Exercise 24.11 Overhead Cost Variances (LO24-4, LO24-5) Zeta, Inc., produces han

Question

Exercise 24.11 Overhead Cost Variances (LO24-4, LO24-5)

Zeta, Inc., produces handwoven rugs. Budgeted production is 5,000 rugs per month and the standard direct labor required to make each rug is 2 hours. All overhead is allocated based on direct labor hours. Zeta's manager is interested in what caused the recent month's $3,000 unfavorable overhead variance. The following information was available to aid in the analysis:

a.

What was the overhead spending variance for the month? (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance).)

       

b.

What was the overhead volume variance? (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance).)

      

Zeta, Inc., produces handwoven rugs. Budgeted production is 5,000 rugs per month and the standard direct labor required to make each rug is 2 hours. All overhead is allocated based on direct labor hours. Zeta's manager is interested in what caused the recent month's $3,000 unfavorable overhead variance. The following information was available to aid in the analysis:

Explanation / Answer

a.

Overhead Spending variance = (standard rate-Actual rate)*actual hour = (6-6.11)*9000 Standard Rate Actual Rate = 990 Unfavourable = 60000/10000 = 55000/9000 b. =           6.00 =           6.11 Overhead volume variance = (Standard Hour-Actual Hour)*Standard Rate = (10000-9000)*6 = 6000 Favorable

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.