Chap 010 A
Chap 010 A
Chap 010 A
Appendix 10A
Predetermined Overhead Rates and
Overhead Analysis in a Standard Costing
System
10A-1
Chapter 10A Predetermined Overhead Rates and Overhead Analysis in a Standard Costing System
2.
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Chapter 10A Predetermined Overhead Rates and Overhead Analysis in a Standard Costing System
10A-3
Chapter 10A Predetermined Overhead Rates and Overhead Analysis in a Standard Costing System
3.
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Chapter 10A Predetermined Overhead Rates and Overhead Analysis in a Standard Costing System
10A-5
Chapter 10A Predetermined Overhead Rates and Overhead Analysis in a Standard Costing System
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Chapter 10A Predetermined Overhead Rates and Overhead Analysis in a Standard Costing System
10A-7
Chapter 10A Predetermined Overhead Rates and Overhead Analysis in a Standard Costing System
2. and 3.
Fixed Overhead Applied Budgeted Fixed Actual Fixed
to Work in Process Overhead Overhead
8,000 standard DLHs ×
$6.00 per DLH*
= $48,000 $45,000 $45,600*
Volume variance Budget variance
= $3,000 F* = $600 U
*Given.
4.
10A-8
Chapter 10A Predetermined Overhead Rates and Overhead Analysis in a Standard Costing System
Alternative solution:
Variable overhead efficiency variance = SR (AH – SH)
= £1.75 per MH (15,000 MHs – 16,000 MHs)
= £1,750 F
Variable overhead rate variance = (AH × AR) – (AH × SR)
= (£26,500) – (15,000 MHs × £1.75 per MH)
= £250 U
10A-9
Chapter 10A Predetermined Overhead Rates and Overhead Analysis in a Standard Costing System
Alternative solution:
Verification of variances:
Variable overhead efficiency variance............... £1,750 F
Variable overhead rate variance....................... 250 U
Fixed overhead volume variance...................... 8,000 U
Fixed overhead budget variance....................... 2,000 F
Underapplied overhead.................................... £4,500 U
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Chapter 10A Predetermined Overhead Rates and Overhead Analysis in a Standard Costing System
Fixed overhead
Fixed overhead budget variance: This variance is simply the difference
between the budgeted fixed cost and the actual fixed cost. In this case,
the variance is favorable, which indicates that actual fixed costs were
lower than anticipated in the budget.
Fixed overhead volume variance: This variance occurs as a result of
actual activity being different from the denominator activity that was
used in the predetermined overhead rate. In this case, the variance is
unfavorable, so actual activity was less than the denominator activity. It
is difficult to place much of a meaningful economic interpretation on this
variance. It tends to be large, so it often swamps the other, more
meaningful variances if they are simply netted against each other.
10A-11