MGMT_201_(Ganguly)_Lecture_25

MGMT_201_(Ganguly)_Lecture_25 - MGMT 201 (Ganguly) MGMT

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MGMT 201 (Ganguly) MGMT 201 (Ganguly) Lectures 25: Recapitulate  Lectures 25: Recapitulate  Overhead budgets & then look at  Overhead budgets & then look at  Flexible Budgeting (Chapter 11) Flexible Budgeting (Chapter 11)
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2 Cost Management Using Cost Management Using Overhead Cost Variances Overhead Cost Variances First, recap variable overhead .
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3 AH × AR Spending variance = AH(AR - SVR) Efficiency variance = SVR(AH - SH) Spending Variance Efficiency Variance Actual Flexible Budget Flexible Budget Variable for Variable for Variable Overhead Overhead at Overhead at Incurred Actual Hours Standard Hours AH × SVR SH × SVR Variable Overhead Variances
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4 3,300 hours 3,200 hours × × $2.00 per hour $2.00 per hour The $140 unfavorable spending variance and the $200 unfavorable efficiency variance result in a $340 unfavorable flexible budget variance. Actual Flexible Budget Flexible Budget Variable for Variable for Variable Overhead Overhead at Overhead at Incurred Actual Hours Standard Hours $6,740 $6,600 $6,400 Variable Overhead Variances – Variable Overhead Variances – Example Example
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5 Variable Overhead Variances – Variable Overhead Variances – A Closer Look A Closer Look Spending Variance Spending Variance Efficiency Variance Efficiency Variance Results from paying more or less than expected for overhead items and from excessive usage of overhead items. A function of the selected cost driver. It does not reflect overhead control.
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6 Fixed Overhead Fixed Overhead Next, recap fixed overhead .
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7 3,200 hours × $3.00 per hour Fixed Overhead Variances – Fixed Overhead Variances – Example Example Actual Fixed Fixed Fixed Overhead Overhead Overhead Incurred Budget Applied $8,450 $9,000 $9,600 Budget variance $550 favorable Volume variance $600 (neither favorable nor unfavorable)
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8 Fixed Overhead Variances – Fixed Overhead Variances – A Closer Look A Closer Look Budget Variance Budget Variance Volume Variance Volume Variance Results from paying more or less than expected for overhead items. Results from the inability to operate at the activity level planned for the period. Has no significance for cost control.
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9 Fixed Overhead Variances Fixed Overhead Variances Let’s look at a graph showing fixed overhead variances.
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MGMT_201_(Ganguly)_Lecture_25 - MGMT 201 (Ganguly) MGMT

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