ACC 406 Chapter Notes - Chapter 11: Stabilisation Force In Bosnia And Herzegovina

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aquamarinejellyfish565

30 Nov 2012

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Chapter 11 flexible budgets and overhead analysis: prepare a flexible budget, and use it for performance reporting. Static budgets provide expected cost for a given level of activity. If the actual level of activity differs from the level associated with the static budget level, then comparing actual costs with budgeted costs does not make any sense. Flexible budgets divide costs into those that vary with units of production (or direct labour hours) and those that are fixed with respect to these unit level drivers. These relationships allow the identification of a cost formula for each item in the budget: calculate the variable overhead variances, and explain their meaning. Overhead costs are often a significant proportion of costs in a budget. Comparing actual variable and fixed overhead costs with applied overhead costs yields a total overhead variance. In a standard cost system, it is possible to break down these overhead variances into component variances.

Related Questions

Cole manufactures coffee mugs that it sells to other companies for customizing with their own logos. Cole prepares flexible budgets and uses a standard cost system to control manufacturing costs. The standard unit cost of a coffee mug is based on static budget volume of 60,100 coffee mugs perâ month:

Data Table

Direct materials (			0.2	lbs @		$0.25		per lb)		$0.05
Direct labor	(	3	minutes @		$0.10		per minute)			0.30
Manufacturing overhead:
Variable		(	3	minutes @		$0.05		per minute)	$0.15
Fixed	(	3	minutes @		$0.14		per minute)		0.42	0.57
Total cost per coffee mug										$0.92

Actual cost and production information for Julyâ follow:

Actual production and sales were

62,800

coffee mugs.

Actual direct materials usage was

12,000

âlbs., at an actual price of

$0.18

per lb.

Actual direct labor usage of

201,000

minutes at a total cost of

$26,130.

Actual overhead cost was

$40,800

Requirements

1.	Compute the price and efficiency variances for direct materials and direct labor.
2.	Journalize the usage of direct materials and the assignment of directâlabor, including the related variances.
3.	For manufacturingâ overhead, compute the totalâ variance, the flexible budgetâ variance, and the production volume variance. â(Hintâ: Remember that the fixed overhead in the flexible budget equals the fixed overhead in the staticâ budget.)
4.	Cole intentionally hiredâ more-skilled workers during July. How did this decision affect the costâ variances? Overall, was the decisionâwise?

skydonkey8

The Rotations Corporation is a manufacturer of centrifuges.Fixed and variable manufacturing overheads are allocated to eachcentrifuge using budgetedâ assembly-hours. Budgeted assembly timeis 2 hours per unit. The following table shows thebudgeted amounts and actual results related to overhead forJune 2014.

	Actual	Static
The Rotations Corporation (June 2014)	Results	Budget
Number of centrifuges assembled and sold	240	190
Hours of assembly time	312
Variable manufacturing overhead cost per hour of assemblytime		$28.00
Variable manufacturing overhead costs	$9,148
Fixed manufacturing overhead costs	$19,990	$18,620

Requirements

Prepare an analysis of all variable manufacturing overhead andfixed manufacturing overhead variances.

Prepare journalentries for Rotationsâ'June2014variable and fixedmanufacturing overhead costs andâ variances; write off thesevariances to cost of goods sold for the quarter ending Juneâ30,2014.

How does the planning and control of variable manufacturingoverhead costs differ from the planning and control of fixedmanufacturing overheadâ costs?

Requirement 1. Prepare an analysis of allvariable manufacturing overhead and fixed manufacturing overheadvariances.

Begin by calculating the following amounts for the variableoverhead.

