Fixed Cost Variances Notes.docx - Fixed Cost Variances...

This preview shows page 1 - 2 out of 4 pages.

Fixed Cost Variances Background: Fixed costs, in total, are __unchanged_______ as volume changes within the relevant range of activity. Therefore, when we budget fixed costs at any level of activity within the relevant range, we expect the total cost to be the same. This concept is illustrated above with the master budget for 100,000 units and the flexible budget for 80,000 units—the total fixed manufacturing overhead is $200,000. Thus, the spending variance (also known as a _budget__ variance) for fixed overhead is simply the difference between the actual overhead of $_195500__ and the flexible budget of $200,000 , or $4500 F . Since the income statement in this exhibit is a contribution_ income statement, this represents a _variable costing_ approach. In a variable costing system, only _variable manufacturing costs are included in inventory. The _fixed manufacturing_ costs are _expense_______ in the period they are incurred and not included in the product cost. Under __________ _______

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture