Chapter 8, Problem 8.1Q

How do managers plan for variable overhead costs?

To determine

Variable Cost:

The cost which fluctuates on the basis of the output level produced. The variable cost and output shares a direct relationship.

To explain: The planning related to variable overhead costs by managers.

Explanation of Solution

Explanation

Planning by managers related to variable overhead costs is mentioned below:

• The managers devote their attention to such activities which lead to the production of high quality products.
• They also remove those activities from the operation channel which are not valuable from production point of view.
• They examine the relevance of each cost in accordance of product superiority.
• The maintenance of equipment is also required to plan properly to maintain the production efficiency.

The managers examine all the activities and then plan according to their interpretation related to value of the activities in relevance of high quality productivity.

Conclusion

Hence, the managers plan variable overhead costs on basis of value of an activity from production point of view for better efficient production.