COST ACCOUNTING
INTRODUCTION TO COST ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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choosing the appropriate level of capacity
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eliminating nonvalue-adding costs
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redesigning products to use fewer resources
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redesigning the plant layout for more efficient processing
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Detailed explanation-1: -12-1 Effective planning of variable overhead costs involves: 1. Planning to undertake only those variable overhead activities that add value for customers using the product or service, and 2. Planning to use the drivers of costs in those activities in the most efficient way.
Detailed explanation-2: -Fixed overheads are costs that remain constant every month and do not change with changes in business activity levels. Examples of fixed overheads include salaries, rent, property taxes, depreciation of assets, and government licenses.
Detailed explanation-3: -How does the planning of fixed overhead costs differ from the planning of variable overhead costs? At the start of an accounting period, a large percentage of fixed overhead costs are locked-in, whereas, ongoing operating decisions determine the VOH costs.
Detailed explanation-4: -The correct answer is b. flexible budget amount-actual costs incurred. In calculating fixed overhead spending variance, the formula used takes the flexible budget amount, which is the actual units produced multiplied by the budgeted fixed overhead cost per unit and subtracts the actual fixed overhead costs.