What are the sub-variances of the fixed overhead variance

Assignment Help Business Management

Reference no: EM131628006

MODULE TITLE: BUSINESS MANAGEMENT TECHNIQUES

TOPIC TITLE: COSTING TECHNIQUES

LESSON 7: VARIANCE ANALYSIS

INTRODUCTION - In this lesson we explain the objective of variance analysis and provide a practical example of how the difference between budgeted and actual profit can be broken down into its constituent elements by analysing the sales margin and production cost variances.

YOUR AIMS - At the end of this lesson you should be able to:

state the objectives of variance analysis
define the main variances
understand the linkage between individual variances and the difference between budgeted and actual profit
explain the potential causes of favourable and adverse variances
reconcile budgeted and actual profit using variance analysis
appreciate the significance of variances.

QUESTIONS -

1. What are the sub-variances of the fixed overhead variance?

2. Define the labour rate variance.

3. What are the likely causes of a labour rate variance?

4. A company producing sprockets has set its budget to produce 8000 units in each period. The unit standards are:

Sales price : £12.00

Direct labour : 12 mins at £10.00/hour

Direct material : 250g at £6.00/kg

Variable overhead : £20.00/hour

Fixed overhead : 75% direct labour cost

The actual production in the period was 8200 units with costs as follows:

Sales revenue : £99 200

Direct labour : 1515 hours costing £15 301.50

Direct material : 2200 kg costing £12 980

Variable overheads : £35 250

Fixed overheads : £11 800

Prepare an operating statement reconciling the budgeted and actual profit for the period.

Reference no: EM131628006

Questions Cloud

Priority would common stockholders have : Assume that a firm had such serious financial problems that it was about to be liquidated after a bankruptcy. All of the firm's assets are about.

Globalization versus regionalization-localization : Discuss the relative advantages and disadvantages of globalization versus regionalization/localization.?

Explain bank to make analogies with the isaacses case : The judge uses North Shore Bank to make analogies with the Isaacses' case. Do you think this analogy is effective

Mismatch between the employee and the job : What is the best course of action when there is a mismatch between the employee and the job?

What are the sub-variances of the fixed overhead variance : What are the sub-variances of the fixed overhead variance? What are the likely causes of a labour rate variance? Define the labour rate variance

What factors affect the choice of a cash or accrual basis : BULAW 3731- What factors affect the choice of a cash or accrual basis? - Does Lee have a choice of the basis he adopts - Should Lee's basis be the same in both

Create a plan for security training and monitoring : department manager now wants you to create a plan for security training and monitoring

What can leaders do to effectively manage diversity : What can individuals, leaders, and organizations do to effectively manage diversity? Provide an example with your response.

Debt financing versus selling company : The investors would like to know the advantages and disadvantages of using debt financing versus selling company stock to raise capital for growth.

User Account

All Pages