AC100_Lecture7-8_COMPLETE LECTURE SLIDES.pdf

117 ah ar sr 28500 x 182 2 5013f variable overhead

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117 AH (AR SR) 28,500 x (1.82* 2)= 5,013F** Variable overhead spending (expenditure) variance
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Variable Overheads Efficiency variance 118 SR (AH SH)
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Variable Overheads Efficiency variance Have we used too much of absorption basis (labour hours here) in producing our output? Should use Did use Standard price Adverse labour efficiency variance hrs 28,500 Labour Actual output = 9,000 units =9,000 x 3hrs 27,000 (1,500) A £2 (£3,000) A ( )
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Variable Overheads Efficiency variance 120 SR (AH SH) 2x (28,500 3hrsx9000 units)= 3,000A
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Fixed overhead variances In your syllabus we will only cover fixed overhead expenditure. It is simply the difference between actual cost and budgeted cost of fixed overheads. There is a favourable effect on profit, therefore it is a favourable variance Budgeted expenditure Actual expenditure 116,000 £ 120,000 4,000 Favourable overhead total variance F ( )
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Criticism of Standard costing in current world (a) Proactive or at least quick response is expected in current environment Standard costing was developed when the business environment was more stable and operating conditions were less prone to change. In the present dynamic environment , such stable conditions cannot be assumed . (b) Historically performance to standard used to be judged as satisfactory, but in today’s climate constant improvement must be aimed for in order to remain competitive. (c) In manufacturing environments the emphasis on labour variances is no longer appropriate with the increasing use of automated production methods. However in service sector its importance remains…
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