ABN Corp.has the following information about its standards and production activity in May:

Question

Quizplus · Accepted Answer

Required:Calculate and show calculations for each of the following variances:
(a)Variable overhead flexible-budget (FB)variance.
(b)Fixed overhead spending variance.
(c)Fixed overhead production-volume variance.
(d)Provide and interpretation of each of the above variances.
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 Feedback: 11ea6e70_bd41_579b_8f54_47b26e633a87_TB1699_00 (d)The variable overhead flexible budget variance is a subdivision of the total overhead flexible-budget variance.It is calculated,as indicated above,as the difference between the actual overhead cost incurred and the FB for VOH cost,based on outputs (or equivalently,standard allowed resource inputs for the actual output of the period).The VOH flexible-budget variance can be further broken down into a VOH spending variance and a VOH efficiency variance,a procedure that is done in a four-variance breakdown of the total OVH variance for a period.The fixed overhead spending variance is simply the difference between the (lump-sum)budgeted FOH cost for the period and the actual FOH cost incurred.The total overhead spending variance is equal to the sum of the OVH spending variance plus the FOH spending variance.Both spending variances are calculated in a four-way analysis of the total overhead variance for the period.The factory overhead production-volume variance represents the difference between budgeted fixed overhead and the applied fixed overhead for actual units produced for the period.That is,for product-costing purposes,we "unitize" budgeted fixed overhead costs by choosing a particular volume (called the denominator volume)over which those budgeted fixed costs are spread.If actual volume of activity differs from the denominator volume,a production-volume variance will arise.Note that the production-volume variance is also called the capacity variance,the idle-capacity variance,and the denominator-level variance.This variance has little to do with short-term cost control,however it can be viewed as a (rough)measure of capacity utilization.Under a two- variance analysis,total overhead variance is separated into a production-volume variance and the total overhead flexible-budget (FB)variance.Under a three-variance analysis,the total overhead variance for a period is separated into a total overhead spending variance,a variable overhead efficiency variance,and a production-volume variance.

ABN CorpHas the Following Information About Its Standards and Production Activity