Variable cost variance flexible budget variance costs

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Variable cost variance= flexible budget variance costs – actual variance costs OR (budg UVC – actual UVC) * actual sales Input Quantity (efficiency) variance= cost in flex budg – cost in “as if” budget OR (flex budg input – actual input) * budg input Input price variance= cost “as if” budget- actual cost OR actual input * (budget input- actual input) Profit margin= CM- allocated capacity costs OR (Rev-VC) – allocated capacity costs Allocation rate= cost in cost pool/ denominator value Cost allocated to each product line= # cost driver units for that product line * allocation rate The higher the margin of safety, the lower the risk of loss if actual sales do not meet expectations Depreciation, advertising, rent, fire insurance, cost of salaries for quality control supervisors, R + D costs, CEO salary, production supervisor salaries are fixed costs
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Cost of materials and components used in production, sales commission, wages for assembly workers, assembly labor wages per hour are all variable CEO bonus is either variable or mixed pending on how bonus is structured. EVA= NOPAT – [WACC* (invested capital – current liabilities) NOPAT= (1 – tax rate) * net operating profit before taxes
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