Compute the fixed overhead spending and volume variances Compute the controllabl

Question

Compute the fixed overhead spending and volume variances Compute the controllable variances ezto.m The following information applies to the questions displayed below. Sedona Company set the following standard costs for one unit of its product for 2013 Direct material (30 lbs. e $2.00 per Ib.) Direct labor (20 hrs.@$4.50 per hr) Factory variable overhead (20 hrs. $2.90 per hr) Factory foxed overheed (20 hrs.@$1.20 per hr) S 60.00 90.00 58.00 24.00 $ 232.00 Standard cost The S4($2.90-$120) total overhead rate per direct labor hour is based on an expected operating level equal to 65% of the factory's capacity of 63,000 units per month. The following monthly fiexible budget Operating Levels (% of capacity) 60% 37,800 65% 70% Budgeted output (units) Budgeted labor (standard hours) Budgeted overhead (dolars) 40.950 756.000819,000 44,100 882,000 Variable overhead Fxed overhead s 2192.400 $ 2.375,100 $2,557,800 982,800 982,800 982,800 Total overhead s 3175,200 $3,357,900 $3,540,600 Dunng te current month, te compeny ooerated at 60%of capacity, employees worked 726,000 hours, and the following actual ovehead costs were incurred s 2120.000 Fixed overheed costs Total ovethead costs 10.00 points

Explanation / Answer

Fixed overhead spending variance = Actual fixed overheads - Budgeted fixed overheads 1065000 - 982800 $82200 Unfavourable Fixed overhead volume variance = Actual fixed overheads - Standard fixed overheads              or = Actual output x Fixed overhead appliaction rate - Budgeted output x Fixed overhead appliaction rate Fixed overhead application Rate = Budgeted overheads / Budgeted units 982800 / 37800 = $26 Fixed overhead volume variance = (726000 * 1.2) - (37800*26) $111600 Unfavourable Controllable variance = Actual overhead costs x standard rate per unit x Budgeted units = 3185000 - (37800 * 232) = -5584600

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