Hauser brother uses machine hours to apply standard overhead cost to productions

ID: 2578057 • Letter: H

Question

Units 2,500

total machine hours denominator volume 100,000

total variable overhead costs 250,000

total fixed overhead cost 50,000

actual operating results:

variable overhead costs incurred 265,000

fixed overhead costs incurred 54,000

units manufactured 2,250

actual machine hours 96,000

FInd

variable overhead spending variance

variable overhead efficiency variance

fixed overhead spending variance

fixed overhead production - volume variance

1. Standard variable overhead rate = $250000/ 100000 = $2.5

Actual variable overhead rate = $265000/ 96000 = $2.76

variable overhead spending variance = (SR-AR) x AH

= ($2.50 - $2.76) x 96000

= $25000 U

2. Standard hours for actual output = 100000/ 2500 x 2250 = 90000

Actual hours for actual output = 96000

variable overhead efficiency variance = (SH - AH) x SR

= (90000-96000) x $2.5

= $15000 U

3. fixed overhead spending variance = Budgeted - Actual

= 50000 - 54000

= $4000 U

4. Applied fixed overhead = 50000/ 100000 x 96000 = $48000

fixed overhead production - volume variance = Applied - Budgeted

= $48000 - $50000

= $2000 U

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