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Budgeted MOH Rate: Total MOH costs/Total Manufacturing Hours.Budgeted MOH cost per output unit: Total MOH costs/units to be produced.oBudgeted income statement: Revenues – COGS = Gross Margin – Operating Costs (Variable & Fixed) = Operating Income.
Chapter 7 Favorable vs. unfavorable variances (C & P) oFavorable Variance: Actual Cost < Budgeted Cost; Actual Revenue > Budgeted Revenue.oUnfavorable Variance: Actual Costs > Budgeted Costs; Actual Revenue < Budgeted Revenue.Master/Static budget vs. flexible budget (C):oA static budget, or master budget, is based on plannedoutput and is prepared at the start of the budget period. oA flexible budget adjusts the master budget using actual outputto recalculate revenue and variable costs for the budgetperiod. This allows management to compare actual results with budgeted results for actualactivity level. Flexible budgets accommodate changes in activity levels.oThe three-step process for developing the flexible budget is as follows:Identify the actual output quantity.Calculate flexible budget revenues (budgeted selling price actual quantity). Calculate flexible budget costs (budgeted per-unit variable cost actual quantity plus fixed costs).Prepare a static budget and flexible budget (P)
Static-budget variance, sales-volume variance, and flexible-budget variance: each item and total amount (C & P) oA static-budget variance, then, is the difference between actual results and the budgeted amounts in the staticbudget.oThe sales-volume variance is the difference between the flexiblebudget (at actual output) and the corresponding staticbudget amount.oThe flexible-budget variance is the difference between actualrevenues or costs and the corresponding flexiblebudget amounts. The flexible-budget variance for revenues is called the selling pricevariance as it arises only from the difference between the actual selling price and the budgeted selling price.