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 80,000 direct-labor hours as follows:

  

   

During April, 26,000 units were scheduled for production: however, only 20,000 units were actually produced. The following data relate to April.

   

Actual direct-labor cost incurred was $1,425,000 for 75,000 actual hours of work.

Actual overhead incurred totaled $1,372,500, of which $472,500 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.

Variable-overhead spending variance.

Variable-overhead efficiency variance.

Fixed-overhead budget variance.

Fixed-overhead volume variance.

Variable-Overhead Spending and Efficiency Variances. (Select "None" and enter "0" for no effect (i.e., zero variance). Round "Actual Rate" and "Standard Rate" to 2 decimal places.)

Fixed-Overhead Budget and Volume Variances. (Select "None" and enter "0" for no effect (i.e., zero variance).)

Standard costs per unit (one box of paper): Variable overhead (3 direct-labor hours @ $4) $ 12 Fixed overhead (3 direct-labor hours @ $12) 36 Total $ 48

Explanation / Answer

Table 1

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Table 2

Variable-Overhead Spending And Efficiency Variances (Hours = Direct-Labor Hours) (1) (2) (3) (4) Actual Variable Overhead Projected Variable Overhead Flexible Budget: Variable Overhead Variable Overhead Applied To Work-In-Process Actual Qty (AQ) × Actual Rate (AVR) Actual Qty (AQ) × Standard Rate (SVR) Standard Allowed Qty (SQ) × Standard Rate (SVR) Standard Allowed Qty (SQ) × Standard Rate (SVR) 75,000 × 6.3 (472,500/75,000) 75,000 × 4 60,000 (20,000*3) × 4 60,000 (20,000*3) × 4 hours per hour hours per hour hours per hour hours per hour 472,500 300,000 240,000 240,000 172,500 Unfavorable 60,000 Unfavorable Variable-overhead spending variance Variable-overhead efficiency variance No difference

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