ACTG2020_Week8 Ch9_2014

Hmm comparing static budgets with actual costs is

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Unformatted text preview: activity. LO 3 Flexible Budgets May be prepared for any activity level in the relevant range. Show costs that should have been incurred at the actual level of activity, enabling “apples to apples” cost comparisons. Reveal variances related to cost control. Improve performance evaluation. Let’s look at CheeseCo. LO 3 Static Budgets and Performance Reports CheeseCo Static Budget Machine hours V ariable costs I ndirect labour I ndirect materials Power Fixed costs Depreciation I nsurance Total overhead costs Actual Results Variances 10,000 $ 40,000 30,000 5,000 12,000 2,000 $ 89,000 LO 3 Static Budgets and Performance Reports CheeseCo Static Budget Machine hours V ariable costs I ndirect labour I ndirect materials Power Fixed costs Depreciation I nsurance Total overhead costs Actual Results 10,000 8,000 $ 40,000 30,000 5,000 $ 34,000 25,500 3,800 12,000 2,000 12,000 2,050 $ 89,000 Variances $ 77,350 LO 3 Static Budgets and Performance Reports CheeseCo Static Budget Machine hours 10,000 Actual Results Variances 8,000 2,000 U Variable costs U = Unfavourable variance I ndirect labour $ 40,000 $ 34,000 CheeseCo was unable to achieve I ndirect materials 30,000 25,500 level Power the budgeted 5,000 of activity. 3,800 Fixed costs Depreciation I nsurance Total overhead costs $6,000 F 4,500 F 1,200 F 12,000 2,000 12,000 2,050 0 50 U $ 89,000 $ 77,350 $11,650 F LO 3 Static Budgets and Performance Reports CheeseCo Static Budget Machine hours Variable costs I ndirect labour I ndirect materials Power Actual Results Variances 10,000 8,000 2,000 U $ 40,000 30,000 5,000 $ 34,000 25,500 3,800 $6,000 F 4,500 F 1,200 F F = Favourable variance that occurs when Fixed costs actual costs are less than budgeted 2,000 Depreciation 12,000 1 costs. I nsurance 2,000 2,050 Total overhead costs $ 89,000 $ 77,350 0 50 U $11,650 F LO 3 Static Budgets and Performance Reports CheeseCo Static Budget Machine hours Variable costs I ndirect labour I ndirect materials Power Actual Results Variances 10,000 8,000 2,000 U $ 40,000 30,000 5,000 $ 34,000 25,500 3,800 $6,000 F 4,500 F 1,200 F Since cost Fixed costs variances are favourable, have we done a good job controlling costs? Depreciation 12,000 12,000 I nsurance 2,000 2,050 Total overhead costs $ 89,000 $ 77,350 0 50 U $11,650 F LO 3 Static Budgets and Performance Reports Actual activity is below Actual activity is below budgeted activity - vari...
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This note was uploaded on 03/28/2014 for the course ACTG 2020 taught by Professor Lizfarrel during the Spring '11 term at York University.

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