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 97,000 direct-labor hours as follows: Standard costs per unit (one box of paper): Variable overhead (3 direct-labor hours $6) Fixed overhead (3 direct-labor hours $8) Total $18 $42 During April, 35,000 units were scheduled for production: however, only 29,000 units were actually produced. The following data relate to April 1. Actual direct-labor cost incurred was $2,576,000 for 92,000 actual hours of work. 2. Actual overhead incurred totaled $1,270,400, of which $570,400 was variable and $700,000 was fixed.

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 92000 X 6.20 92000 X 6.00 87000 6.00 87000 6.00 (570400/92000) (29000*3) (29000*3) 570400 552000 522000 522000 A -18400 A -30000 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 87000 X 8.00 Hours Per Hour 700000 776000 696000 (97000*8) Fixed OH Budget Variance Fixed OH Volume Variance Actual FOH-Budgeted FOH Applied OH-Budgeted FOH 700000-776000 696000-776000 -76000 -80000 F A

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