Question

The solution may be submitted as a Word document, Exc or PDF. The assignment will be from Chapter 11 Problem 11-4 your textbook. PI Overt Varia (LO 1 2. Va Maxwell Company uses a standard cost accounting system and applies production overhead to products on the basis of machine hours. The following information is available for the year just ended: Standard variable-overhead rate per hour: $2.50 Standard fixed-overhead rate per hour: $4.00 Planned activity during the period: 20,000 machine hours Actual production: 10,700 finished units Machine-hour standard: Two completed units per machine hour Actual variable overhead: $55,440 Actual total overhead: $155,900 Actual machine hours worked: 23,100 varia 5. Va unde Required: 1. Calculate the budgeted fixed overhead for the year. 2. Compute the variable-overhead spending variance. 3. Calculate the company's fixed-overhead volume variance. 4. Did Maxwell spend more or less than anticipated for fixed overhead? How much? 5. Was variable overhead underapplied or overapplied during the year? By how much? 6. On the basis of the data presented, does it appear that Maxwell suffered a lengthy strike during the year by its production workers? Briefly explain.

Answer 1

Answer-1
Budgeted Fixed overhead = planned activity* std rate per hour
	=20,000*4
	=$ 80,000
Answer-2
Variable Overhead Spending Variance = Actual hours at actual rate- Actual hours at Std rate
Actual rate=55440/23100 = $2.40 per hour
Std rate =$ 2.50 per hour
Variable overhead Spending variance
=(23100*2.4)-(23100*2.5)
=2310 (F)
Answer -3
Fixed overhead Volume variance = Budgeted fixed Overhead- ( Std hours*Std rate)
Std hours =10700*0.5 per hour =5350 hours
Std rate = $4 per hour
Budgeted Fixed Overhead = $80,000
so, Fixed Overhead Volume variance
=80,000- (5350*4)
=58,600 (F)
Answer-4
Actual Fixed Overhead = Total actual Overhead- Actual variable overhead
	=$ 1,55,900- $ 55,440
	= $ 100,460
Budgeted Fixed Overhead = $ 80,000
Budgeted Fixed Overhead variance =$ (100460-80000) =$20,460 (U)
Answer-5
Actual variable Overhead = $ 55,440
Applied Variable Overhead =5350 hours @ $ 4 per hour = $ 21,400
So, variable overhead was under applied by $ 42,065
Answer -6
Planned Production =( $ 2* 20,000) $ 40,000
Actual production = 10,700 units.
Based on volume variance , it does appear that lengthy Strike is a strong possibilty.