Victory for MSU, Inc. manufactures huge MSU flags for tailgating. The company us
ID: 2509433 • Letter: V
Question
Victory for MSU, Inc. manufactures huge MSU flags for tailgating. The company uses a standard costing system and applies overhead on the basis of direct labor hours. Victory provides the following information about this product:
Carry your answers to four decimal places.
Calculate variable manufacturing overhead (MOH) variances. Enter as a positive if favorable and negative if unfavorable.
a. Variable MOH rate variance:
b. Variable MOH efficiency variance:
Calculate fixed manufacturing overhead (MOH) variances. Enter as a positive if favorable and negative if unfavorable.
a. Fixed overhead budget variance:
b. Fixed overhead volume variance:
Standards: Direct material 18.0 yards of material per flag at $12.80 per yard Direct labor 3.0 hours per flag at $10.60 per hour Variable manufacturing overhead (MOH) standard rate $4.00 per direct labor hour Predetermined fixed MOH standard rate $11.00 per direct labor hour Total budgeted fixed MOH cost $81,600Explanation / Answer
Solution 1:
Standard direct labor hours for actual production (SH) = 2000*3 = 6000 hours
Standard rate of variable overhead = $4 per direct labor hour
Actual direct labor hours (AH) = 8920 hours
Actual rate of variable manufacturing overhead = $44,629/ 8920 = $5.0033 per hour
Variable overhead rate variance = (SR - AR) * AH = ($4 - $5.0033) * 8920 = $8,949 U
Variable overhead efficiency variance = (SH - AH) * SR = (6000 - 8920) * $4 = $11,680 U
Solution 2:
Budgeted fixed manufacturing overhead cost = $81,600
Actual fixed manufacturing overhead cost = $79,300
Fixed manufacturing overhead applied = Standard direct labor hours for actual production * Predetermined overhead rate
= 6000 * $11 = $66,000
Fixed overhead budget variance = Budgeted fixed overhead - Actual fixed overhead = $81,600 - $79,300
= $2,300 F
Fixed overhead volume variance = Fixed overhead applied - Budgeted fixed overhead
= $66,000 - $81,600 = $15,600 U
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