Page 164 - DMGT514_MANAGEMENT_CONTROL_SYSTEMS

Unit 7: Budgeting: Tool for Management Control

Option A- Notes
Variable OH
20200 20000 20000 800 x 20
= 16000

– ` 200 A – – ` 4000 A –
Spending Never a Production
Variance Variance Vol. Variance
` 200 A ` 4000 A
– Flexible Budget Variance – Production vol. Variance –
– ` 4200 A –

Under Applied Fixed Overhead
(1) Actual costs (2) Flexible Budget (3) Flexible Budget: (4) Applied:
incurred Budget: Actual Budget: Std. Std. Inputs
Inputs Inputs allowed allowed for
× Budgeted Rate for Actual Actual Outputs
Outputs × × Budgeted
Budgeted Rate Rate
Combined Overhead
Option B
14250 + 20200 13430 + 20000 13600 + 20000 13600 + 16000

= 34450 = 33430 = 33600 = 29600
3. Variance analysis– ` 1020 A – ` 170 F – ` 4000 A –
Spending Efficiency Prod. Volume
Variance Variance Variance

2 . Variance analysis – ` 850 A – ` 4000 A –
Flexible Budget Variance Prod. Volume
(Controllable Variance) Variances
1. Variance analysis – ` 4850 A –

Total Variances under applied Overhead
Illustration: The following information is provided:
Budget Actual
Number of working days 20 21
Man hours 40000 43000
Output per man hour (in units) 3, 2 3, 0
Total output (units) 1,28,000 1,29,000
Overhead – Fixed ` 32000 ` 31500
Variable ` 102400 ` 114400

Compute Variable Overhead Variances and Fixed Overhead Variances

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