10 42 Volume Variance A Closer Look Does not measure over or under spending It

10 42 volume variance a closer look does not measure

This preview shows page 42 - 48 out of 48 pages.

10-42 Volume Variance A Closer Look Does not measure over- or under spending It results from treating fixed overhead as if it were a variable cost. Volume Variance
10-43 Activity Cost 3,000 Hours Expected Activity $9,000 budgeted fixed OH Graphic Analysis of Fixed Overhead Variance
10-44 $8,450 actual fixed OH Activity Cost $9,000 budgeted fixed OH { Graphic Analysis of Fixed Overhead Variance 3,000 Hours Expected Activity $550 Favourable Budget Variance
10-45 { $8,450 actual fixed OH 3,200 machine hours × $3.00 fixed overhead rate $600 Favourable Volume Variance $9,600 applied fixed OH 3,200 Standard Hours Activity Cost $9,000 budgeted fixed OH $550 Favourable Budget Variance { $8,450 actual fixed OH 3,000 Hours Expected Activity Graphic Analysis of Fixed Overhead Variances
10-46 Overhead Variances and Under or Overapplied Overhead Cost In a standard cost system: Unfavourable variances are equivalent to underapplied overhead. Favourable variances are equivalent to overapplied overhead. The sum of the overhead variances equals the under- or overapplied overhead cost for a period.
10-47 Advantages of Standard Costs Management by exception Advantages Promotes economy and efficiency Simplified bookkeeping Enhances responsibility accounting