Question

Overhead Application, Fixed and Variable Overhead Variances Zepol Company is planning to produce 600,000 power drills for the coming year. The company uses direct labor hours to assign overhead to products. Each drill requires 0.75 standard hour of labor for completion. The total budgeted overhead was $1,777,500. The total fixed overhead budgeted for the coming year is $832,500. Predetermined overhead rates are calculated using expected production, measured in direct labor hours. Actual results for the year are: Actual production (units) Actual direct labor hours (AH) 594,000 Actual variable overhead $928,000 446,000 Actual fixed overhead $835,600 Required: 1. Compute the applied fixed overhead. 2. Compute the fixed overhead spending and volume variances. Enter amounts as positive numbers and select Favorable or Unfavorable. Spending variance $ Volume variance $ 3. Compute the applied variable overhead. 4. Compute the variable overhead spending and efficiency variances. Enter amounts as positive numbers and select Favorable or Unfavorable. Spending variance Efficiency variance $ $

Answer 1

Answer Page: No 0 © Applied fixed overhead Boelgebed fixed overhead . freed overhead x Applied Actual howrs Budgetcel hours $832500 x 446000 hrs 600,000 onilo x 0.75 832500X446000 450,000 1.85 X 446000 - 825100 overhead = $825100 - Applied fixed red Overhead pending Volun Variances Fided overhead aspending variance = Budgeted overhead – Achaal overhead = 832500 - 835600 = 3100 Confavorable)

Page No ③ Spending variance = $3100 Confavorable) . Fixed overhead Fixed overhead volume vcoviance = standard cord for adual olp - Budgeted overhead | 8325000 832500 x 594000 600,000 unit 832500 = 824175 – 832500 = 8325 (unfavorable) Hifised overhead volume variance = '$8325 (on leucoable) ☺ Arelied variable owerhead overhead Applied variable Total overhead - fixed overhead Bedgebed hours C Actual hours 1779500 - 832.500 -.X 446000 600,000 units X0-75 945000 x446000 450,000

Page. No 3 E = 2:1 X 446000 $936600 = 936600 1. Applied variable overhead efficiency variances Spend OvocaO ااااا Variable WANA MC Variable overhead spending variance = Applied variable overhead - Aeliu al overhead - 936,600 – 928000 = 8600 ( favorable) - Variable overhead Spending variance = $8600 (favorable) V Variable overhea variance = X Standard sho Orale Variable overhead efficiency vaniance = (standand bra x standing - Applied ovenhed a Standoorid hours - Budgeted hrs & Actual output Budgeted output 450,000 x 594000 6003000

Page No 4 2 0.75 X 594000 = 445500 Standard rate = Budgeted Budgeted overhead Budgebed howro 1777500 - 832500 450,000 945000 4501000 = $2.1 Variable overhead efficiency variance = (445500 x2-1).- 936600 935550 - 936600 - $1050 ( unfavorable) .: variable overhead efficiency variance = $1050 (unfavorable)