COST ACCOUNTING
FLEXIBLE BUDGETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Given that:VOH spending variance = 960FVOH efficiency variance = 600FFixed OH budget variance = 2, 100FFixed OH volume variance = 2, 600U, What would be in the journal entry to record these variances?
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Debit VOH spending variance 960
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Debit Fixed OH volume variance 2, 600
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Credit VOH efficiency variance 600
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Credit Fixed OH budget variance 2, 100
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Explanation:
Detailed explanation-1: -The formula for this variance is:(standard hours allowed for production – actual hours taken) × standard overhead absorption rate per hour (fixed or variable).
Detailed explanation-2: -Variable overhead cost variance = Recovered variable overheads-Actual variable overheads. Fixed overhead cost variance = Recovered fixed overheads-Actual fixed overheads.
Detailed explanation-3: -The spending variance for direct materials is known as the purchase price variance, and is the actual price per unit minus the standard price per unit, multiplied by the number of units purchased.
Detailed explanation-4: -The formula is as follows: VOH = VOH exp. variance + VOH efficiency variance.
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