MGMT 30B Lecture Notes - Lecture 14: Operating Margin, Earnings Before Interest And Taxes, Gross Margin
8 Jun 2016
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Variable overhead efficiency variance = variable portion of pre- determined overhead rate x (actual level of activity standard activity allowed). Box 1 and 2: favorable if standard is more than actual. Variable overhead rate variance = actual level of activity x (actual variable portion of pre-determined overhead rate standard variable portion of pre-determined overhead rate) box 2 and 3: favorable if standard is more than actual. A. 1) advantages: can tailor decision making to our own customers better than ceo"s can. Makes local managers and employees feel better because they aren"t subject to ceo"s. Cost center: place in business where we can control costs but can"t control revenues or investments (b. 1. a. i) Cut costs but still deliver the products and services needed (b. 1. a. ii) costs. Profit center: can control costs and can control revenue but no control over investments (b. 1. b. i) Maximize profit by increasing revenue or decreasing costs (b. 1. b. ii) profit. Investment center: has control over costs, revenues, and investments (b. 1. c. i) (b. 1. c. ii)
