ECONOMICS

COST ACCOUNTING

INTRODUCTION TO COST ACCOUNTING

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
The MAJOR challenge when planning fixed overhead is:
A
calculating total costs
B
calculating the cost-allocation rate
C
choosing the appropriate level of capacity
D
choosing the appropriate planning period
Explanation: 

Detailed explanation-1: -Fixed overhead volume variance is the difference between the amount budgeted for fixed overhead costs based on production volume and the amount that is eventually absorbed. This variance is reviewed as part of the cost accounting reporting package at the end of a given period.

Detailed explanation-2: -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-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 variable overhead costs.

Detailed explanation-4: -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.

There is 1 question to complete.