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• In order to do overhead variances, here's what we're going to do. As I said, all the

• variances are done in the flexible budget equation. What was the flexible budget equation

• we've learned in the past? We learned total cost equals fixed plus variable times x. That's

• you're flexible budget equation. Fixed plus variable times x, total cost, for fixed, plus

• times x is your activity level. So x is some cost driver, some activity level. So our flexible

• budget equation is total cost equals fixed plus variable times x. When you're doing flexible

• budget, when you do the budget, within a budget what costs are normally the same? Fixed or

• fixed? Remember, within the relevant range, fixed are fixed. Variable are fixed per unit.

• We're looking at the x, which is the cost driver, the activity level. So that's called

• our flexible budget equation. We're trying to figure out what total cost will be at different

• levels of activity, x being your cost driver. So, for doing all of our overhead analysis

• using, so we're always going to compare something with the flexible budget equation, and the

• way we're going to do this is, we're going to look at, on the left side, we're going

• to start here with our actual overhead. Actual overhead. We're going to compare that with

• our flexible budget equation at actual. We're going compare that with our flexible budget

• equation at standard, and then we're going to compare that with standard of standard.

• What is standard of standard. That's called applied. That's your applied overhead. That's

• the overhead you applied into what? WIP. Whip it good! Remember that? WIP? Work in process.

• That's the amount we applied into work in process. So, with overhead, again, don't lose

• sight of the big picture...What is overhead? All the other costs in the factory except

• which? Direct materials, direct labor. We already gave materials and labor. Now we're

• looking at overhead. So, in the factory, what do we have? We have fixed costs, like rent,

• we have variable costs, like electricity, glue, screws, nuts, bolts. So, what we're

• looking at are the fixed and the variable. We're trying to look at how we did in the

• factory, how we did the factory. Did we spend too much for fixed or variable? Did we waste

• hours of electricity? Efficiency in the in the factory...Was our production capacity

• up or down? Volume. So, that's what we're looking at. Now, notice, here's actual. I'm

• always going to start with actual because it's given. Then we're going to compare that

• with our flexible budget at actual, our flexible budget at standard and applied is basically

• standard...that's what you applied into work in process. Now, when I have 1, 2, 3, 4...when

• you have 4 numbers, I'm looking at the differences, 1, 2, 3. Four numbers give you how many differences?

• 1, 2, 3. Four numbers gives you 3 differences. What is 4 plus 3 everybody? Seven. Spending,

• efficiency, volume, spending, efficiency, volume. This is called your spending variance.

• The difference between actual and your flexible budget and actual. That's how much you spent.

• This is called your efficiency variance. How efficient were you? That's the difference

• between your budget at actual and your budget at what got applied. And the last one is called

• budget at standard and what got applied into WIP because you were over- or underapplied,

• over- or underapplied. So, what we're looking at is, the difference between spending, efficiency,

• volume. Four plus 3 is what? Seven. Think you. Seven. Spending, efficiency, volume.

• So, that's a quick overview of where we're going to go. Now, this is actual, so this

• is fixed, plus variable, times x. So, for both of these formulas, fixed is the same,

• variable is the same. It's the x that changes. X is either actual at actual, or x is standard

• allowed for actual. The key is study hard. Don't get discouraged. Woo! Little Michael

• Jackson walk. Come on down! I've been teaching almost 20 years after I left Deloitte and

• Touche. I've done it for many, many years, helped thousands and thousands of people accomplish

• their goal, which is to get through the exam.

In order to do overhead variances, here's what we're going to do. As I said, all the

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# BEC Exam Variance Analysis

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陳虹如 posted on 2017/06/23
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