To compute the value of the flexible budget, multiply the variable cost per unit by the actual production volume . Here, the figure indicates that the variable costs of producing 125,000 should total $162,500 (125,000 units x $1.30).
How do you calculate factory overhead budget?
To calculate the estimated cost per unit, divide the total costs by the estimated production run . For example, say your total factory overhead costs are $30,000 and your estimated production for the year is 10,000 units. Divide $30,000 by 10,000 units to get your per-unit factory overhead cost of $3.
What is the flexible budget formula for factory overhead?
Total factory overhead budgeted = $18,300 fixed (per quarter), plus $2 per hour of direct labor. This is one example of a cost-volume (or flexible budget) formula (y = a + bx) , developed via the least-squares method with a high R 2 .
What is factory overhead cost budget?
The factory overhead budget shows all the planned manufacturing costs which are needed to produce the budgeted production level of a period , other than direct costs which are already covered under direct material budget and direct labor budget.
What is a flexible overhead budget?
Flexible budgets show the budgeted amount of manufacturing overhead for various levels of output . ... These activity bases include percentage of capacity, units of output machine-hours, and direct labor-hours, among others. Machine-hours are budgeted at 2 machine-hours per product.
What are the three types of flexible budget variances?
Favorable variances arise when actual results exceed budgeted. Unfavorable variances arise when actual results fall below budgeted. Favorable profit variances arise when actual profits exceed budgeted profits. Unfavorable profit variance occurs when actual profit falls below budgeted profit.
How many ways can you prepare a flexible budget?
There are three methods of preparing a flexible budget:
Tabular Method or Multi-Activity Method.
What are the components of overhead budget?
Overhead expenses are all costs on the income statement except for direct labor, direct materials, and direct expenses. Overhead expenses include accounting fees, advertising, insurance, interest, legal fees, labor burden, rent, repairs, supplies, taxes, telephone bills, travel expenditures, and utilities .
How do you calculate overhead cost?
Calculate the Overhead Rate
The overhead rate or the overhead percentage is the amount your business spends on making a product or providing services to its customers. To calculate the overhead rate, divide the indirect costs by the direct costs and multiply by 100.
What appears in a cash budget?
A cash budget itemizes the projected sources and uses of cash in a future period. ... The Sources of Cash section contains the beginning cash balance , as well as cash receipts from cash sales, accounts receivable collections, and the sale of assets.
What are examples of factory overhead?
- Production supervisor salaries.
- Quality assurance salaries.
- Materials management salaries.
- Factory rent.
- Factory utilities.
- Factory building insurance.
- Fringe benefits.
- Depreciation.
Which is not a factory overhead cost?
All expenses incurred outside the manufacturing process are not considered factory overhead. For example, wages paid to the company president, manager, or human resources employees are considered administrative overhead, as is all money spent on public relations and accounting.
What are the three categories of factory overhead expenses?
TYPES OF OVERHEAD COSTS
Overhead expenses can divided into three general categories: company overhead, selling overhead, and administrative overhead . These expenses cannot be directly linked with manufacturing products or providing services.
What does a flexible budget look like?
This type of budget is most often based on changes in a company’s actual revenue and uses percentages of revenue rather than static numbers . For example, a flexible budget may allot 25% of a company’s revenue to salary as opposed to allotting $100,000 to salary in a given year.
What are the characteristics of flexible budget?
- The flexible budget covers a range of activities,
- A flexible budget is easy to change according to variations of production and sales levels.
- Flexible budget facilitates performance measurement and evaluation.
- It takes into account the changes in the volume of activity.
What do you mean by flexible budget?
A flexible budget adjusts to changes in actual revenue levels . Actual revenues or other activity measures are entered into the flexible budget once an accounting period has been completed, and it generates a budget that is specific to the inputs. ... This updates the variable costs in the flexible budget.
