 2. Develop budgeted variable and fixed overhead cost rates 3. Compute the variable overhead flexible- budget variance, the variable overhead efficiency variance , and the variable overhead spending variance (slide 7) 4. Compute the fixed overhead flexible- budget variance, the fixed overhead spending variance , and the fixed overhead production-volume variance 8-2
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5. Show how the 4-variance analysis approach reconciles the actual overhead incurred with the overhead amounts allocated during the period 6. Explain the relationship between the sales-volume variance and the production-volume variance 7. Calculate variances in activity-based costing 8. Examine the use of overhead variances in nonmanufacturing settings 8-3
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To effectively plan variable overhead costs , managers should focus on activities that add value and eliminate those that do not . Fixed overhead planning is similar ~ plan only for essential activities and plan to be as efficient as possible. 8-4
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…is a costing system that Traces direct costs to output by multiplying the standard prices or rate by the standard quantities of inputs allowed for actual outputs produced. Allocates overhead costs on the basis of the standard overhead-cost rates times the standard quantities of the allocation bases allowed for the actual outputs produced. 8-5
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1. Choose the period to be used for the budget. 2. Select the cost-allocation bases to use in allocating variable overhead costs to 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.
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