		Actual Input
	Actual Costs	x	Flexible	Allocated
	Incurred	Budgeted Rate	Budget	Overhead
Variable OH

I need some feedback if these are correct.
1.
A flexible budget is a budget that:
A) is updated with actual costs as they occur during theperiod.
B) is updated to reflect the actual level of activity during theperiod.
C) is prepared using a computer spreadsheet application.
D) contains only variable production costs.
2.
Ofarrell Snow Removal's cost formula for its vehicle operating costis $1,840 per month plus $377 per snow-day. For the month ofNovember, the company planned for activity of 14 snow-days, but theactual level of activity was 19 snow-days. The actual vehicleoperating cost for the month was $9,280. The vehicle operating costin the flexible budget for November would be closest to:
A) $9,003
B) $7,118
C) $9,280
D) $9,660
3.
Entler Framing's cost formula for its supplies cost is $2,250 permonth plus $16 per frame. For the month of June, the companyplanned for activity of 502 frames, but the actual level ofactivity was 497 frames. The actual supplies cost for the month was$10,580. The supplies cost in the planning budget for June would beclosest to:
A) $10,580
B) $10,282
C) $10,686
D) $10,202
4.
Johannsen Catering uses two measures of activity, jobs and meals,in the cost formulas in its budgets and performance reports. Thecost formula for catering supplies is $310 per month plus $103 perjob plus $23 per meal. A typical job involves serving a number ofmeals to guests at a corporate function or at a host's home. Thecompany expected its activity in February to be 28 jobs and 187meals, but the actual activity was 26 jobs and 192 meals. Theactual cost for catering supplies in February was $7,620. Thecatering supplies in the flexible budget for February would beclosest to:
A) $7,495
B) $7,404
C) $7,620
D) $6,960
5.
Kimbril Catering uses two measures of activity, jobs and meals, inthe cost formulas in its budgets and performance reports. The costformula for catering supplies is $530 per month plus $91 per jobplus $12 per meal. A typical job involves serving a number of mealsto guests at a corporate function or at a host's home. The companyexpected its activity in January to be 27 jobs and 174 meals, butthe actual activity was 31 jobs and 173 meals. The actual cost forcatering supplies in January was $5,330. The activity variance forcatering supplies in January would be closest to:
A) $255 F
B) $255 U
C) $352 F
D) $352 U
6.
Lapinsky Air uses two measures of activity, flights and passengers,in the cost formulas in its budgets and performance reports. Thecost formula for plane operating costs is $31,400 per month plus$2,148 per flight plus $7 per passenger. The company expected itsactivity in April to be 89 flights and 261 passengers, but theactual activity was 84 flights and 260 passengers. The actual costfor plane operating costs in April was $204,810. The spendingvariance for plane operating costs in April would be closestto:
A) $8,842 U
B) $19,589 F
C) $19,589 U
D) $8,842 F
7.
Velten Corporation's flexible budget performance report for lastmonth shows that actual indirect materials cost, a variable cost,was $45,198 and that the spending variance for indirect materialscost was $9,114 favorable. During that month, the company worked18,600 machine-hours. Budgeted activity for the month had been19,000 machine-hours. The cost formula per machine-hour forindirect materials cost must have been closest to:
A) $1.90
B) $2.86
C) $1.94
D) $2.92
8.
Which of the following comparisons best isolates the impact thatchanges in prices of inputs and outputs have on performance?
A) static planning budget and flexible budget
B) static planning budget and actual results
C) flexible budget and actual results
D) master budget and static planning budget
9.
The excess or deficiency of cash available over disbursements onthe cash budget is calculated as follows:
A) The beginning balance less the expected cash receipts less theexpected cash disbursements.
B) The cash available less the expected cash receipts plus theexpected cash disbursements.
C) The beginning balance plus the expected cash receipts less theexpected cash disbursements.
D) None of the above.
10.
There are various budgets within the master budget. One of thesebudgets is the production budget. Which of the following BESTdescribes the production budget?
A) It details the required direct labor hours.
B) It details the required raw materials purchases.
C) It is calculated based on the sales budget and the desiredending inventory.
D) It summarizes the costs of producing units for the budgetperiod.
1.B
2.A
3.A
4.C
5.D
6.C
7.A
8.B
9.A
10.C

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ACC 406 Chapter Notes - Chapter 11: Stabilisation Force In Bosnia And Herzegovina

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