Koontz Company manufactures a number of products. The standards relating to one

Question

Koontz Company manufactures a number of products. The standards relating to one of these products are shown below, along with actual cost data for May.

     The production superintendent was pleased when he saw this report and commented: “This $0.08 excess cost is well within the 2 percent limit management has set for acceptable variances. It's obvious that there's not much to worry about with this product."

     Actual production for the month was 12,000 units. Variable overhead cost is assigned to products on the basis of direct labor-hours. There were no beginning or ending inventories of materials.

c.

Variable overhead rate and efficiency variances. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance).)

Koontz Company manufactures a number of products. The standards relating to one of these products are shown below, along with actual cost data for May.

Explanation / Answer

c) variable overhead rate variance = (5-4.50)*11040 = 5520 F

Variable overhead efficiency variance = (12000*.90-11040)*5 = 1200 U

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