8 - no - Financial Accounting: Building Accounting Knowledge Financial Accounting I )

lOMoARcPSD|25973474




8 - no - Financial Accounting: Building Accounting
Knowledge


Financial Accounting I )

, lOMoARcPSD|25973474




8-2 How does the planning of fixed overhead costs differ from the planning of
variable overhead costs?


At the start of an accounting period, a larger percentage of fixed overhead costs are
locked-in than is the case with variable overhead costs. When planning fixed
overhead costs, a company must choose the appropriate level of capacity or
investment that will benefit the company over a long time. This is a strategic decision.

8-3 How does standard costing differ from actual costing?


The key differences are how direct costs are traced to a cost object and how indirect
costs
are allocated to a cost object:


Actual Costing Standard Costing
Direct costs Actual prices Standard prices
× Actual inputs used × Standard inputs allowed for actual output
Indirect costs Actual indirect rate Standard indirect cost-allocation rate
× Actual inputs used × Standard quantity of cost-allocation base
allowed for actual output


8-5 What are the factors that affect the spending variance for variable manufacturing
overhead?


Two factors affecting the spending variance for variable manufacturing overhead are:
a. Price changes of individual inputs (such as energy and indirect materials)
included in variable overhead relative to budgeted prices.
b. Percentage change in the actual quantity used of individual items included
in variable overhead cost pool, relative to the percentage change in the
quantity of the cost driver of the variable overhead cost pool.




Downloaded by kevin wacira ()