mzimba sofa company has developed the following manufacturing overhead standards
ID: 2498659 • Letter: M
Question
mzimba sofa company has developed the following manufacturing overhead standards for its sofa production.
variable overhead
0.9machine hours @32.00 per machine hour
fixed overhead
0.9machine hours @58.00 per machine hour
manufacturing overhead at mzimba is applied to production on the basis of standard machine hours. the above standards were based on an expected annual volume of 20,000 sofas.
the actual results last year were as follows:
1. what was mzimba's variable overhead rate variance?
2.what was mzimba's variable efficiency variance?
3.what was mzimba's fixed manufacturing overhead volume variance?
plz explain
standard cost per sofavariable overhead
0.9machine hours @32.00 per machine hour
$28.8fixed overhead
0.9machine hours @58.00 per machine hour
$52.2Explanation / Answer
1.Variable overhead rate variance =Standard rate *Actual unit –Actual rate * Actual unit
Variable overhead rate variance=28.8 * 21400 -625086=-8766
Unfavourable
2.. Variable overhead efficiency variance =Standard overhead rate * (Standard hours –Actual hours)
Variable overhead efficiency variance =Standard variable cost-Actual variable cost
Standard variable cost =28.8 * 20,000=576000
Actual overhead cost=625086
Variable overhead efficiency variance =625086-576000=567486
Favourable
3. Fixed manufacturing overhead volume variance
Fixed manufacturing overhead volume variance =Actual output * Fixed overhead rate –Standard output * Fixed Overhead rate
Fixed manufacturing overhead volume variance =21400*52.2 -20000*52.2=73080
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