Susan Cabinet shop has total budgeted variable overhead of $220,000. Actual vari

Question

Susan Cabinet shop has total budgeted variable overhead of $220,000. Actual variable overhead for the period also amounted to $220,000. The overhead is based on direct labor hours. Other data on the two types of cabinets are as follows:

For M:

Budgeted hours per unit 10
Budgeted production 100
Actual hours per unit 13
Actual number of units 140

For N:

Budgeted hours per unit 16
Budgeted production 200 units
Actual hours per unit 18
Actual number of units 160

Find the following :

1. The variable overhead applied amounts to
a. $40
b. $45
c. $50
d. $55
e. None of the above.

2.Variable overhead per unit of M amounts to
a. $600
b. $471
c. $800
d. $900
e. $950
f. None of the above.

3. Variable overhead spending variance amounts to
a. –$15,000
b. $15,000
c. $38,500
d. – $38,500
e. None of the above.

4. Variable overhead spending variance amounts to 22,000 favorable and variable overhead efficiency variance amounts to 32,000 unfavorable. WIP inventory amounts to $50,000, Finished goods inventory $150,000, and cost of goods sold amounts to $200,000. The overhead portion of these accounts amounts to 20%, 40%, and 45% of same respectively. Closing and prorating the efficiency variance would
a. increase work in process by $2,000.
b. increase finished goods inventory by $12,000.
c. increase cost of goods sold by $18,000.
d. All of the above.
e. None of the above.

Explanation / Answer

1. b $45 220,000/[(200*18)(100*13)] 2. f. None of the above. 3. a. –$15,000 4. d. All of the above.

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