Lecture Fundamentals of cost accounting (4th edition): Chapter 16 - Lanen, Anderson, Maher

(BQ) Chapter 16: Fundamentals of variance of analysis. After completing this chapter you should be able to: Use budgets for performance evaluation; develop and use flexible budgets; compute and interpret the sales activity variance; prepare and use a profit variance analysis; compute and use variable cost variances; compute and use fixed cost variances; from the appendix, understand how to record costs in a standard costing system.
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Lecture Fundamentals of cost accounting (4th edition): Chapter 16 - Lanen, Anderson, Maher© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in anymanner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. FundamentalsofVarianceAnalysis Chapter16 PowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPAMcGrawHill/Irwin Copyright©2014byTheMcGrawHillCompanies,Inc.Allrightsreserved.LearningObjectivesLO 16-1 Use budgets for performance evaluation.LO 16-2 Develop and use flexible budgets.LO 16-3 Compute and interpret the sales activity variance.LO 16-4 Prepare and use a profit variance analysis.LO 16-5 Compute and use variable cost variances.LO 16-6 Compute and use fixed cost variances.LO 16-7 (Appendix) Understand how to record costs in a standard costing system. 163 LO16-1 UsingBudgetsfor PerformanceEvaluation LO 16-1 Usebudgetsforperformanceevaluation. Operating Budgets Budgeted income statement, production budget, budgeted cost of goods sold, and supporting budgets Financial Budgets Budgets of financial resources; for example, the cash budget and the budgeted balance sheet Variance Difference between planned result and actual outcome 164 LO16-1 ProfitVariance Favorable Variance Variance that, taken alone, increases operating profit Unfavorable Variance Variance that, taken alone, reduces operating profit 165 LO16-1 ProfitVariance Bayou Division Budget and Actual Results August Master Actual Variance Budget Sales (units) 80,000 100,000a Sales revenue $840,000 $1,000,000 Less: Variable costs Variable mfg. costs 329,680 380,000b Variable selling and administrative 68,000 90,000c Total variable costs $397,680 $ 470,000 Contribution margin $442,320 $ 530,000 Fixed costs: Fixed manufacturing overhead 195,500 200,000 Fixed selling and administrative costs 132,320 140,000 Total fixed costs $327,820 $ 340,000 Profit $114,500 $ 190,000a $10.00 per unit b $3.80 per unit c $0.90 per unit 166 LO16-1 ProfitVariance Bayou Division Budget and Actual Results August Master Actual Variance Budget Sales (units) 80,000 20,000 U 100,000a Sales revenue $840,000 $160,000 U $1,000,000 Less: Variable costs Variable mfg. costs 329,680 50,320 F 380,000b Variable selling and administrative 68,000 22,000 F 90,000c Total variable costs $397,680 $ 72,320 F $ 470,000 Contribution margin $442,320 $ 87,680 U $ 530,000 Fixed costs: Fixed manufacturing overhead 195,500 4,500 F 200,000 Fixed selling and administrative costs 132,320 7,680 F 140,000 Total fixed costs ...