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


Spending and efficiency overhead variances, service sector



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16.20 Spending and efficiency overhead variances, service sector.
(20–25 min)
1
Budgeted variable overhead rate
=
DKr 2 per hour of home delivery time Budgeted fixed overhead rate
=
DKr 24,000 8,000 0.80
×
=
24,000 6,400

=
DKr 3.75 per hour of home delivery time A detailed comparison of actual and flexible budgeted amounts is
Actual
Flexible
budget
Static budget
Output units (deliveries) c 7,460 8,000 Allocation base (hours) ca 6,400
b
Allocation base per output unit c 0.80 0.80 Variable MOH
DKr c DKr d – Variable MOH per hour
DKr 2.53
e
DKr 2.00
DKr 2.00 Fixed MOH
DKr 27,600
c
DKr 24,000
DKr 24,000 Fixed MOH per hour
DKr f –
DKr
3.75
g

a
7,460
× 0.80 = 5,968 b 8,000
× 0.80 = 6,400 c 5,595 ÷ 7,460 = 0.75 d
7,460
× 0.80 × DKr 2.00 = DKr 11,936 e DKr 14,174 ÷ 5,595 = DKr 2.53 f
DKr 27,600 ÷ 5,595 = DKr 4.93 h DKr 24,000 ÷ 6,400 = DKr 3.75 The required variances are


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