You brought your work home one evening, and your nephew spilled his chocolate mi

Question

You brought your work home one evening, and your nephew spilled his chocolate milk shake on the variance report you were preparing. Fortunately, knowing that overhead was applied based on machine hours, you were able to reconstruct the obliterated information from the remaining data. Fill in the missing numbers below. (Round your answer to two decimal places. Indicate the effect of each variance by selecting "Favorable" or "unfavorable". Select "None" and enter"0" for no effect (i.e., zero variance).) Standard machine hours per unit of output Standard variable-overhead rate per machine hour$10.00 Actual variable-overhead rate per machine hour Actual machine hours per unit of output Budgeted fixed overhead Actual fixed overhead Budgeted production in units Actual production in units Variable-overhead spending variance Variable-overhead efficiency variance Fixed-overhead budget variance Fixed-overhead volume variance Total actual overhead Total budgeted overhead (flexible budget) Total budgeted overhead (static budget) Total applied overhead 5 hours $ 61,625 14,500 $ 64,000 Unfavorable $140,000 Favorable $ 12,500 Unfavorable vorable $538,125 585,900

Explanation / Answer

Solution:

Budgeted fixed overhead = $61,625

Fixed overhead budget variance = $12,500 U

Actual fixed overhead = $61,625 + $12,500 = $74,125

Total actual overhead = $538,125

Actual variable overhead = $538,125 - $74,125 = $464,000

Variable overhead spending variance = $64,000 U

Standard variable overhead = $464,000 - $64000 = $400,000

SR of variable overhead * SH for actual production = $400,000

$10 * SH for actual production = $400,000

Standard hours for actual production = 40000 hours

Standard hours per unit = 5 hours

Actual production = 40000 / 5 = 8000 units

Variable overhead efficiency variance = $140,000 F

(SH - AH) * SR = $140,000

(40000 - AH) * $10 = $140,000

AH = 26000 hours

Actual variable overhead cost = $464,000

Actual variable overhead rate per machine hour = $464,000 / 26000 = $17.85 per hour

Actual machine hours per unit of output = 26000 / 8000 = 3.25 hours per unit

Allocation rate of fixed overhead = $61,625 / (14500*5) = $0.85 per hour

Fixed overhead volume variance = Fixed overhead applied - Budgeted fixed overhead

= (8000*5*$0.85) - $61,625 = $27,625 U

Total budgeted overhead (static budget) = $61,625 + (14500*5*$10) = $786,625

Total budgeted overhead (Flexible budget) = $61,625 + (8000 * 5* $10) = $461,625

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