tools-for-enterprise-performance-evaluation

and other items extensive budgeting andetc indirect

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Unformatted text preview: hopof indirect etc.), and other items. Extensive budgeting andetc.), indirect been performed, primarily foreman, materials (welding rods, grinding disks, paint, analysis had labor (inspector and itshop estimated etc.),variable factory overhead should be applied at $10 per direct performed, time, was foreman, that and other items. Extensive budgeting and analysis had been labor hour. During August, $105,000variable factory overhead should be applied at $10 per directstandard cost and it was estimated that was actually spent on variable factory overhead items. The labor hour. for August’s production was as follows: During August, $105,000 was actually spent on variable factory overhead items. The standard cost for August’s production was as follows: Output -- Number of rail sections Standard hours per rail section * Standard hours to achieve output Standard variable overhead rate per hour of direct labor * Standard cost of variable overhead 3,400 3 10,200 X $10 $ 102,000 X The total variable overhead variance is unfavorable $3,000 ($102,000 - $105,000). This may lead to the conclusion that performance is about on track. But, a closer look reveals that overhead spending The total variable overhead variance is unfavorable $3,000 ($102,000 - $105,000). This may lead to wasconclusion that performance is about on track. But, a closer look reveals that 12,500 hours were the quite favorable, while overhead efficiency was not so good. Remember that overhead spending actually worked. Since variable overhead is consumed at the presumed rate of $10 per hour, this was quite favorable, while overhead efficiency was not so good. Remember that 12,500 hours were means that $125,000 ofvariable overhead is consumed at the presumed rate of $10 per hour,the actually worked. Since variable overhead (actual hours X standard rate) was attributable to this output achieved. Comparing this overhead (actual hours Xstandard cost ($102,000) reveals an means that $125,000 of variable figure ($125,000) to the standard rate) was attributable to the unfavorable variable overhead efficiency variance of $23,000. However, this inefficiency was output achieved. Comparing this figure ($125,000) to the standard cost ($102,000) reveals an significantly variable overhead efficiency variance of $23,000. However, variance ($105,000 vs. unfavorable offset by the $20,000 favorable variable overhead spending this inefficiency was $125,000). The following $20,000 favorable variablein helping spendingout the variable overhead significantly offset by the diagram may prove useful overhead you sort variance ($105,000 vs. variances: The following diagram may prove useful in helping you sort out the variable overhead $125,000). variances: Download free ebooks at bookboon.com 35 Variance Analysis Tools for Enterprise Performance Evaluation 4.13 Journal Entry for Variable Overhead Variances Please click the advert The following journal entry can be used to apply variable factory overhead to production and record the related variances: Download free eboo...
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