Question

The Tavarez Company uses standard costing in its manufacturing plant for auto parts. The standard cost of a particular auto part, based on a denominator level of 3.700 output units per year, included 6 machine-hours of variable manufacturing overhead at $0 per hour and machine-hours of fixed manufacturing overhead at $14 per hour. Actual output produced was 4,000 units. Variable manufacturing overhead incurred was $255,000. Fixed manufacturing overhead incurred was $373.000 Actual machine-hours were 26,500 Read the requirements Requirement 1. Prepare an analysis of all variable manufacturing overhead and fixed manufacturing overhead variances, using the 4-variance analysis. Begin by calculating the following amounts for the variable overhead. Actual Input Flexible Actual Costs Incurred Allocated Overhead Budgeted Rate Budget Variable OH

Answer 1

Answer-1:

The analysis of variable manufacturing overhead: Actual cost incurred: Actual input x Actual rate Actual input Budgeted rate Allocated: Budgeted input for actual output < Budgeted rate (3) (4,000 x 6 x $9) $ 216,000 (1) (2) (26,500 $9) 238,500 255,000 $ $16,500 U Spending variance $22,500 U Efficiency variance $39,000 U Flexible Budget variance

The analysis of fixed manufacturing overhead: Actual cost incurred: Actual input Actual rate Flexible budget: lumpsum regardless of output level Allocated: Budgeted input for actual output Budgeted rate (2) (3) (3,700 x 6* $14) $ 310,800 $ 373,000 (4,000 x 6 x $14) $ 336,000 $62,200 u Spending variance $25,200 F prod. Vol. variance $37,000 U over allocated fixed overhead

Answer-2:

Credit Debit 255,000 $ Account Variable overhead control | Account payable and various other accounts (to record the actual overhead cost incurred) $ 255,000 216,000 WIP Control Variable overhead allocated (to record the actual variable overhead allocated) 216,000 Variable overhead allocated Variable overhead spending variance Variable overhead efficiency variance Variable overhead control |(to record the variance for the accounting period) 216,000 16,500 22,500 255,000

Credit Debit $ 373,000 Account Fixed overhead control Account payable and various other accounts (to record the actual overhead cost incurred) $ 373,000 336,000 WIP Control Fixed overhead allocated I(to record the actual variable overhead allocated) 336,000 336,000 62,200 Fixed overhead allocated Fixed overhead spending variance Fixed overhead production volume variance Fixed overhead control |(to record the variance for the accounting period) 25,200 373,000