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

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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 owerhead 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 each 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 vanance FOH cost variance FOH volume variance = = Static budget variable overhead $ 7,000 = Static budget fixed overhead $ 3,000 Static budget direct labor hours 1,000 hours Static budget number of units 4,000 units Goldman allocates manufacturing on standard direct labor hours. Last month, Goldman reported the following actual results: actual variable overhead, $10,800; actual fixed overhead, $2,780; actual production of 7,400 units at 0.40 direct labor hours per unit. The standard direct labor time is 0.25 direct labor hours per uni 1,000 static direct labor hours4,000 static units) overhead to production base Enter any number in the edit fields and then click Check Answer parts remaining Clear All

Explanation / Answer

Static Budget Variable OH 7000 Static Budget Fixed OH 3,000 Static Budget Fixed OH 3,000 Static Budget DLH 1000 Static Budget DLH 1000 Static Budget Number of Units 4000 Recovery Rate Per DLH 3.00 Fixed OH Alloction Basis DLH Standard Data: Qty Rate Amt Variable OH 1000 7.00 7000 (0.25*4000) Fixed OH 1000 3.00 3,000 (0.25*4000) Standard Data for Actual Production: Actual Units 7,400 Qty Rate Amt Variable OH 1850 7.00 12,950 Actual Production 7400 Fixed OH 1850 3,000 Actual DLH 2960 15,950 (7400*.40) Actual data: Actual Units 7,400 Actual Hours 2960 Qty PU Amt Recovery Rate Per DLH 3.00 Variable OH 2960 3.65 10800 Allocated OH 8880 Fixed OH 2960 2780 Requirements: VOH Cost Variance Actual OH-(Actual HoursXSP) (10800-(2960*7) -9920 Favourable Rate of Actual OH was way less than Budgeted VOH Efficiency Variance (Actual Hours-Standard Hours)XSP (2960-1850)7 7770 Adverse Actual Hours were higher than Standard Hours -2150 FOH Cost Variance Actual OH-Budgeted OH (2780-3000) -220 Favourable Actual OH were less than Budgeted FOH Volume Variance Budgeted OH-Allocated OH (3000-8880) -5880 Over Allocation Actual Production was much more than Static Budget Favourable

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