Flashcards in Chapter 3 - Variable And Fixed Overheads Deck (24)

Loading flashcards...

1

## What is variable overheads?

### Indirect costs which vary in proportion to the volume of production or other output

2

##
How to calculate variable overheads?

###
Standard absorption (Standard rate x Standard hours)

Minus

Actual absorption (SR x AH) = EFFICIENCY

Actual absorption (SR x AH)

Minus

Actual expenditure = Expenditure

3

## What does the variable overhead expenditure variance tell you? (Bottom)

### Measures how much of the variance is caused by the difference between Standard Rate and Actual Rate.

4

## What does the variable efficiency overhead tell you? (Top)

### Measures how much of the variance is caused by the difference between Standard Hours used and Actual Hours used.

5

## What is fixed overheads?

### Indirect costs which do not vary in proportion to the volume of production.

6

## How do you calculate fixed overhead marginal costing variance?

###
Budgeted expenditure

Minus

Actual expenditure

= Expenditure

7

## What does the fixed overhead marginal costing tell you?

### This measures the difference between the budgeted expenditure and the actual expenditure on fixed overheads in a given period.

8

## What does TOTAL fixed overhead absorption variance tell you?

### The difference between the actual expenditure on the fixed overheads and the amount of fixed overheads absorbed by actual output.

9

## How to calculate absorption costing variance under units basis

###
1) budgeted fixed overheads / budget units = OAR

2) S - standard output X OAR

3) B - budget output X OAR

4) A - actual fixed overheads

Volume = 2-3

Expenditure = 3-4

10

## How to calculate absorption costing variance under Hours basis?

###
1) budget fixed overheads / budget HOURS = OAR

2) S - (budget hours / budget output) X OAR

3) A - actual hours X OAR

4) B - budget hours X OAR

5) A - actual fixed overheads

Efficiency = 2-3

Capacity = 3-4

Expenditure = 4-5

11

## What does the fixed expenditure variance tell you? (Absorption costing)

### Difference between budgeted expenditure and actual expenditure on fixed overheads

12

## What does the fixed volume variance tell you? (Absorption costing)

### Difference between fixed overheads which would have been absorbed by the budgeted output and the fixed overhead absorbed by actual output.

13

## What does the fixed efficiency variance tell you? (Absorption)

### This shows how efficient or inefficient the use of resource used to measure the output was. (Example- number of hours used)

14

## What does the fixed capacity variance tell you? (Absorption)

### This shows the amount of resources used to measure the output. Example: hours

15

## What order does the variances go in for hours Absorption basis?

###
Efficiency

Capacity

Expenditure

Efficiency plus capacity = Volume

16

##
Fixed overhead reconciliation -

How to calculate ‘budgeted / standard fixed cost for actual production’ (absorption)

### Budgeted fixed overheads / budgeted units X actual units produced

17

## Absorption rate on an hourly basis

### Budgeted overheads / budgeted labour or machine hours

18

## Absorption rate on units basis

### Budgeted overheads / number of units

19

## How to calculated fixed overhead expenditure variance?

###
Budgeted cost of fixed overheads

Minus

Actual cost of fixed overhead

20

## How to calculate fixed overhead capacity variance?

###
Standard

Actual

Budget

Actual

Actual output X absorption rate

Minus

Budgeted output X absorption rate

21

##
How to calculate fixed over head efficiency variance

###
Standard

Actual

Budget

Actual

Standard hrs for actual output X absorption rate

Minus

Actual hours taken X absorption rate

22

## Fixed overhead expenditure calculation

### Budgeted overheads - actual overheads

23

##
Splitting variances -

Calculate the revised standard price (index formula)

Standard price £20

Actual price £25

Index was 100 when standard was set

Index was 110 when Material was purchased

### 110 new / 100 old X £20 standard

24