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EXAMPLE:
Following is the flexible budget of a department of a manufacturing company.
The data from this flexible budget is used to calculate all variances relating
to factory overhead.
Department 3
Monthly Flexible Budget
Total variable factory overhead $3,840 $4,800 $5,760 $1.20 per dlh
Total fixed factory overhead $3,200 $3,200 $3,200 $3,200 per month
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Variable expenses (3,400 standard hours allowed $1.20 variable overhead rate) 4,080
- 7,280
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Factory overhead controllable variance consists of variable expenses
only and can also be calculated as follows:
Actual variable expenses ($7,384 actual factory overhead $3,200 of fixed expenses budgeted) $4,184
$104
Controllable variance unfav.