13-49 Variances Consider the following data regarding factory overhead: Variable

Question

13-49 Variances

Consider the following data regarding factory overhead:

Variable Fixed

Budget for actual hours of input $45,000 $70,000

Applied 41,000 64,800

Budget for standard hours allowed

for actual output achieved ? ?

Actual incurred 48,500 68,500

Using the above data, fill in the following blanks with the variance amounts. Use F for favorable or U

for unfavorable for each variance.

Total Overhead Variable Fixed

1. Spending variance ______ ______ ______

2. Efficiency variance ______ ______ ______

3. Production-volume variance ______ ______ ______

4. Flexible-budget variance ______ ______ ______

5. Underapplied overhead ______ ______ ______

Explanation / Answer

1) The formula for calculating the spending variance is Variable overhead spending variance formula = Actual variable overhead - Budgeted variable overhead Fixed overhead spending variance = Actual fixed overhead - Budgeted fixed overhead 2) The formula for calculating the efficiency variance is Variable overhead efficiency variance = Variable overhead cost absorbed - Standard variable overhead for actual activity Fixed overhead efficiency variance = Fixed overhead cost absorbed - Standard fixed overhead for actual activity 3) Volume overhead variance is calculated as Variable overhead volume variance = Variable overhead cost absorbed - Budgeted variable overhead cost Fixed overhead volume variance = Fixed overhead cost absorbed - Budgetd fixed overhead cost 4) Fixed Flexible budget variance = Actual fixed overhead cost - Budgeted fixed overhead cost Variable flexible budget variance = Actual variable overhead cost - Budgeted variable overhead cost 1. $3,500 -$1,500 (Variable is favourable) 2. -$3,500 $1,500(Fixed is favourable) 3. $3,500 -$1,500 4. $3,500 $1,500 5.

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