Jay Enterprises collected the following data regarding production of one of its

Question

Jay Enterprises collected the following data regarding production of one of its products.

Compute the variable overhead cost variance, the variable overhead spending variance, the variable overhead efficiency variance, the fixed overhead cost variance, the fixed overhead spending variance, and the fixed overhead volume variance.

Direct labor standard (2 hrs. @ $15/hr.)

$30.00 per finished unit

Actual direct labor hours

60,800 hrs.

Budgeted units

31,000 units

Actual finished units produced

30,000 units

Standard variable OH rate (2 hrs. @ $14.00/hr.)

$28.00 per finished unit

Standard fixed OH rate ($310,000/31,000 units)

$10.00 per unit

Actual variable overhead costs incurred

$857,600

Actual fixed overhead costs incurred

$312,000

Direct labor standard (2 hrs. @ $15/hr.)

$30.00 per finished unit

Actual direct labor hours

60,800 hrs.

Budgeted units

31,000 units

Actual finished units produced

30,000 units

Standard variable OH rate (2 hrs. @ $14.00/hr.)

$28.00 per finished unit

Standard fixed OH rate ($310,000/31,000 units)

$10.00 per unit

Actual variable overhead costs incurred

$857,600

Actual fixed overhead costs incurred

$312,000

Explanation / Answer

(1)

Variable overhead cost variance = Actual variable overhead cost - Standard variable overhead cost

= $857,600 - (30,000 x $28) = $(857,600 - 840,000)

= $17,600

(2)

Variable overhead spending variance = Actual variable overhead costs incurred - (Actual hours x Standard variable OH Rate)

= $857,600 - (60,800 x $14)

= $(857,600 - 851,200) = $6,400 (Adverse)

(3)

Variable overhead efficiency variance = Standard Rate x (Actual Hours - Standard Hours)

= $14 x [60,800 - (30,000 x 2)] = $14 x (60,800 - 60,000) = $14 x 800 = $11,200 (Adverse)

(4)

Fixed overhead cost variance = Actual Fixed overhead cost - Standard Fixed overhead cost

= $312,000 - (30,000 x $10) = $(312,000 - 300,000)

= $12,000 (Adverse)

(5)

Fixed overhead spending variance = Actual Fixed overhead costs incurred - Budgeted Fixed OH expense

= $312,000 - $310,000

= $2,000 (Adverse)

(6)

Fixed overhead volume variance = Standard fixed OH rate x (Actual Output - Budgeted Output)

= $10 x (30,000 - 31,000) = $10 x - 1,000

= $10,000 (Adverse)

NOTE: Variance Analysis is an Accounting subject & not Finance. Please categorize questions properly.

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