Understanding Relationships between Overhead Variances, Budgeted Amounts, and Ac
ID: 2461661 • Letter: U
Question
Understanding Relationships between Overhead Variances, Budgeted Amounts, and Actual Units Produced and Direct Labor Hours Worked
Last year, Gladner Company had planned to produce 162,500 units. However, 169,000 units were actually produced. The company uses direct labor hours to assign overhead to products. Each unit requires 0.9 standard hour of labor for completion. The fixed overhead rate was $11 per direct labor hour and the variable overhead rate was $6.36 per direct labor hour.
The following variances were computed:
Required:
Round your answers to the nearest whole dollar.
1. Calculate the total applied fixed overhead.
$
2. Calculate the budgeted fixed overhead.
$
3. Calculate the actual fixed overhead.
$
4. Calculate the total applied variable overhead.
$
5. Calculate the number of actual direct labor hours.
hrs
6. Calculate the actual variable overhead.
$
Explanation / Answer
1)Overhead applied = 169000 * .9 * 11 = $ 1,673,100
2)Budgeted fixed overhead = 162500* .9 *11 = $ 1,608,750
3)Actual fixed overhead = Spending variance + Budgeted overhead
= 24000 + 1608750 = $ 1,632,750
4)Applied variable overhead = 169000 * .9 *6.36 = $ 967356
5) Variable efficiency variance = (AH*SR) - (SH*Sr)
1272 = (AH * 6.36 ) - 967356
1272 +967356 = AH *6.36
AH = 968628/ 6.36
= 152300 hours
actual hours = 152300
6) variable spending variance = AH(AR -SR)
9196 = 152300( AR - 6.36)
9196 /152300= AR - 6.36
.06038 =AR -6.36
AR = .06038 +6.36
= 6.42 Per labor hour
actual overhead = 6.42 * 152300 = $ 977824
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