Managerial Accounting Chapter 9

Managerial Accounting Chapter 9 - 3 The activity base...

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Managerial Accounting Chapter 9 – Flexible Budgets and Overhead Analysis Flexible Budgets - Static Budgets – prepared at the beginning of the budgeting period and is valid for only the planned level of activity. - Flexible Budgets – take into account how changes in activity reflect costs. Flex budgets make it easy to estimate what costs should be for any level of activity within a specified range. o Actual costs are compared to what the costs should have been for actual level of activity The Measure of Activity – A critical choice 1) Changes in activity base should cause changes in variable overhead costs in the flexible budget 2) The activity base should not be expressed in dollars (physical measures only)
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Unformatted text preview: 3) The activity base should be simple and easily understood Variable Overhead Variances – A Closer Look Actual vs. Standard Hours-Spending Variance Overhead Rates and Fixed Overhead Analysis Predetermined Overhead Rate = Estimated total MOH cost / estimated total allocation base Fixed Overhead Variances -For Manufacturing Overhead Applied overhead costs = standard hours allowed x POR Budget Variance – Difference between actual fixed OH costs and original budgeted fixed overhead costs Budget Variance = Actual fixed OH costs – Budgeted fixed OH costs Volume Variance – Measure of facility utilization Fixed Component of POR x (Denominator hours – Std. hours allowed)...
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This note was uploaded on 02/28/2010 for the course AEM 3230 taught by Professor Little,j.e. during the Spring '08 term at Cornell.

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