Crystal Glassware Company has the following standards and flexible-budget data S

Question

Crystal Glassware Company has the following standards and flexible-budget data Standard variable-overhead rate Standard quantity of direct labor Budgeted fixed overhead Budgeted output $ 6.00 per direct-labor hour 3 hours per unit of output $150,000 25,000 units Actual results for April are as follows Actual output Actual variable overhead Actual fixed overhead Actual direct labor 16,000 units $384,000 $141,000 55,000 hours Required Use the variance formulas to compute the following variances. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance).) 1. Variable-overhead spending variance 2. Variable-overhead efficiency variance 3. Fixed-overhead budget variance 4. Fixed-overhead volume variance nfavorable nfavorable avorable nfavorable

Explanation / Answer

1. Variable overhead spending variance = (standard overhead rate - Actual overhead rate) x Actual hours worked
= {$6.00 - ($384,000 / 55,000)} x 55,000
= ($6 - $6.98) x 55000 = $54,000 Unfavorable

2. Variable overhead efficiency variance = (standard hours - Actual hours worked) x standard overhead rate
= {(16,000 x 3) - 55,000} x $6
= $42,000 Unfavorable

3. Fixed overhead budget variance = Actual fixed overhead - Budgeted fixed overhead
= $141,000 - $150,000 = $9,000 Favorable

4. Fixed overhead volume variance = Applied Fixed Overhead – Budgeted Fixed Overhead
= {($150,000 / 25,000 x 16,000) - $150,000}
= $54,000 Unfavorable

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