James Corp. applies overhead on the basis of direct labor hours. For the month o
ID: 2475313 • Letter: J
Question
James Corp. applies overhead on the basis of direct labor hours. For the month of May, the company planned production of 9,600 units (80% of its production capacity of 12,000 units) and prepared the following overhead budget:
During May, the company operated at 90% capacity (10,800 units) and incurred the following actual overhead costs:
1.Compute the overhead controllable variance.
Prepare an overhead variance report at the actual activity level of 10,800 units.
2
James Corp. applies overhead on the basis of direct labor hours. For the month of May, the company planned production of 9,600 units (80% of its production capacity of 12,000 units) and prepared the following overhead budget:
Explanation / Answer
1) Overhead controllable variance = Actual - Flexible budget = 104,620 - (10,800*50,400/9600 + 46,800) = 104,620 - (56,700 variable + 46,800 fixed) = 104,620 - 103,500 = 1,120(U) 2) Performance report Actual Flexible units 10,800 10,800 Variance F(U) Variable cost : indirect materials $ 18,000.00 $ 20,250.00 $ 2,250.00 F indirect labor 26,650.00 27,000.00 350.00 F Power 6,075.00 6,075.00 - Maintenance 3,995.00 3,375.00 (620.00) U total variable costs 54,720.00 56,700.00 1,980.00 U fixed costs Rent of factory building 20,000.00 20,000.00 - Depreciation-machinery 10,500.00 10,500.00 - supervisor salary 19,400.00 16,300.00 (3,100.00) U total fixed cost 49,900.00 46,800.00 (3,100.00) U total cost $ 104,620.00 $ 103,500.00 $ (1,120.00) U
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