Question

Crystal Glassware Company has the following standards and flexible-budget data. Standard variable-overhead rate Standard quantity of direct labor Budgeted fixed overhead Budgeted output $ 6.00 per direct-labor hour 2 hours per unit of output $144,000 24,000 units Actual results for April are as follows: 1 + Actual output Actual variable overhead Actual fixed overhead Actual direct labor 17,000 units $306,000 $141,000 50,000 hours Required: Use the variance formulas to compute the following variances. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "O" for no effect (i.e., zero variance).) | 1. Variable-overhead spending variance 2. Variable-overhead efficiency variance 3. Fixed-overhead budget variance 4. Fixed-overhead volume variance Unfavorable Unfavorable Favorable Unfavorable

Answer 1

1) Variable-overhead spending variance = Standard variable OH for actual labour hrs. - Actual variable OH

                                      ie.( Actual hrs.*Std.VOH rate ) - Actual VOH cost

                                         =(50000*6)-306000 =6000 (UF)

2) Variable-overhead efficiency variance =Absorbed VOH - Std. VOH

                                                               ie. (Std.hrs. for actual output -Actual hrs ) * Std. VOH rate

                                                            = {(17000 *2) - 50000 } * 6

= 96000 (UF)

3)

Fixed-overhead budget/expenditure variance = Budgeted FOH - Actual FOH

                                                    ie. 144000-141000 = 3000 (F)

4)

Fixed-overhead volume variance = Absorbed FOH - Budgeted FOH

                                                    ie. ( Std. hrs.for actual output-Budgeted hrs.) *Std.FOH rate

Std.FOH Rate =      $144000/(24000units*2hrs) = $3

                                                = { ( 17000*2 ) - (24000*2) }*3

                                                = (34000 -48000 )*3= 42000 (UF)