Chapter 8 Flexible Budgets, Overhead Cost Variances, and Management Control

Topics: Variable cost, Costs, Variance Pages: 75 (11684 words) Published: December 18, 2012
CHAPTER 8
FLEXIBLE BUDGETS, OVERHEAD COST VARIANCES, AND
MANAGEMENT CONTROL

8-16(20 min.) Variable manufacturing overhead, variance analysis.

1.Variable Manufacturing Overhead Variance Analysis for Esquire Clothing for June 2009

| | |Flexible Budget: |Allocated: | |Actual Costs Incurred | |Budgeted Input Qty. |Budgeted Input Qty. | |Actual Input Qty. | |Allowed for |Allowed for | |× Actual Rate |Actual Input Qty. |Actual Output |Actual Output | |(1) |× Budgeted Rate |× Budgeted Rate |× Budgeted Rate | | |(2) |(3) |(4) | |(4,536 × \$11.50) |(4,536 × \$12) |(4 × 1,080 × \$12) |(4 × 1,080 × \$12) | |\$52,164 |\$54,432 |\$51,840 |\$51,840 | | | | | |

2.Esquire had a favorable spending variance of \$2,268 because the actual variable overhead rate was \$11.50 per direct manufacturing labor-hour versus \$12 budgeted. It had an unfavorable efficiency variance of \$2,592 U because each suit averaged 4.2 labor-hours (4,536 hours ÷ 1,080 suits) versus 4.0 budgeted labor-hours.

8-17 (20 min.)Fixed-manufacturing overhead, variance analysis (continuation of 8-16).

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=\$15 per hour

Fixed Manufacturing Overhead Variance Analysis for Esquire Clothing for June 2009

| | |Flexible Budget: | | | |Same Budgeted |Same Budgeted |Allocated: | | |Lump Sum |Lump Sum |Budgeted Input Qty. | | |(as in Static Budget) |(as in Static Budget) |Allowed for Actual Output | |Actual Costs Incurred |Regardless of |Regardless of |× Budgeted Rate | |(1) |Output Level |Output Level |(4) | | |(2) |(3) | | | | | |(4 × 1,080 × \$15) | |\$63,916 |\$62,400 |\$62,400 |\$64,800 | | | | | |

\$1,516 U\$2,400 F
Spending variance Never a variance Production-volume variance

\$1,516 U\$2,400 F
Flexible-budget varianceProduction-volume variance

The fixed manufacturing overhead spending variance and the fixed manufacturing flexible budget variance are the same––\$1,516 U. Esquire spent \$1,516 above the \$62,400 budgeted amount for June 2009.

The production-volume variance is \$2,400 F. This arises because Esquire utilized its...

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