XO-20 is an oil-based product used to remove rust on bolts and nuts that are stu

Question

XO-20 is an oil-based product used to remove rust on bolts and nuts that are stuck. Its accounting system uses standard costs. The standards per 0.6-liter can of solution call for 0.78 liters of material and 4 hours of labor. (0.78 liters of material are needed due to evaporation in the production process.) The standard cost per liter of material is $2.5. The standard cost per hour for labor is $12.30. Overhead is applied at the rate of $15.06 per can. Expected production is 8,100 cans with fixed overhead per year of $40,419 and variable overhead of $10.07 per unit (a 0.6-liter can).

During 2015, 7,820 cans were produced; 12,100 liters of material were purchased at a cost of $51,667; 10,140 liters of material were used in production. The cost of direct labor incurred in 2015 was $356,720, based on an average actual wage rate of $10.40 per hour. Actual overhead for 2015 was $125,000.

Controllable Overhead Variance:

the answer is not 3014 and 907.

Explanation / Answer

Answer

Controllable Overhead Variance = $ 5833.60 Unfavorable

Actual factory overhead                          125,000.00 Budgeted allowance based on Actual Quantity:    Fixed expenses budgeted         40,419.00    Variable expenses (7820 Actual Unit Produced × $10.07 variable overhead rate)         78,747.40                          119,166.40 Controllable Overhead Variance: 5833.60 Unfavorable

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