Accounting Exam 4 FHSU

Contribution margin =

net sales revenue - variable cost

Fixed overhead cost variance =

= actual fixed overhead - budgeted fixed overhead

Fixed overhead volume variance =

= budgeted fixed overhead - allocated fixed overhead

Allocated fixed overhead =

= standard overhead allocation rate x standard quantity of allocation base allowed for actual output

Flexible budget cost =

= (budgeted variable cost per unit x actual # of units produced) + total budgeted fixed costs

Static budget cost =

= (budgeted variable cost per unit x budgeted # of units produced) + total budgeted fixed costs

Cost Variance =

= (AC - SC) x AQ

Efficiency Variance

= (AQ-SQ) x SC

Cost variance measures…

how well a business keeps unit costs of material inputs within standards

Efficiency variance measures…

how well a business uses its materials

Favorable(F) Variances effects of operating income?

increases

Unfavorable (U) Variances effects on operating income?

decreases

Favorable variances debited or credited?

credit because they increase operating income

Unfavorable variances debited or credited

Debited because they decrease operating income