Bài giảng môn Kế toán, kiểm toán - Chapter 11: Flexible budgeting and analysis of overhead costs

Flexible Budgeting and Analysis of Overhead CostsChapter 11Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.Flexible Budgets Static budgets are prepared for a single, planned level of activity. Performance evaluation for overhead is difficult when actual activity differs from the planned level of activity.Hmm! Comparingstatic budgetswith actual costsis like comparingapples and oranges.11-2Advantages of Flexible BudgetsImprove performance evaluation.May be prepared for any activity level in the relevant range.Show revenues and expensesthat should have occurred at theactual level of activity. Reveal variances due to good costcontrol or lack of cost control.11-3Preparing a Flexible Budget11-4Preparing a Flexible BudgetVariable costs are expressed as a constant amount per hour.Fixed costs are expressed as a total amount that does not change within the relevant range of activity. 11-5Preparing a Flexible Budget11-6Preparing a Flexible Budget11-7Preparing a Flexible BudgetNote: There is no flexin the fixed costs.11-8Preparing a Flexible BudgetBudgeted variable Total overhead cost per activity  activity unit units ×+Budgeted fixedoverhead costTotal budgetedoverhead cost=11-9Flexible BudgetPerformance Report11-10Flexible BudgetPerformance ReportFlexible budget is prepared for thesame activity level (8,000 hours) as actually achieved.11-11Flexible BudgetPerformance Report11-12Flexible BudgetPerformance ReportIndirect labor and indirect material have unfavorable variances because actual costs are more than the flexible budget costs. 11-13Flexible BudgetPerformance ReportPower has a favorable variance because the actual cost is less than the flexible budget cost. 11-14Overhead Application in a Standard Costing System11-15Overhead Application in a Standard Costing System11-16Choice of Activity Measure Variable overhead and the activity measure should vary in a similar pattern. Identify variable overhead cost drivers. Examples: machine hours, labor hours, process time. Dollar measures should be avoided as they are subject to price-level changes.11-17Spending VarianceEfficiencyVariance AH × SVR AH × ARAH = Actual Hours of Activity AR = Actual Variable Overhead RateSVR = Standard Variable Overhead RateSH = Standard Hours Allowed SH × SVR Actual Flexible Budget Flexible Budget Variable for Variable for Variable Overhead Overhead at Overhead at  Incurred Actual Hours Standard Hours Variable Overhead Variances11-18Spending VarianceEfficiencyVariance AH × SVR AH × AR SH × SVR Actual Flexible Budget Flexible Budget Variable for Variable for Variable Overhead Overhead at Overhead at  Incurred Actual Hours Standard Hours Variable Overhead VariancesSpending variance = AH(AR - SVR)Efficiency variance = SVR(AH - SH)11-19Budget VarianceVolumeVariance PFOHR = Predetermined Fixed Overhead Rate SH = Standard Hours Allowed SH × PFOHR  Actual Fixed Fixed Fixed Overhead Overhead Overhead  Incurred Budget Applied Fixed Overhead Variances11-20PFOHR =Applied Fixed Overhead = PFOHR × Standard HoursBudgeted Fixed OverheadPlanned Activity in HoursFixed Overhead Recall that fixed overhead costs are applied to products and services using a predetermined fixed overhead rate (PFOHR):11-21Fixed Overhead Variances –A Closer LookBudget VarianceVolume VarianceResults from paying moreor less than expected foroverhead items.Results from the inabilityto operate at the activitylevel planned for the period.Has no significance for cost control.11-22Overhead Cost Performance Report11-23Activity-Based Flexible BudgetThe Cheese Co.’s flexible budget is based on a single cost driver, machine hours11-24Activity-Based Flexible BudgetIf different cost drivers are identified for the different variable costs, an activity-based flexible budget should be prepared with different costformulas based on the different drivers.11-25Standard Costs and Product Costing11-26Standard Costs and Product Costing11-27A General Model for Variance Analysis Actual Quantity Actual Quantity Standard Quantity × × ×  Actual Price Standard Price Standard PricePrice VarianceQuantity Variance Materials price variance Materials quantity variance Labor rate variance Labor efficiency variance Variable overhead Variable overhead  spending variance efficiency variance AQ(AP - SP) SP(AQ - SQ) AQ = Actual Quantity SP = Standard Price AP = Actual Price SQ = Standard Quantity 11-28A General Model for Variance Analysis Actual Sales Volume Actual Sales Volume Budgeted Sales Volume  × × ×  Actual Sales Price Budgeted Sales Price Budgeted Sales Price Sales Price VarianceSales Volume Variance ASV(ASP - BSP) BSP(ASV - BSV) ASV = Actual Sales Volume BSP = Budgeted Sales Price ASP = Actual Sales Price BSV = Budgeted Sales Volume 11-29