Google monitors its fixed overhead. In an analysis of fixed overhead cost variances, what is the volume variance?
The differences in the actual cost obtained from the actual production is termed overhead volume variance.
In accounting, the term fixed cost denotes the expenses that are independent or not dependent on production level. Such costs remain the same for all production levels and are not directly associated with the manufacturing process.
The expenses incurred by a business entity for a definite production level are termed overhead costs. It includes variable and fixed expenses that facilitate drafting a flexible budget. The actual fixed overhead cost differences obtained from the actual product produced during a particular period state the overhead volume variance.
Brodrick Company expects to produce 20,000 units for the year ending December 31. A flexible budget for 20,000 units of production reflects sales of $400,000; variable costs of $80,000; and fixed costs of $150,000. If the company instead expects to produce and sell 26,000 units for the year, calculate the expected level of income from operations.
The following information describes production activities of Mercer Manufacturing for the year.
Actual direct materials used 16,000 lbs. at $4.05 per lb.
Actual direct labor used 5,545 hours for a total of $105,355
Actual units produced 30,000
Budgeted standards for each unit produced are 0.50 pounds of direct material at $4.00 per pound and 10 minutes of direct labor at $20 per hour.
1. Compute the direct materials price and quantity variances and classify each as favorable or unfavorable.
2. Compute the direct labor rate and efficiency variances and classify each as favorable or unfavorable.
Presented below are terms preceded by letters a through j and a list of definitions 1 through 10. Enter the letter of the term with the definition, using the space preceding the definition.
1. The difference between actual and budgeted sales or cost caused by the difference between the actual price per unit and the budgeted price per unit.
2. A planning budget based on a single predicted amount of sales or production volume; unsuitable for evaluations if the actual volume differs from the predicted volume.
3. Preset costs for delivering a product, component, or service under normal conditions.
4. A process of examining the differences between actual and budgeted sales or costs and describing them in terms of the amounts that resulted from price and quantity differences.
5. The difference between the total budgeted overhead cost and the overhead cost that was allocated to products using the predetermined fixed overhead rate.
6. A budget prepared based on predicted amounts of revenues and expenses corresponding to the actual level of output.
7. The difference between actual and budgeted cost caused by the difference between the actual quantity and the budgeted quantity.
8. The combination of both overhead spending variances (variable and fixed) and the variable overhead efficiency variance.
9. A management process to focus on significant variances and give less attention to areas where performance is close to the standard.
10. The difference between actual cost and standard cost, made up of a price variance and a quantity variance.
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