201-Wk15-Variances-OH-F'10 (STUD)

# 201-Wk15-Variances-OH-F'10 (STUD) - Mgmt 201 Managerial...

• Notes
• 10

This preview shows pages 1–3. Sign up to view the full content.

page 1 Mgmt. 201 - Managerial Accounting – Week 15 Production Variances – All of them Professor Thoman page 2 Standard costs and Variances In these notes we will: I. Add OH variances to our repertoire. II. Time permitting, work additional variance and costing problems.

This preview has intentionally blurred sections. Sign up to view the full version.

page 3 Framington Co. – Example of production cost variances Framington Co. is a small manufacturer of etched tin eyeglass cases. Framington wants use variance analysis to evaluate its performance during the month of June. Before June, the company had established its standards (and budgets): During its budgeting process before the start of June, Framington set its target or standard costs for the manufacture of the eyeglass cases: SQ I /unit SP I Standard cost/unit DM: Tin 3 ounces/case \$2.50/oz. \$ 7.50 DL: Etching .3 DLH \$10/DLH 3.00 DIRECT COSTS \$ 10.50 VOH .2 MH \$8/MH 1.60 FOH* .2 MH \$10/MH 2.00 TOTAL OVERHEAD \$ 3.60 TOTAL STANDARD COST PER UNIT \$ 14.10 *Fixed overhead is allocated on the basis of MH; it was expected that 600 eyeglass cases would be produced each month; thus, the predetermined FOH rate was estimated as follows: Predetermined FOH rate = SP I = Estimated OH Estimated driver = \$1,200 (600 cases)(.2 MH/case) = \$10/MH page 4 At the end of June, the company wants to see how they performed: During the month of June, Framington actually produced 500 eyeglass cases. What is the targeted direct cost of making the 500 eyeglass cases? What is the total standard or targeted cost of making the 500 eyeglass cases? 500 x \$10.50 = \$5,250 500 x \$14.10 = \$7,050 Actual production costs for the month of June were: Total actual production costs for 500 eyeglass cases DM: Tin 2,000 ounces purchased and used \$ 6,000 DL: Etching 200 DLH 1,800 DIRECT COSTS \$ 7,800 VOH 150 MH 1,050 FOH 1,100 TOTAL COSTS \$ 9,950 What is the total of the direct cost variances for the production of the 500 cases? What is the total of all production cost variances for the 500 eyeglass cases?
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern