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


Manufacturing overhead, variance analysis



Download 1.72 Mb.
View original pdf
Page342/469
Date01.12.2021
Size1.72 Mb.
#57828
1   ...   338   339   340   341   342   343   344   345   ...   469
solutions-manual-to-bhimani-et-al-management-and-cost-accounting-pearson-2012-1
16.19 Manufacturing overhead, variance analysis.
(30–40 min)
1
The summary analysis is
Spending
variance
Efficiency
variance
Production-volume
variance
Variable manufacturing overhead
€40,700 F
€59,200 U Never a variance Fixed manufacturing overhead
€23,420 U Never a variance U Variable manufacturing overhead



Actual costs
incurred



Actual input
× Budgeted rate
Flexible budget
(Budgeted input
allowed for actual
output achieved
× Budgeted rate)
€610,500
(16,280
× €40)
€651,200
(7,400
× 2 × €40)
€592,000

€40,700 F
€59,200 U
Spending variance
Efficiency variance
€18,500 U


Flexible-budget variance


Bhimani, Horngren, Datar and Rajan, Management and Cost Accounting, 5
th
Edition, Instructor’s Manual
© Pearson Education Limited 2012 Fixed manufacturing overhead


Actual costs
incurred


Same lump sum
regardless of
output level

Same lump sum
regardless of output
level
Allocated
(Budgeted input
allowed for actual
output achieved
×

Budgeted rate)
€503,420
€480,000
€480,000
(7,400
× 2 × €30.00)
€444,000

€23,420 U

€36,000 U
Spending variance
Never a variance Production-volume variance Summary information is
Actual
Flexible budget
Static budget
Output units
7,400 7,400 8,000 Allocation base (hours)
16,280 a 16,000
b
Allocation base per output unit
2.20 2.00 2.00 Variable MOH
€610,500 c – Variable MOH per hour d €40.00
– Fixed
MOH
€503,420 €480,000 €480,000 Fixed MOH per hour e –
€30.00
f

a
7,400
× 2.00 = 14,800 b
8,000
× 2.00 = 16,000 c
7,400
× 2 × €40 = €592,000 d €610,500 ÷ 16,280 hours = €37.50 per hour e €503,420 ÷ 16,280 hours –
€30.92 per hour f €480,000 ÷ 16,000 hours = €30 per hour
2
Mondragon produces 600 fewer CardioX units than were budgeted. The variable manufacturing overhead cost efficiency variance of €59,200 U arises because more assembly time hours per output unit (16,280 ÷ 7,400 = 2.2 hours) were used than the budgeted 2.0 hours per unit. The variable manufacturing overhead cost spending variance of €40,700 F indicates one or more of the following probably occurred (i) actual prices of individual items included invariable overhead differ from their budgeted prices, or (ii) actual usage of individual items included invariable overhead differs from their budgeted usage. The fixed manufacturing overhead cost spending variance of €23,420 U means that the fixed overhead was above that of the budgeted. For example, it could be due to an unexpected increase in plant leasing costs. The unfavourable production-volume variance of €36,000 arises because the actual output of 7,400 units is below the
8,000 units used in determining the €30.00 per assembly-hour budgeted rate.
3
Planning and control of
variable manufacturing overhead costs has both a long-run and a short-run focus. It involves Mondragon planning to undertake only value- added overhead activities (a long-run view) and then managing the cost drivers of those activities in the most efficient way (a short-run view. Planning and control of
fixed manufacturing overhead costs at Mondragon has primarily a long-run focus. It involves undertaking only value-added fixed-overhead activities fora budgeted level of output. Mondragon makes most of the key decisions that determine the level of fixed-overhead costs at the start of the accounting period.


Bhimani, Horngren, Datar and Rajan, Management and Cost Accounting, 5
th
Edition, Instructor’s Manual
© Pearson Education Limited 2012

Download 1.72 Mb.

Share with your friends:
1   ...   338   339   340   341   342   343   344   345   ...   469




The database is protected by copyright ©ininet.org 2024
send message

    Main page