Question

HOW DO I CALCULATE?

World Company expects to operate at 80% of its productive capacity of 56,250 units per month. At this planned level, the company expects to use 22,500 standard hours of direct labor. Overhead is allocated to products using a predetermined standard rate of 0.500 direct labor hour per unit. At the 80% capacity level, the total budgeted cost includes $60,750 fixed overhead cost and $263,250 variable overhead cost. In the current month, the company incurred $338,000 actual overhead and 19,500 actual labor hours while producing 42,000 units. (1) Compute the overhead volume variance. Classify each as favorable or unfavorable. (2) Compute the overhead controllable variance. Classify each as favorable or unfavorable. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the overhead volume variance. Classify as favorable or unfavorable. (Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance. Round "OH costs per DL hour" to 2 decimal places.) Fixed Overhead Applied Fixed overhead applied Volume Variance Volume variance

Answer 1

Solution:

19 21 world company 23 24 25 26 27 28 29 30 31 Fixed Overhead Applied Fixed Overhead Per DL hr ($60750/22500) $2.70 Standard DL Hours (42000 Units* 0.500) 21000 Fixed Overhead Applied (21000X2.70) $56,700 Volume variance Total Fixed Overhead Applied $56,700 Total Budgeted Fixed OH $60,750 Volume Variance $4,050 Unfavorable 32 33 35 36 37 Computation of Overhead Controllable Variance Total Actual Overhead $338,000 Flexible Budgeted Overhead: Variable ($263250/22500*21000) $245,700 Fixed $60,750 $306,450 Overhead Controllable Variance $31,550 Unfavorable 42 Total 44 5) Sheet914 Sheet915 Sheet247 (2) Sheet917 She