May be prepared for any activity; Show revenues and expenses that should have occurred at the actual activity; Improve performance evaluation level in the relevant range; Reveal variances due to good cost control or lack of cost control
What we need to know to flex a budget for different activity?
1. The market price for the product has changed. The total demand for the product grows (declines) at a rate higher then expected then expected 2. The firm lost its market share to competitors 3. The firm failed to set a proper goal for the period
A standard cost sheet specifies the standard costs (including both price and quantity) for all manufacturing cost elements in the production of one unit of elements in the production of one unit of a product
Determine the behavioral patterns of variable factory overhead costs; Select one or more appropriate activity measures; Choose the levels of operation and estimate the Choose the levels of operation and estimate the total variable factory overhead and the total variable factory overhead; Compute the standard variable factory overhead Compute the standard variable factory overhead rate
Determining a Standard Variable Factory Overhead Rate
Decide the level of operation; Determine total variable factory overhead for the operation; Select an activity base for variable factory overhead and determine the amount for the operation; Divide the amount in 2 by the amount in 3 to arrive at the standard variable overhead rate.