Question

Holicow Manufacturing manufactures widgets for distribution. The standard costs for the manufacture of widgets follow: Standard Costs Actual Costs Direct materials 3 lbs. per widget at 31,000 lbs. at $34 $35 per pound per pound Direct labor 2.5 hours per widget at $11 per hour 22,500 hours at $11.80 per hour Factory overhead Variable cost, $24/widget Fixed cost, $40/widget $241,500 variable cost $381,250 fixed cost Budgeted factory overhead was $640,000. Overhead applied is based on widgets produced. The company estimated that 10,000 widgets would be produced; however, only 9,600 were produced. Instructions Calculate the following amounts. 1. Rate at which total factory overhead is applied 2. Materials price variance 3. Total materials variance 4. Overhead volume variance 5. Overhead controllable variance

Answer 1

Solution:1	Rate at which Total Factory Overhead is Applied
	Given:
	Total Budgeted Factory Overheads	$640,000
	Overhead rate will be based on widgets produced
	Budgeted Widgets Produced	10000
	Overhead rate will be	Budgeted Factory OH/Budgeted Widgets Produced
		$640000/10000=$64

Solution-2	Material Price Varience
	Material Price Varience=(SP-AP)xAQ
	Where
	SP=Standard Price
	AP= Actual Price
	AQ=Actual Quantity
	In the Given Question:
	SP=$35/Pound
	AP=$34/Pound
	AQ=31000 Ibs
	MPV=(35-34)x31000=31000

Solution-3

Total Material Varience:

Total Material Varience= (Std Cost-Actual Cost)

Where Std Cost= (Std Quantity(SQ)xStd Price(SP))

And Actual Cost =(Actual Qty(AQ)xActual Price(AP))

In the Given Question:

Std Quantity = Std Qty required for actual units produced

(9600x3)=28800 Ibs

So Std Cost=(28800x35)=$1008000

Actual Cost=(31000x34)=$1054000

Total Material Varience =(1008000-1054000)=-46000

Solution-3

Overhead Volume Varience:
Overhead Volume Varience= Absorbed Factory OH-Budgeted Factory OH
In the Given Question:
Absorbed Factory OH= (9600x64)=$614400
Budgeted Factory OH=(10000x64)=$640000
Overhead Volume Varience=($614400-$640000)=-$25600

Solution-4

Overhead Controlable Varience:
Overhead Controlable Varience=Actual OH Exp-(Budgeted OH/UnitxStd No of Units)
In the given Question
Actual Factory OH=($241500+$381250)=622750$
Budgeted OH/Unit=$64(As per Solution 1)
Std No of Units=10000
Overhead Controlable Varience=$622750-($64x10000)=-17250$