predetermined overhead rates and overhead analysis in a standard costing system
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Predetermined Overhead Rates and Overhead Analysis in a Standard Costing System. Appendix 11A. Learning Objective 11-4. Compute and interpret the fixed overhead volume and budget variances. Fixed Overhead Volume Variance. Fixed Overhead Applied. Budgeted Fixed Overhead. - PowerPoint PPT PresentationTRANSCRIPT
PowerPoint Authors:Susan Coomer Galbreath, Ph.D., CPACharles W. Caldwell, D.B.A., CMAJon A. Booker, Ph.D., CPA, CIACynthia J. Rooney, Ph.D., CPA
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Predetermined Overhead Rates and Overhead Analysis in a Standard Costing System Appendix 11A
11A-2
Learning Objective 11-4
Compute and interpret the fixed overhead volume and budget
variances.
11A-3
Volumevariance
Fixed Overhead Volume VarianceFixed
OverheadApplied
ActualFixed
Overhead
BudgetedFixed
Overhead
Volumevariance
Fixedoverheadapplied to
work in process
Budgetedfixed
overhead= –
11A-4
FPOHR = Fixed portion of the predetermined overhead rate DH = Denominator hours SH = Standard hours allowed for actual output
SH × FR DH × FR
Fixed Overhead Volume Variance
Volume variance FPOHR × (DH – SH)=
FixedOverheadApplied
ActualFixed
Overhead
BudgetedFixed
Overhead
Volumevariance
11A-5
Budget variance
Fixed Overhead Budget Variance
Budgetvariance
Budgetedfixed
overhead
Actualfixed
overhead= –
FixedOverheadApplied
ActualFixed
Overhead
BudgetedFixed
Overhead
11A-6
Predetermined Overhead Rates
Predetermined overhead rate
Estimated total manufacturing overhead costEstimated total amount of the allocation base=
Predetermined overhead rate
$360,00090,000 Machine-hours=
Predetermined overhead rate = $4.00 per machine-hour
11A-7
Predetermined Overhead Rates
Variable component of thepredetermined overhead rate
$90,00090,000 Machine-hours=
Variable component of thepredetermined overhead rate = $1.00 per machine-hour
Fixed component of thepredetermined overhead rate
$270,00090,000 Machine-hours=
Fixed component of thepredetermined overhead rate = $3.00 per machine-hour
11A-8
Applying Manufacturing Overhead
Overheadapplied
Predetermined overhead rate
Standard hours allowedfor the actual output= ×
Overheadapplied
$4.00 permachine-hour 84,000 machine-hours= ×
Overheadapplied $336,000=
11A-9
Computing the Volume Variance
Volumevariance
Fixed overheadapplied to
work in process
Budgetedfixed
overhead= –
Volumevariance
= $18,000 Unfavorable
Volumevariance
= $270,000 – $3.00 permachine-hour( × $84,000
machine-hours )
11A-10
Computing the Volume Variance
FPOHR = Fixed portion of the predetermined overhead rate DH = Denominator hours SH = Standard hours allowed for actual output
Volume variance FPOHR × (DH – SH)=
Volumevariance
= $3.00 permachine-hour (× 90,000
mach-hours – 84,000mach-hours )
Volumevariance
= 18,000 Unfavorable
11A-11
Computing the Budget Variance
Budgetvariance
Budgetedfixed
overhead
Actualfixed
overhead= –
Budgetvariance
= $280,000 – $270,000
Budgetvariance
= $10,000 Unfavorable
11A-12
A Pictorial View of the VariancesFixed Overhead
Applied toWork in Process
ActualFixed
Overhead
BudgetedFixed
Overhead 280,000270,000252,000
Total variance, $28,000 unfavorable
Budget variance,$10,000 unfavorable
Volume variance,$18,000 unfavorable
11A-13
End of Appendix 11A