AMIS 212 Introductory Managerial Accounting

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Presentation transcript:

AMIS 212 Introductory Managerial Accounting Chapter 10 Module 4 CHAPTER 1 MODULE 1 AMIS 212 Introductory Managerial Accounting Professor Marc Smith

Chapter 10 Module 4: VOVH Variances 2 Variable Overhead Variances: (1) Variable overhead spending variance (2) Variable overhead efficiency variance ● A positive variance is referred to as an unfavorable variance ● A negative variance is referred to as a favorable variance

Chapter 10 Module 4: VOVH Variances VOVH Spending Variance = Actual Variable Overhead Cost - (AH x SR) VOVH Efficiency Variance = (AH x SR) - (SH x SR) NOTE: The standard hours (SH) is calculated: (standard hours of DL per unit x number of units produced)

Chapter 10 Module 4: VOVH Variances VOVH Spending Variance = Actual Variable Overhead Cost - (AH x SR) ● measures the difference between what was actually spent on variable overhead and what should have been spent, according to the standards VOVH Efficiency Variance = (AH x SR) - (SH x SR) ● measures the difference between the actual quantity of the activity (direct labor hours) used and how much should have been used, according to the standards

Chapter 10 Module 4: Example #1 VOVH Spending Variance = Actual variable overhead cost - (AH x SR) 104,499 - (15,300 x 6.80) 104,499 - 104,040 = $459 unfavorable ● Betty DeRose spent $459 more on variable overhead than she should have, given standards

Chapter 10 Module 4: Example #1 VOVH Efficiency Variance = (AH x SR) - (SH x SR) (15,300 x 6.80) - [(67,500 x 0.25) x 6.80] 104,040 - 114,750 = $10,710 favorable ● Betty DeRose used $10,710 less in the activity (direct labor) than she should have, given the standards

Chapter 10 Module 4: Example #1 Total VOVH Variance = VOVH Spend Variance + VOVH Effic Variance 459 U + 10,710 F 459 + -10,710 Total VOVH Variance = 10,251 F

Chapter 10 Module 4: Review Question Hanson, Inc. has the following variable overhead standards to manufacture one units of its product, called a zippy: 1.5 hours per zippy at $3 per hour Last week 1,550 direct labor hours were worked to make 1,000 zippies and $5,115 was spent for variable overhead. What was the variable overhead spending variance? a. $465 U b. $400 F c. $335 U d. $300 F 5,115 - (1,550 x $3.00) = $465 U 8

Chapter 10 Module 4: Review Question Hanson, Inc. has the following variable overhead standards to manufacture one units of its product, called a zippy: 1.5 hours per zippy at $3 per hour Last week 1,550 direct labor hours were worked to make 1,000 zippies and $5,115 was spent for variable overhead. What was the variable overhead efficiency variance? a. $435 U b. $435 F c. $150 U d. $150 F (1,550 x $3) - [(1,000 x 1.5) x $3] = $150 U 9