24. The following information for the past year is available from Thicknews Co..

Question

24. The following information for the past year is available from Thicknews Co...& Company that uses machine hours to apply factory overhead. The following information applies to questions 24& 25 are worth 4 points each. Actual variable overhead cost Actual fixed overhead cost Budgeted fixed overhead cost Actual machine hours Standard machine hours for the units manufactured Standard fixed overhead rate per machine hour 14,000 10,000 11,000 5,000 4,800 2 Standard variable overhead rate per machine hour $3 The variable overhead spending variance is: 25. The above information (see questions #24) for the past year is available from Thinnews Co& company that uses machine hours to apply factory overhead. The fixed overhead production volume variance is: 26. The following data applies to questions #26-29. Questions 26-29 are worth 5 points each. Winston company had two products named X and Y. The firm had the following budget for August

Explanation / Answer

24.

The variable overhead spending variance is the difference between the actual and budgeted rates of spending on variable overhead. The variance is used to focus attention on those overhead costs that vary from expectations.

The formula is:

Variable overhead spending variance = Actual hours worked x (Actual overhead rate - standard overhead rate)

= 5000 x (14000/5000 - 3) = -1000

A favorable variance means that the actual variable overhead expenses incurred per labor hour were less than expected. In given case , Variable overhead spending variance is favourable.

25. The fixed overhead volume variance is the difference between the amount of fixed overhead actually applied to produced goods based on production volume, and the amount that was budgeted to be applied to produced goods.

The company budgets for the allocation of $11,000 of fixed overhead costs to produced goods at the rate of $2 per hour worked, with the expectation that 5000 hours will be worked on maching for production. However, the actual number of hours worked on maching is 5000, at a total of $10,000 of fixed overhead costs allocated. This creates a fixed overhead production volume variance of $1,000.

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