Chapter 8 Cost Accounting.pptx - Chapter 8 Flexible Budgets...

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Chapter 8: Flexible Budgets, Overhead Cost Variances, and Management Control 1
Plan for the Chapter 1. Manufacturing Overhead Costs and Overhead Costs Rates 2. Compute and interpret the variable overhead flexible-budget variance, the variable overhead efficiency variance and the variable overhead spending variance 3. Compute and interpret the fixed overhead flexible-budget variance, the fixed overhead spending variance and the fixed overhead production-volume variance 4. Show how the 4-variance analysis approach reconciles the actual overhead incurred with the overhead amounts allocated during the period 2
Manufacturing Overhead Costs Variable MOH Indirect variable manufacturing costs other than DM and DL. Examples: Maintenance, utilities, supplies… Allocated to cost objects using a VMOH cost rate Fixed MOH Indirect fixed manufacturing costs. They represent capacity costs. Lump sum of costs remaining unchanged for a given period despite changes in activity within the relevant range Examples: Leasing costs for a machine, depreciation on factory building, supervisors’ salaries… Allocated to cost objects using a FMOH cost rate 3
Developing Budgeted Overhead Cost Rates 1. Choose the period to be used for the budget. 2. Select the cost-allocation bases to use in allocating variable/fixed overhead costs to output produced. 3. Identify the variable/fixed overhead costs associated with each cost- allocation base. 4. Compute the rate per unit of each cost-allocation base used to allocate variable/fixed overhead costs to output produced. 4
Developing Budgeted Overhead Cost Rates Variable MOH

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