Illustration of overhead variance analysis, Cost Accounting

Illustration of Overhead Variance Analysis

Again for intentions of our demonstrations in overhead variance analysis, we will suppose the given basic data for company in the production of a radio cassette model Stereo F262 as:

Budget for December 2003;

Shs.

Fixed Overheads

11,480

Variable Overheads

13,120

Labour Hours

3,280 hours

Standard Hours of Production

3,280 hours

Actual Results for December 2003

Shs.

Fixed Overheads

12,100

Variable Overheads

13,930

Actual Labour Hours

3,150/hours

Standard Hours of Production

3,280 hours

Note

Based upon our budget above that the predetermined overhead absorption rates can be computed as given as:

F.O.A.R = Budgeted Fixed overhead/ Budgeted activity level

= Shs.11,480/3,280 std hours

= Shs.3.5/h

V.O.A.R = Budgeted Variable overhead/ Budgeted activity level

= Shs.13, 120/3,280 std hours

= Shs.4/h

Total OAR = F.O.A.R + V.O.A.R

= Shs.3.5/h+ Shs.4/h

= Shs.7.5/h

This is also notable from our budget such the budgeted standard hours and the budgeted labour hours of production are the similar: it is the normal planning basis that assumes as the actual labour hours will be the similar as the standard hours actually produced. It would imply such efficiency is as initially planned hence no efficiency variances would arise. Conversely, this is rarely the case in practice and thus the efficiency variances in overhead variances analysis.

Posted Date: 2/7/2013 7:01:26 AM | Location : United States







Related Discussions:- Illustration of overhead variance analysis, Assignment Help, Ask Question on Illustration of overhead variance analysis, Get Answer, Expert's Help, Illustration of overhead variance analysis Discussions

Write discussion on Illustration of overhead variance analysis
Your posts are moderated
Related Questions
Describe the ways in which the needs of internal and external users of accounting information are the same and different.

ADVANTAGES OF COST ACCOUNTING 1.         It helps in efficient decision making. 2.         It assists in cost drop. 3.         It is useful in obsession of selling price

Lapsol limited manufacture electrical appliances for the export market. The management of the company are considering investing in one of two possible capital expenditure projects.

Accrued liabilities show expenses or obligations incurred in the earlier accounting period but the payment for similar will be made in the subsequent period. In several cases where

One month before she died on April 14, 2002, Barbara Gent (Amy's aunt) gave Amy a coin collection. Based on careful records that Barbara kept, the collection had a cost basis of $9

SD manufactures and sells a small range of timber based  products. The main differences b/w the products are their size and the type of timber they used. SD prepares annual budgets

Amanda Deal, president of XYZ, had recently finished an arduous round of meetings with her financial staff". Those meetings dealt with the details necessary to produce an accurate

NSC Ltd. has a 31 May fiscal year-end. NSC disposed of its Information Systems Group (ISG) on 31 January 20X3. ISG had a net loss (after taxes) of $37,700,000 in 20X3, to the date

is sale of salvage from capital project recorded as gain/loss or applied back to project costs

Cost Classification Bases Costs can be classified on either more or one of the given bases as: a) Are the costs dependent on the level of output as like variable or are the