RSM322H1 Lecture Notes - Lecture 13: Contribution Margin, Voh, Business Cycle
Document Summary
Bv: budgeted volume (also known as denominator volume) Estimated at the beginning of the year and used for calculating the overhead rate. Sv: standard volume (also known as earned or allowed volume) (output units completed) (standard input hours per output unit) Volume used to apply overhead to work-in-process inventory. Actual hours or other input resource used during period. Increasing budgeted volume (denominator) while holding total budgeted dollars constant (numerator) decreases the overhead rate. Adjust expectation based on number of units forecast for next year. Flexible overhead budget is the formula for budget forecast. Flexible overhead budget = foh + (voh v) Estimate budgeted overhead (boh) dollars using a specific budgeted volume number (bv) and the flexible overhead budget formula. = $ 1,350,000 + ( 67,500 hours) Overhead rate is the total budgeted overhead dollars for the year divided by the budgeted volume for the year. Ohr = (boh bv) = (foh bv) + voh.
