Fifth edition Alnoor Bhimani Charles T. Horngren Srikant M. Datar Madhav V. Rajan Farah Ahamed



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solutions-manual-to-bhimani-et-al-management-and-cost-accounting-pearson-2012-1
16.9
A variance analysis relies on
a
a breakdown of overhead into its variable and fixed components
b
a breakdown into three components – spending, efficiency and production volume. A variance analysis relies only on the breakdown of variances into the three components in (b. A variance analysis breaks down variances into only two components (flexible-budget and production volume. A variance analysis reports only one variance where there is no breakdown of the (a) orb) categories as noted above.
Flexible-budget variance
Flexible-budget variance
Efficiency variance Never a variance) Spending variance


Bhimani, Horngren, Datar and Rajan, Management and Cost Accounting, 5
th
Edition, Instructor’s Manual
© Pearson Education Limited 2012 Efficiency variance Never a variance) Spending variance.
16.10
There are two never a variance entries in the variance analysis
• Never a variance for the production-volume variance for variable manufacturing overhead – the production-volume variance applies only to a fixed manufacturing overhead because a lump sum is to be allocated.
• Never a variance for the efficiency variance for fixed manufacturing overhead – because there can be no efficiency variance for fixed overhead, this amount is a lump sum regardless of the output level.

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