Calgary Paper Company produces paper for photocopiers. The company has developed

Question

Calgary Paper Company produces paper for photocopiers. The company has developed standard overhead rates based on a monthly capacity of 96,000 direct-labor hours as follows: Standard costs per unit (one box of paper) Variable overhead (2 direct-labor hours $6) $12 Fixed overhead (2 direct-labor hours e s10) Total 20 $32 During April, 41,000 units were scheduled for production: however, only 35,000 units were actually produced. The following data relate to April. 1. Actual direct-labor cost incurred was $1,971,000 for 73,000 actual hours of work 2. Actual overhead incurred totaled $1,359,900, of which $459,900 was variable and $900,000 was fixed. Required: Prepare two exhibits similar to Exhibit 11-6 and Exhibit 11-8, which show the following variances. State whether each variance is favorable or unfavorable, where appropriate.

Explanation / Answer

Variable OH Spending And Efficency Variance Actual Variable OH Projected Variable OH Flexible Budget: Variable OH Variable OH Applied to WIP Actual Quantity X Actual Price Actual Quantity X Standard Price Standard Qty Allowed X Standard Price Standard Qty X Standard Price 73000 X 6.30 73000 X 6.00 70000 6.00 70000 6.00 (459900/73000) (35000*2) (35000*2) 459900 438000 420000 420000 A -21900 A -18000 Variable OH Spending Variance Variable OH Efficency Variance (Projected VOH-Actual OH) (Flexible Budget-Projected VOH) Fixed OH Budget and Volume Variance 1 2 Actual Budgeted Fixed OH Applied to WIP Fixed OH Fixed OH Standard Hours Allowed X Standard FOH Rate 70000 X 10.00 Hours Per Hour 900000 960000 700000 Fixed OH Budget Variance Fixed OH Volume Variance Actual FOH-Budgeted FOH Applied OH-Budgeted FOH 900000-960000 700000-960000 60000 -260000 F A

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