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Title: Different management levels in Bates Inc. require varying degrees of managerial accounting ... Post by: StormLrd on Nov 5, 2017 Different management levels in Bates Inc. require varying degrees of managerial accounting information. Because of the need to comply with the managers' requests, four different variances for manufacturing overhead are computed each month. The information for the September overhead expenditures is as follows:
Budgeted output units 3,200 units Budgeted fixed manufacturing overhead $20,000 Budgeted variable manufacturing overhead $5.00 per direct labour hour Budgeted direct manufacturing labour hours 2 hours per unit Fixed manufacturing costs incurred $26,000 Direct manufacturing labour hours used 7,200 Variable manufacturing costs incurred $35,600 Actual units manufactured 3,400 Required: a. Compute a 4-variance analysis for the plant controller. b. Compute a 3-variance analysis for the plant manager. c. Compute a 2-variance analysis for the corporate controller. d. Compute the flexible-budget variance for the manufacturing vice-president. Title: Re: Different management levels in Bates Inc. require varying degrees of managerial accounting ... Post by: btpsand on Nov 5, 2017 a. 4-variance analysis:
Variable overhead rate variance = $35,600 - (7,200 × $5) = $400 favourable Variable overhead efficiency variance = $5 × (7,200 - 6,800) = $2,000 unfavourable 3,400 units × 2 hours Fixed overhead rate variance = $26,000 - $20,000 = $6,000 unfavourable Fixed overhead production-volume variance = $20,000 - (3,400 × 2 × $3.125) = $1,250 favourable $20,000/(3,200 units × 2 hours) = $3.125 b. 3-variance analysis: Rate variance = $400 favourable + $6,000 unfavourable = $5,600 unfavourable Efficiency variance = $2,000 unfavourable Production volume variance = $1,250 favourable c. 2-variance analysis: Flexible budget variance = $400 F + $2,000 U + $6,000 U = $7,600 unfavourable Production volume variance = $1,250 favourable d. 1-variance analysis: Flexible Actual Budget Variances Fixed overhead $26,000 $21,250 $4,750 U Variable overhead 35,600 34,000 1,600 U Flexible budget variance $6,350 U $3.125 × 3,400 × 2 = $21,250 3,400 × 2 × $5 = $34,000 |