Upload
sharonlong
View
117
Download
2
Embed Size (px)
DESCRIPTION
Managerial Accounting ed 15 Chapter 10A
Citation preview
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
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Appendix 10A
Predetermined Overhead Rates and Overhead Analysis in a Standard Costing System
10A-2
Learning Objective 4
(Appendix 10A)
Compute and interpret the fixed overhead budget and volume
variances.
10A-3
Budget variance
Fixed Overhead Budget Variance
Budgetvariance
Budgetedfixed
overhead
Actualfixed
overhead= –
ActualFixed
Overhead
FixedOverheadApplied
BudgetedFixed
Overhead
10A-4
Volumevariance
Fixed Overhead Volume Variance
Volumevariance
Fixedoverheadapplied to
work in process
Budgetedfixed
overhead= –
ActualFixed
Overhead
FixedOverheadApplied
BudgetedFixed
Overhead
10A-5
FPOHR = Fixed portion of the predetermined overhead rate DH = Denominator hours SH = Standard hours allowed for actual output
SH × FPOHRDH × FPOHR
Fixed Overhead Volume Variance
Volume variance FPOHR × (DH – SH)=
ActualFixed
Overhead
FixedOverheadApplied
BudgetedFixed
Overhead
Volumevariance
10A-6
Computing Fixed Overhead Variances
Budgeted production 30,000 units Standard machine-hours per unit 3 hours Budgeted machine-hours 90,000 hours Actual production 28,000 units Standard machine-hours allowed for the actual production 84,000 hours Actual machine-hours 88,000 hours
Production and Machine-Hour DataColaCo
10A-7
Computing Fixed Overhead Variances
Budgeted variable manufacturing overhead 90,000$ Budgeted fixed manufacturing overhead 270,000 Total budgeted manufacturing overhead 360,000$
Actual variable manufacturing overhead 100,000$ Actual fixed manufacturing overhead 280,000 Total actual manufacturing overhead 380,000$
ColaCoCost Data
10A-8
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
10A-9
Predetermined Overhead Rates
Fixed component of thepredetermined overhead rate
$270,00090,000 Machine-hours
=
Fixed component of thepredetermined overhead rate
= $3.00 per machine-hour
10A-10
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=
10A-11
Computing the Budget Variance
Budgetvariance
Budgetedfixed
overhead
Actualfixed
overhead= –
Budgetvariance
= $280,000 – $270,000
Budgetvariance
= $10,000 Unfavorable
10A-12
Computing the Volume Variance
Volumevariance
Fixedoverheadapplied to
work in process
Budgetedfixed
overhead= –
Volumevariance
= $18,000 Unfavorable
Volumevariance
= $270,000 –$3.00 per
machine-hour( ×$84,000
machine-hours)
10A-13
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 per
machine-hour (×90,000
mach-hours–
84,000mach-hours)
Volumevariance
= 18,000 Unfavorable
10A-14
A Pictorial View of the VariancesFixed Overhead
Applied toWork in Process
ActualFixed
Overhead
BudgetedFixed
Overhead
252,000270,000280,000
Total variance, $28,000 unfavorable
Budget variance,$10,000 unfavorable
Volume variance,$18,000 unfavorable
10A-15
Fixed Overhead Variances –A Graphic Approach
Let’s look at a graph showing fixed overhead
variances. We will use ColaCo’s
numbers from the previous example.
10A-16
Graphic Analysis of FixedOverhead Variances
Machine-hours (000)
Budget$270,000
90
Denominatorhours
00
Fixed overhead applied at
$3.00 per standard hour
10A-17
Graphic Analysis of FixedOverhead Variances
Actual$280,000
Machine-hours (000)
Budget$270,000
90
Denominatorhours
00
Fixed overhead applied at
$3.00 per standard hour
Budget Variance 10,000 U{
10A-18
Applied$252,000
Machine-hours (000)
Budget$270,000
Graphic Analysis of Fixed Overhead Variances
908400
Standardhours
Fixed overhead applied at
$3.00 per standard hour
Denominatorhours
Budget Variance 10,000 U
Volume Variance 18,000 U
{{
Actual$280,000
10A-19
Reconciling Overhead Variances and Underapplied or Overapplied Overhead
In a standardIn a standardcost system:cost system:
Favorablevariances are equivalentto overapplied overhead.
The sum of the overhead variancesequals the under- or overapplied
overhead cost for the period.
10A-20
Predetermined overhead rate (a) 4.00$ per machine-hour Standard hours allowed for the actual output (b) 84,000 machine hours Manufacturing overhead applied (a) × (b) 336,000$ Actual manufacturing overhead 380,000$ Manufacturing overhead underapplied or overapplied 44,000$ underapplied
Computation of Underapplied OverheadColaCo
Reconciling Overhead Variances and Underapplied or Overapplied Overhead
10A-21
Computing the Variable Overhead Variances
Variable manufacturing overhead rate varianceVMRV = (AH × AR) – (AH × SR) = $100,000 – (88,000 hours × $1.00 per hour) = $12,000 unfavorable
10A-22
Computing the Variable Overhead Variances
Variable manufacturing overhead efficiency varianceVMEV = (AH × SR) – (SH × SR) = $88,000 – (84,000 hours × $1.00 per hour) = $4,000 unfavorable
10A-23
Computing the Sum of All Variances
Variable overhead rate variance 12,000$ U Variable overhead efficiency variance 4,000 U Fixed overhead budget variance 10,000 U Fixed overhead volume variance 18,000 U Total of the overhead variances 44,000$ U
Computing the Sum of All variancesColaCo
10A-24
End of Appendix 10A