Lynwood Company produces surge protectors. To help control costs, Lynwood employ
ID: 2524593 • Letter: L
Question
Lynwood Company produces surge protectors. To help control costs, Lynwood employs a standard costing system and uses a flexible budget to predict overhead costs at various levels of activity. For the most recent year, Lynwood used a standard overhead rate of $18 per direct labor hour. The rate was computed using practical activity. Budgeted overhead costs are $396,000 for 18,000 direct labor hours and $540,000 for 30,000 direct labor hours. During the past year, Lynwood generated the following data:
(a) Actual production: 100,000 units;
(b) Fixed overhead volume variance: $20,000 U;
(c) Variable overhead efficiency variance: $18,000 F;
(d) Actual fixed overhead costs: $200,000;
(e) Actual variable overhead costs: $310,000.
Required:
1. Calculate the fixed overhead rate.
2. Determine the fixed overhead spending variance. Enter amount as a positive number and select Favorable or Unfavorable.
3. Determine the variable overhead spending variance. Round hours in the interim calculations to a whole hour. Enter amount as a positive number and select Favorable or Unfavorable.
4. Determine the standard hours allowed per unit of product. Assume actual units equal planned units. Round to five decimal places.
Explanation / Answer
1. Fixed overhead rate = Fixed Overhead Cost / Actual Production Fixed Overhead rate
= $200000/$100000 = $2
2. Fixed overhead spending variance = Actual Fixed Overhead – Budgeted Fixed Overhead
= $200000 - $196000 = $4000 U
3. Variable overhead spending variance = Actual variable overhead – (AH x SVOR)
= $310000 – $302004 = $7996 U
4. Standard hours allowed per unit product = 0.2667 hour per unit
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