Chapter 3 - Variable And Fixed Overheads Flashcards Preview

AAT Decision & Control L4 AQ2016 > Chapter 3 - Variable And Fixed Overheads > Flashcards

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

Splitting variances

Calculate revised standard price (index formula)

Standard rate £25
Old index 100
New index 143

25 price / 110 old X 143 new index