Cornerstones of Managerial Accounting Study Set 5

Business

Quiz 11 :

Flexible Budgets and Overhead Analysis

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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is the purpose of a before-the-fact flexible budget?
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help deal with uncertainty, managers should use
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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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total variable overhead variance is the difference between
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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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are flexible budgets superior to static budgets for performance reporting?
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total variable overhead variance can be expressed as the sum of
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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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is the purpose of an after-the-fact flexible budget?
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variable overhead spending variance can occur because
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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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Explain why the fixed overhead spending variance is usually very small.
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performance reporting, it is best to compare actual costs with budgeted costs using
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is the cause of an unfavorable volume variance?
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help assess performance, managers should use
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Explain why the variable overhead spending variance is not a pure price variance.
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