Week 1 Lecture Advanced Cost Accounting

Week 1 Lecture Advanced Cost Accounting - Advanced Cost...

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1/7/14 Advanced Cost Accounting www.devryu.net/re/DotNextLaunch.asp?courseid=9177854&userid=2389222&sessionid=99773cd25f&tabid=XXQOm/ibpKPwC2XlJ5h09+tWmZ4u5l+3n3iOcAou… 1/3 Flexible Budgets, Overhead Cost Variances, and Management Control Developing Overhead Rates | Levels of Overhead Analysis Developing budgeted variable overhead costs rates is critical to effectively managing overhead and doing performance evaluation. As such, these rates should be established at the start of a budget period. Concentrating on activities that add value to a product or service is the key, and in the case of variable overhead, the goal should be to establish a cause-and-effect relationship between the cost and the activity level. Fixed overhead, on the other hand, emphasizes capacity. Once a fixed overhead rate is set, it is frequently locked in for an extended period of time and can have a long-term effect on a company’s profitability. So what is the procedure for developing these critical rates? It involves four steps. Once these static rates are established, it is time to put them to use. The basic level of analysis for both variable and fixed overhead is called the flexible budget variance. The formula for both types of flexible budget variances is as follows.
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Week 1 Lecture Advanced Cost Accounting - Advanced Cost...

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