Requirements 1. Compute the overhead variances for the month: variable overhead

Question

Requirements 1. Compute the overhead variances for the month: variable overhead cost variance, variable overhead efficiency variance, fixed overhead cost variance, and fixed overhead volume variance 2. Explain why the variances are favorable or unfavorable Requirement 1. Compute the overhead variances for the month: variable overhead cost variance, variable overhead efficiency variance, fixed overhead cost variance, and fixed overhead volume variance Begin by selecting the formulas needed to compute the variable overhead (VOH) and fixed overhead (FOH) variances, and then compute Actual overhead - (Actual hours x Standard price) (Actual hours Standard hours allowed) x Standard price Actual overhead - Budgeted overhead Budgeted overhead - Allocated overhead Data Table VOH cost variance VOH efficiency variance FOH cost variance FOH volume variance Static budget variable overhead S 7,500 Static budget fixed overhead S 3,000 = Static budget direct labor hours 1,500 hours Static budget number of units 7,500 units Johnson allocates manufacturing overhead to production based on standard direct labor hours. Last month, Johnson reported the following actual results: actual variable overhead, $10,500, actual fixed overhead, $2,810; actual production of 7,200 units at 0.30 direct labor hours per unit. The standard direct labor time is 0.2 direct labor hours per unit (1,500 static direct labor hours /7,500 static units). Enter any number in the edit fields and then click Check Answer parts remaining Clear All

Explanation / Answer

Variable Overhead Cost Variance = $ 10,500 - {(7,200 × 0.2) × ($7500/1500)}

    = $ 10,500 - (1440 × 5)

    = $ 10,500 - $ 7,200

Variable Overhead Cost Variance = $ 3,300 Favorable

Variable Overhead Efficiency Variance   = {(7200 × 0.3) - 1500} × 5

                                                               = (2160-1500) × 5

                                                               = 660 hours × 5

Variable Overhead Efficiency Variance = $ 3300 Favorable

Fixed Overhead Cost Variance = $ 2810 - $ 3000                                    

Fixed Overhead Cost Variance = $ 190 Unfavorable

Fixed Overhead Volumer Variance = $ 3000 - {(7200×0.30) × $3000/1500}

                                                        = $ 3000 - (2160 × 2)

    = $ 3000 - $ 4320

Fixed Overhead Volumer Variance = $ 1120 Unfavorable

Related Questions

Navigate

• Browse (All)
• Browse R
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.