Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 33

Graphical Presentation

Refer to the data in Exercise 16-32. Management would like to see results reported graphically.

Required

Prepare a graph like that shown in Exhibit 16.14.

Step 1 of 2

Price variance component of Fixed Overhead variance assumes no input-output relationship, treated as period costs. The difference between flexible budget and the actual fixed overhead is attributed due to change in costs. Therefore, the variance falls under the category of Price Variance.

When fixed manufacturing costs are unitized and treated as product costs, another variance is calculated that is production volume variance which occurs when companies use full absorption, standard costing.