This preview shows pages 1–2. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: Chapter 11: Flexible Budgets and Overhead Analysis: Total Overhead Costs = Total Variable Costs + Total Fixed Costs Total Variable Overhead = Total Overhead Rate per activity x Total Activity Flexible Budget Concept: use a cost formula and multiply it by the actual level of activity for variable cost categories Computing the Overhead Rate: Predetermined Overhead Rate = Overhead from Flexible Budget at denominator activity level / Denominator Activity Level Ex: predetermined Overhead Rate = $7.50 – for every (standard machine hour recorded, WIP will be charged $7.50) Assigned Overhead = Predetermined Overhead Rate x Standard Activity Denominator Activity: estimated total amount of the base in the formula for the predetermined overhead rate (remains unchanged throughout year) Fixed Overhead Variances: Actual Fixed Budgeted Fixed Fixed Overhead Overhead Cost Overhead Cost Cost Applied to WIP (SQ x SR) Budget Variance Volume Variance Volume Variance = Fixed Component of the POR x (Denominator Hours – Standard Hours Allowed) Budget Variance = Actual Fixed Overhead – (Denominator hours x Standard fixed OH rate) Normal Cost System= overhead applied to WIP based on the actual # hours worked in the period Standard Cost System: overhead applied to WIP based on the standard hours allowed for actual output of the period. Factory Overhead Predetermined Overhead Rate x Standard Activity (or for Normal Costing use Actual Activity) Fixed Overhead Applied = Standard hours allowed for actual output x Fixed portion of Predetermined Overhead Rate Chapter 12 Segment Margin: Is computed by subtracting the traceable fixed costs of a segment from its contribution margin. Best gauge of long- run profitability ROI = (Net Operating Income / Sales) x (Sales / Average Operating Assets) ROI = Margin x Turnover Problem w/ ROI: more likely to not take investments that the company would want him to take.more likely to not take investments that the company would want him to take....
View Full Document
This document was uploaded on 08/10/2011.
- Spring '11