Albert and Elva each own 50% of the stock of Eagle,Inc.(a C corporation).To cover what is perceived as temporary working capital needs,each shareholder loans Eagle $200,000 with an annual interest rate of 6% (same as the Federal rate)and a maturity date of one year.The loan is made at the beginning of 2012.
Definitions:
Overhead Volume Variance
The difference between the budgeted overhead costs and the actual costs incurred, due to changes in the level of production or activity.
Fixed Overhead
Fixed Overhead refers to the indirect costs of production that do not vary with the volume of production, such as salaries of managers, rent of factory, and depreciation of equipment.
Standard Cost System
A system of accounting that uses predetermined costs for calculating variances and tracking operational performance.
Job Order Cost System
A cost accounting system in which costs are assigned to each job or batch.
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