Predetermined Overhead Rates and Overhead Analysis in a
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Predetermined Overhead Rates and Overhead Analysis in a Standard Costing System Appendix 10 A Power. Point Authors: Susan Coomer Galbreath, Ph. D. , CPA Charles W. Caldwell, D. B. A. , CMA Jon A. Booker, Ph. D. , CPA, CIA Cynthia J. Rooney, Ph. D. , CPA Copyright © 2015 by Mc. Graw-Hill Education. All rights reserved.
10 A-2 Learning Objective 4 (Appendix 10 A) Compute and interpret the fixed overhead budget and volume variances.
10 A-3 Fixed Overhead Budget Variance Actual Fixed Overhead Budgeted Fixed Overhead Applied Budget variance = Actual fixed overhead – Budgeted fixed overhead
10 A-4 Fixed Overhead Volume Variance Actual Fixed Overhead Budgeted Fixed Overhead Applied Volume variance = Budgeted fixed overhead – Fixed overhead applied to work in process
10 A-5 Fixed Overhead Volume Variance Actual Fixed Overhead Budgeted Fixed Overhead DH × FPOHR Fixed Overhead Applied SH × FPOHR Volume variance = FPOHR × (DH – SH) FPOHR = Fixed portion of the predetermined overhead rate DH = Denominator hours SH = Standard hours allowed for actual output
10 A-6 Computing Fixed Overhead Variances
10 A-7 Computing Fixed Overhead Variances
10 A-8 Predetermined Overhead Rates Predetermined Estimated total manufacturing overhead cost = overhead rate Estimated total amount of the allocation base $360, 000 Predetermined = 90, 000 Machine-hours overhead rate Predetermined = $4. 00 per machine-hour overhead rate
10 A-9 Predetermined Overhead Rates Variable component of the predetermined overhead rate $90, 000 = 90, 000 Machine-hours Variable component of the predetermined overhead rate = $1. 00 per machine-hour Fixed component of the predetermined overhead rate $270, 000 = 90, 000 Machine-hours Fixed component of the predetermined overhead rate = $3. 00 per machine-hour
10 A-10 Applying Manufacturing Overhead applied = Predetermined overhead rate × Standard hours allowed for the actual output Overhead applied = $4. 00 per machine-hour × 84, 000 machine-hours Overhead applied = $336, 000
10 A-11 Computing the Budget Variance Actual fixed overhead Budgeted fixed overhead Budget variance = $280, 000 – $270, 000 Budget variance = $10, 000 Unfavorable –
10 A-12 Computing the Volume Variance Volume variance = Budgeted fixed overhead – ( Fixed overhead applied to work in process ) $3. 00 per $84, 000 × machine-hours Volume variance = $270, 000 – Volume variance = $18, 000 Unfavorable
10 A-13 Computing the Volume Variance Volume variance = FPOHR × (DH – SH) FPOHR = Fixed portion of the predetermined overhead rate DH = Denominator hours SH = Standard hours allowed for actual output ( Volume variance $3. 00 per = × machine-hour Volume variance = 18, 000 Unfavorable ) 90, 000 84, 000 – mach-hours
10 A-14 A Pictorial View of the Variances Actual Fixed Overhead 280, 000 Budgeted Fixed Overhead 270, 000 Budget variance, $10, 000 unfavorable Fixed Overhead Applied to Work in Process 252, 000 Volume variance, $18, 000 unfavorable Total variance, $28, 000 unfavorable
10 A-15 Fixed Overhead Variances – A Graphic Approach Let’s look at a graph showing fixed overhead variances. We will use Cola. Co’s numbers from the previous example.
10 A-16 Graphic Analysis of Fixed Overhead Variances Budget $270, 000 t a ed i l r p u p o a h d d a r e a h er tand v o s r d e e x p i F 0 0. $3 Denominator hours 0 0 Machine-hours (000) 90
10 A-17 Graphic Analysis of Fixed Overhead Variances Actual $280, 000 Budget $270, 000 { Budget Variance 10, 000 U t a ed i l r p u p o a h d d a r e a h er tand v o s r d e e x p i F 0 0. $3 Denominator hours 0 0 Machine-hours (000) 90
10 A-18 Graphic Analysis of Fixed Overhead Variances Actual $280, 000 Budget $270, 000 Applied $252, 000 { { Budget Variance 10, 000 U Volume Variance 18, 000 U t a ed i l r p u p o a h d d a r e a h er tand v o s r d e e x p i Standard F 0. 0 hours 3 $ Denominator hours 0 0 Machine-hours (000) 84 90
10 A-19 Reconciling Overhead Variances and Underapplied or Overapplied Overhead In a standard cost system: Unfavorable variances are equivalent to underapplied overhead. Favorable variances are equivalent to overapplied overhead. The sum of the overhead variances equals the under- or overapplied overhead cost for the period.
10 A-20 Reconciling Overhead Variances and Underapplied or Overapplied Overhead
10 A-21 Computing the Variable Overhead Variances Variable manufacturing overhead rate variance VMRV = (AH × AR) – (AH × SR) = $100, 000 – (88, 000 hours × $1. 00 per hour) = $12, 000 unfavorable
10 A-22 Computing the Variable Overhead Variances Variable manufacturing overhead efficiency variance VMEV = (AH × SR) – (SH × SR) = $88, 000 – (84, 000 hours × $1. 00 per hour) = $4, 000 unfavorable
10 A-23 Computing the Sum of All Variances
10 A-24 End of Appendix 10 A
- Overhead rate
- Over head rate
- Predetermined overhead rate
- Predetermined overhead allocation rate
- Recovery of overheads
- Predetermined overhead allocation rate
- Unit ratio
- Equivalent ratios
- Ratios rates and unit rates
- Ratios rates and unit rates
- Overhead aktual adalah
- Flexible budget and overhead analysis
- Flexible budget adalah
- Predetermined objectives
- A predetermined course of action is-
- What is pmts
- Predetermined time system adalah
- Define standard costing
- Missiles have predetermined trajectories
- Predetermined step taken when a critical limit is not met
- What is predetermined cost
- Maynard operation sequence technique
- Objectives of cost analysis
- Interest rates and economic growth
- Pay periods and hourly rates