8 24 8 36 20 min activity based costing batch level

  • Regis University
  • FINANCE 301
  • Notes
  • ProfLightningBear8992
  • 30
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8-24 8-36 (20 min.) Activity-based costing, batch-level variance analysis 1. Static budget number of crates = Budgeted pairs shipped / Budgeted pairs per crate = 240,000/12 = 20,000 crates 2. Flexible budget number of crates = Actual pairs shipped / Budgeted pairs per crate = 180,000/12 = 15,000 crates 3. Actual number of crates shipped = Actual pairs shipped / Actual pairs per box = 180,000/10 = 18,000 crates 4. Static budget number of hours = Static budget number of crates × budgeted hours per box = 20,000 × 1.2 = 24,000 hours Fixed overhead rate = Static budget fixed overhead / static budget number of hours = 60,000/24,000 = $2.50 per hour 5. Variable Overhead Variance Analysis for Rica’s Fleet Feet Inc. for 2008 Actual Actual hours Budgeted hours allowed for Variable Overhead x Budgeted rate Actual output x Budgeted rate (18,000 × 1.1 × $21) (18,000 × 1.1 × $20) (15,000 × 1.2 × $20) $415,800 $396,000 $360,000 $19,800 U $36,000 U Spending variance Efficiency variance 6. Fixed Overhead Variance Analysis for Rica’s Fleet Feet Inc. for 2008 Actual Static Budget Budgeted hours allowed for Fixed Overhead Fixed Overhead Actual output × Budgeted Rate (15,000 × 1.2 ×$2.5) $55,000 $60,000 $45,000 $5,000 F $15,000 U Spending variance Production volume variance
8-38 (35 min.) Production-Volume Variance Analysis and Sales Volume Variance. 1. and 2. Fixed Overhead Variance Analysis for Dawn Floral Creations, Inc. for February Actual Fixed Static Budget Standard Hours Overhead Fixed Overhead × Budgeted Rate (600 × 1.5 × $6*) $9,200 $9,000 $5,400 $200 U $3,600 U Spending variance Production-volume variance * fixed overhead rate = (budgeted fixed overhead)/(budgeted DL hours at capacity) = $9,000/(1000 x 1.5 hours) = $9,000/1,500 hours = $6/hour 3. An unfavorable production-volume variance measures the cost of unused capacity. Production at capacity would result in a production-volume variance of 0 since the fixed overhead rate is based upon expected hours at capacity production. However, the existence of an unfavorable volume variance does not necessarily imply that management is doing a poor job or incurring unnecessary costs. Using the suggestions in the problem, two reasons can be identified.
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