(4) FOH volume variance = budgeted fixed OH - standard fixed OH cost allocated to product, where standard fixed OH cost is based on actual production x standard rate.
When standard costing is used, what are the steps to determine the application of overhead?
(1) Determine a budgeted total amount of overhead ($100,000)
(2) Determine a budgeted cost driver amount (1000 labor hours)
(3) Determine a budgeted cost per cost driver amount
(4) Apply the budgeted cost per cost driver amount to the actual quantity of the cost driver that occurred.
Is over-applied overhead favorable or unfavorable? How is over-applied overhead adjusted?
Over-applied OH means the actual costs were less than budgeted = favorable
Reduce COGS (increases net income)
True / False: You can net all the overhead variances.
True
What is the formula for the sales price variance? And sales volume variance?
Sales Price Variance = Actual units sold x (actual price - budgeted price)
Sales Volume Variance = Actual sales price x (actual volume - budgeted volume)
What is the formula for the production volume variance for overhead?
Production Volume Variance = applied overhead - budgeted overhead based on standard hours.
Applied Overhead = (std FOH rate x actual production)
Budgeted Overhead = Total FOH budgeted
What are the easy formulas to determine (1) price variance for DM, (2) usage variance for DM, (3) rate variance for DL, (4) efficiency variance for DL
PURE
P = Price variance for DM = D x A
U = Usage variance for DM = D x S
R = Rate variance for DL = D x A
E = Efficiency variance for DL = D x S
How is the flexible budget variance calculated?
Flexible budget amount = actual units produced x standard cost
Flexible budget variance = flexible budget amount - actual amount