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CHAPTER 11
Learning Objectives
Chapter Overview
I. Flexible Budgets
A. Flexible budgets vs. static budgets
B. Advantages
C. The activity measure
D. Flexible budget formula
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Chapter 11 - Flexible Budgeting and the Management of Overhead and Support Activity Costs
1. FLEXIBLE BUDGETS
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Chapter 11 - Flexible Budgeting and the Management of Overhead and Support Activity Costs
Normal costing:
Overhead applied = Actual hours x Predetermined
rate
Standard costing:
Overhead applied = Standard hours x Predetermined
rate (i.e., S x S)
Predetermined overhead rates are calculated by dividing the
overhead dollars shown in the flexible budget by the most likely
level of activity.
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Chapter 11 - Flexible Budgeting and the Management of Overhead and Support Activity Costs
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Chapter 11 - Flexible Budgeting and the Management of Overhead and Support Activity Costs
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Chapter 11 - Flexible Budgeting and the Management of Overhead and Support Activity Costs
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Chapter 11 - Flexible Budgeting and the Management of Overhead and Support Activity Costs
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Chapter 11 - Flexible Budgeting and the Management of Overhead and Support Activity Costs
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Chapter 11 - Flexible Budgeting and the Management of Overhead and Support Activity Costs
Teaching Overview
The two main concepts in Chapter 11 are (1) the construction and use of a
flexible budget and (2) the analysis of overhead variances. The construction
of a flexible budget presents little difficulty for students; however, overhead
variance analysis is more troublesome.
A teaching hint: Show why the (AH x SVR) calculation that is used for
variable overhead cannot be used for fixed overhead because no matter
what the activity level, this calculation (the amount that the AH should have
cost) must remain the same (i.e., fixed). Thus, the middle term of the model
cannot fluctuate and, instead, is budgeted fixed overhead.
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Chapter 11 - Flexible Budgeting and the Management of Overhead and Support Activity Costs
11-22 5 20
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Chapter 11 - Flexible Budgeting and the Management of Overhead and Support Activity Costs
11-32 5 15
11-27 1, 2 10
11-26 5 20
11-23 5 40
11-24 5 35
11-29 5 15 C
11-25 4, 7 30 W
11-31 7 10
11-30 2, 5 45
11-28 1, 2 15
11-33 8 15
11-34 9 10
Problems:
11-35 5 45
11-37 1, 2, 3 30 C
11-38 5 40
11-36 1, 2, 4 20
11-41 5 25
11-39 1, 6 30
11-40 1, 2, 5 30
11-43 1, 2, 5 40 C
11-45 1, 2, 6 55 E, C
11-42 1, 6 40 C
11-44 1, 5 45
11-46 5 20 C
11-48 1, 2, 5 60 G
11-47 1, 6 40 C
11-49 5 35
Learnin Completi Special
Item No. g on Feature
Objectiv Time s*
es (min.)
11-50 5, 8 30 I
11-51 2, 5, 8 60 C, G
11-52 9 20
11-53 9 45
Cases:
11-54 1, 3, 5 50 G
11-55 4, 5, 7 50 G
* C = Business communication E = Ethics G = Group work I = International
W = Web-based application
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Chapter 11 - Flexible Budgeting and the Management of Overhead and Support Activity Costs
Video Programs
McGraw-Hill has produced various videos that are relevant to the instruction
of managerial/cost accounting. Information about these videos (including a
description of those applicable to this chapter) appears in Appendix A.
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