Question

Norwall Company's budgeted variable manufacturing overhead cost is $1.40 per machine-hour and its budgeted fixed manufacturing overhead is $77,350 per month. The following information is available for a recent month: a. The denominator activity of 22,750 machine-hours is used to compute the predetermined overhead rate. b. At a denominator activity of 22,750 machine-hours, the company should produce 9,100 units of product. c. The company's actual operating results were: Number of units produced Actual machine-hours Actual variable manufacturing overhead cost Actual fixed manufacturing overhead cost 9,990 24, 190 $ 37,494 $ 72,700 Required: 1. Compute the predetermined overhead rate and break it down into variable and fixed cost elements. (Round your answers to 2 decimal places.) 2. Compute the standard hours allowed for the actual production. 3. Compute the variable overhead rate and efficiency variances and the fixed overhead budget and volume variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (.e., zero variance). Input all amounts as positive values. Round your intermediate calculations and final answers to 2 decimal places.) per MH per MH per MH MHS 1. Predetermined overhead rate Variable element Fixed element 2. Standard hours allowed for the actual production Variable overhead rate variance Variable overhead efficiency variance Fixed overhead budget variance Fixed overhead volume variance

Answer 1

1) Predetermined Overhead rate - variable mfg overhead rate e mfg Estimated tried t echnoted mach overhead Estimated machine hours → $1.40 + $77,350 22,750. - 448 44.8) (1.40+3.4) Variable element = $1.40 fired element = $3.40. 2 computahon of standard howes permitted for actual produchon. - standard hours x Actual Production. allowed per unit - 22,750 & 9,990 9,100 = $24,975 3) var variable overhead rate variance - (Actual standard) x Actual Hour rate a rate = ($37,494 -1.40) x 24, 190 24, 190 - $3,628.50 Unfavourable standard rate b) Variable OH Efficieny valiance = CActual Hours - standard hos) x - (24, 190-24,975) × $34.4 7 $1,099 favourable

tired overhead overhead Budget variance Actual fixed Overhead G) Budget fixed - $72,700 - 77,350 = 4,650 favourable freed overhead volume variance - Budgeted tired overhead - Standard overhead at actual output - $77,350 - 3.40 x 24,975 = $7,565 Favourable

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