Answer to Question 2 12 Answer to Question 4 17 Answer to Question 4 17 Answer to Question 4 17 Answer to Question 4 17 Answer to Question 4 17 Answer to Question 4 17 Answer to Question 4 17 Answer t

Running head: MANAGERIAL ACCOUNTING
MANAGERIAL ACCOUNTING
Name of the Student:
Name of the University:
Author’s Note:

MANAGERIAL ACCOUNTING
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Table of Contents
Answer to Question 1......................................................................................................................3
Requirement (a)...........................................................................................................................3
Requirement (b)...........................................................................................................................5
Requirement (c)...........................................................................................................................7
Requirement (d)...........................................................................................................................8
Requirement (e).........................................................................................................................10
Answer to Question 2....................................................................................................................12
Answer to Question 3....................................................................................................................14
Requirement A...........................................................................................................................14
Requirement B...........................................................................................................................15
Requirement C...........................................................................................................................16
Answer to Question 4....................................................................................................................17
Requirement (a).........................................................................................................................17
Requirement (b).........................................................................................................................18
Requirement (c).........................................................................................................................18
Answer to Question 5....................................................................................................................19
Requirement (a).........................................................................................................................19
Requirement (b).........................................................................................................................20
Requirement (c).........................................................................................................................20

MANAGERIAL ACCOUNTING
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Requirement (d).........................................................................................................................21
Answer to Question 6....................................................................................................................21
Requirement 1............................................................................................................................21
Requirement 2............................................................................................................................26
Requirement 3............................................................................................................................26
Reference.......................................................................................................................................27

MANAGERIAL ACCOUNTING
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Answer to Question 1
Requirement (a)
Particulars Amount
Budgeted Variable Overhead Costs $36,000
Total EstimatedOverheadCost $36,000
Budgeted Output 9000
Machine Hours required per unit 2
BudgetedMachine Hours 18000
PredeterminedOverheadRate $2.00
PredeterminedOverheadRate:
Figure 1: (Image showing Predetermined Overhead rate)
Source: (Created by Author)
Particulars Amount
Actual Variable OverheadCosts $38,000
Actual Machine Hours 15000
Predetermined Overhead Rate $2
StandardOverheadfor Actual Hours $30,000
Variable OverheadSpendingVariances $8,000
Adverse
Figure 2: (Image showing Variable Overhead Variances)
Source: (Created by Author)

MANAGERIAL ACCOUNTING
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Particulars Amount
Actual Output 8000
Machine Hours required per unit 2
StandardHoursfor Actual Output 16000
Predetermined Overhead Rate $2.00
StandardOverheadfor StandardHours $32,000.00
Actual Hours 15000
StandardOverheadfor Actual Hours $30,000.00
Variable OverheadEfficiencyVariances $2,000
Favorable
Figure 3: (Image showing Variable Overhead Efficiency Variances)
Source: (Created by Author)
Particulars Amount
Actual Fixed Overhead $70,000
Budgeted Fixed Overhead $72,000
FixedOverheadSpendingVariance -$2,000
Favorable
Figure 4: (Image showing Fixed Overhead Spending Variance)
Source: (Created by Author)
Particulars Amount
Budgeted Fixed Overhead $72,000
Budgeted Output 9000
StandardFixedOverheadAbsorption Rate $8
Actual Output 8000
StandardOverheadfor Actual Output $64,000
FixedOverheadVolume Variance -$8,000
Adverse
Figure 5: (Image showing Fixed Overhead Volume Variance)

MANAGERIAL ACCOUNTING
5
Source: (Created by Author)
Requirement (b)
The economic significance of the variances which are related to fixed overhead and
variable overhead are given below in details:
1. Variable Overhead Spending Variances: This variance occurs when there is the
difference between actual variable cost incurred on indirect materials related to
manufacturing process and the standard variable cost which was set by the budgeting
process1. such types of variances are significant and generally occurring in large business
which produces large number of identical products. If the results of the above is favorable
then it signifies that the actual rate of overhead is lower than the standard rate of
overhead. This also means that the estimation of the company of the overhead is
appropriate and there is proper control in the business2. The company can use activity-
based costing techniques to have better control over the Variable Overhead Spending
Variances. In addition to this, the company can further improve the planning process to
prevent planning error from cause unfavorable variable overhead spending variances.
2. Variable Overhead Efficiency Variances: It is referred to the variances which occurs
when there is a difference between the actual overhead cost based on the actual time
taken for production and standard variable overhead based on the standard time taken to
produce the product3. This variance is caused due to productivity difference. The
1 DRURY, C.M. Management and cost accounting. Springer. 2013
2 Badem, A.C., Ergin, E. and Drury, C. Is standard costing still used? Evidence from Turkish automotive
industry. International Business Research, 6(7), p.79. 2013
3 Kren, Leslie. "Tracking value created by efficiency improvements in a traditional overhead cost management
system." Engineering Management Journal 26, no. 1 (2014): 3-7.