Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Struggling to understand the point of using an allocation rates for overhead costs when computing variances when the actual amount is required anyway. I can
Struggling to understand the point of using an allocation rates for overhead costs when computing variances when the actual amount is required anyway. I can get $13.05 and $12.00 just by dividing the variable overhead costs given by output ($10,000). They're just factoring in and then factoring out the allocation base (machine hours)??? What am i missing here?
Variable Overhead Cost Variances We now illustrate how the budgeted variable overhead rate is used to compute Webb's variable overhead cost variances. The following data are for April 2017, when Webb produced and sold 10,000 jackets: 1. Output units (jackets) 2. Machine-hours per output unit 3. Machine-hours (1 x 2) 4. Variable overhead costs 5. Variable overhead costs per machine-hour (4 = 3) 6. Variable overhead costs per output unit (4 = 1) Actual Result 10,000 0.45 4,500 $130,500 $ 29.00 $ 13.05 Flexible-Budget Amount 10,000 0.40 4,000 $120,000 $ 30.00 $ 12.00 As we saw in Chapter 7, the flexible budget enables Webb to highlight the differences between actual costs and actual quantities versus budgeted costs and budgeted quantities for the actual output level of 10,000 jacketsStep by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started