0 évaluation0% ont trouvé ce document utile (0 vote)
247 vues2 pages
This document discusses operational performance measurement through analyzing indirect cost variances and resource capacity management. It provides definitions and calculations for standard overhead costs, total overhead variance, variable overhead variance, variable overhead spending variance, variable overhead efficiency variance, fixed overhead variance, and production-volume variance. The purpose is to explain how to calculate various cost variances for cost control and use standard costs for product costing and control purposes.
This document discusses operational performance measurement through analyzing indirect cost variances and resource capacity management. It provides definitions and calculations for standard overhead costs, total overhead variance, variable overhead variance, variable overhead spending variance, variable overhead efficiency variance, fixed overhead variance, and production-volume variance. The purpose is to explain how to calculate various cost variances for cost control and use standard costs for product costing and control purposes.
This document discusses operational performance measurement through analyzing indirect cost variances and resource capacity management. It provides definitions and calculations for standard overhead costs, total overhead variance, variable overhead variance, variable overhead spending variance, variable overhead efficiency variance, fixed overhead variance, and production-volume variance. The purpose is to explain how to calculate various cost variances for cost control and use standard costs for product costing and control purposes.
Operational Performance Measurement: Indirect-Cost Variances and
Resource-Capacity Management
Standard Overhead Costs: Planning versus Control
Standard costs can be used alone for control purposes, or they can be incorporated formally into the accounting records for both product-costing and control purposes. We used a flexible budget at the end of the period to calculate various revenue and cost variances. For cost-control purposes, we calculated a total flexible-budget variance and then proceeded to explain this total variance by calculating a selling price variance, fixed cost variances. For variable factory overhead the underlying model for cost-control and product-costing purposes is the same.
Variance Analysis for Manufacturing Overhead Costs
For product-costing purposes, the total overhead variance for the period (also called the total under/overapplied overhead) is equal to the difference between actual overhead cost incurred and the standard overhead cost applied to production. Total overhead variance = Total actual overhead – Total applied overhead = (Total variable overhead + Total fixed overhead) – (Total overhead application rate × Standard hours allowed for this period’s production)
Variable Overhead Cost Analysis
The total variable overhead variance is the difference between actual variable overhead cost incurred and the standard variable overhead cost applied to production; also called over- or under applied variable overhead for the period. Cost Control: Breakdown of the Total Variable Overhead Variance Variable overhead = Actual variable overhead – Budgeted variable overhead spending variance based on inputs = (AQ × AP) – (AQ × SP) = AQ × (AP – SP)
Variable overhead = Budgeted variable overhead – Standard variable overhead
efficiency variance based on inputs applied to production = (AQ × SP) – (SQ × SP) = SP × (AQ – SQ)
Variable Overhead Spending Variance
This variance is attributable to actual spending for variable overhead items per unit of the activity variable being different from standard. If the variable overhead spending variance is considered “material” or “significant,” a follow-up analysis of individual variable overhead items is indicated.
Variable Overhead Efficiency Variance
Care needs to be exercised when interpreting this variance. Simply put, the variable overhead efficiency variance reflects efficiency or inefficiency in the use of the activity variable used to apply variable overhead costs to products. The variable overhead efficiency variance is therefore related to efficiency or inefficiency in the use of whatever activity variable is used to apply variable overhead for product-costing purposes (and for constructing the flexible budget for cost-control purposes). This reinforces the need to choose the proper activity variable for allocating variable overhead costs
Fixed Overhead Cost Analysis
Total fixed overhead variance is the difference between the actual fixed overhead cost incurred and the fixed overhead cost applied to production based on a standard fixed overhead application rate; also called over- or underapplied fixed overhead for the period.
The Production-Volume (Denominator) Variance
For federal income tax and GAAP purposes, companies must report inventories on a full (absorption) cost basis. This means that each unit produced must absorb a share of fixed factory overhead costs in addition to variable manufacturing costs. The following four-step process can be used for this purpose. Step 1: Determine budgeted total fixed factory overhead Step 2: Choose an appropriate activity measure for applying fixed factory overhead Step 3: Choose a denominator activity level, for alternatives: 1. Supply-Based Definitions of Capacity 2. Demand-Based Definitions of Capacity Step 4: Calculate the predetermined fixed overhead application rate In summary, for product-costing purposes a company must choose an activity level over which it spreads budgeted fixed manufacturing costs for a given period. Fixed overhead production volume variance is the difference between budgeted fixed overhead for the period and the standard fixed overhead applied to production (using the fixed overhead allocation rate). Production-volume variance = Budgeted fixed factory overhead cost – Standard fixed overhead cost assigned to production Or = SP × (Denominator activity hours – SQ)
A Beginners Guide to QuickBooks Online 2023: A Step-by-Step Guide and Quick Reference for Small Business Owners, Churches, & Nonprofits to Track their Finances and Master QuickBooks Online
Taxes for Small Businesses 2023: Beginners Guide to Understanding LLC, Sole Proprietorship and Startup Taxes. Cutting Edge Strategies Explained to Lower Your Taxes Legally for Business, Investing
How to Start a Business: Mastering Small Business, What You Need to Know to Build and Grow It, from Scratch to Launch and How to Deal With LLC Taxes and Accounting (2 in 1)
The Accounting Game: Learn the Basics of Financial Accounting - As Easy as Running a Lemonade Stand (Basics for Entrepreneurs and Small Business Owners)