Looking for Quiz 11 :
Flexible Budgets and Overhead Analysis
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Describe the difference between the variable overhead efficiency variance and the labor efficiency variance.
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Variable overhead efficiency variance measures the actual change in actual variable overhead cost that occurs because of efficient use of direct labor hours where as labor efficiency variance indicates variance of efficiency labor hours and ineffective labor that is there in production units.
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a performance report that details the spending and efficiency variances, which of the following columns will be found?
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D) in performance report we found all the three cost formula for each item as on the basis of which we calculate variance among the two and secondly we find budget for actual hours which is calculated by using actual hours multiplied by standard variable overhead rate and by using budget of standard hours for each is used to calculate efficiency variances.
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Discuss the differences between static and flexible budgets.
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Static budget and flexible budget are two different forms of budget which is formed by any organization depend on situations. Static budget is a budget which created well in advance before getting into that activity for which budget has been prepared. It will help an organization to estimate overall cost which they have to incur during commencement of project.
Flexible projects are that project which are a prepared for particular division or activity. It is prepared during course of business in order to overcome budgetary problem for particular activity of a business. It is flexible as company has to re create this budget according to the situation of company's activity
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Explain why mixed costs must be broken down into their fixed and variable components before a flexible budget can be developed.
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create a meaningful performance report, actual costs and expected costs should be compared
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firm comparing the actual variable costs of producing 10,000 units with the total variable costs of a static budget based on 9,000 units would probably see
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variable overhead efficiency variance has nothing to do with efficient use of variable overhead. Do you agree or disagree? Why?
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Because the calculation of both variances is based on direct labor hours, a favourable labor efficiency variance implies that
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performance reporting, it is best to compare actual costs with budgeted costs using
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