Question

The (partial) cost sheet for the single product manufactured at Vienna Company follows. Direct labor Variable overhead Fixed overhead (15 hours @ $25) (15 hours @ $2) (15 hours @ $4) $375 30 60 The master budget level of production is 78,000 direct-labor hours, which is also the production volume used to compute the fixed overhead application rate. Other information available for operations over the past accounting period include the following. Actual variable overhead incurred Actual fixed overhead incurred Direct labor efficiency variance Variable overhead price variance $ 128,000 326,800 158,000 U 26,000 F Required: a. What was the variable overhead efficiency variance? b. What was the fixed overhead price variance? c. What was the fixed overhead production volume variance? (For all requirements, indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.) Answer is complete but not entirely correct. a. Variable overhead efficiency variance Fixed overhead price variance Fixed overhead production volume variance $ $ $ 12,640U 14,800 4,000 ⓇU c.

Please help me with part c, thanks in advance.

Answer 1

Firstly we have to calculate actual direct labour hours

Variable overheads price variance

= actual cost - ( standard cost × actual direct labour hours)

- 26000 = 128000 - ( 2 × actual direct labour hours)

(26000 + 128000)/2 = actual direct labour hours

77000 hours = actual direct labour hours

Direct labour efficiency variance

= ( actual hours - standard hours)× standard price

158000 = (77000 - standard hours)×25

Standard hours =77000 - (158000/25)

Standard hours = 70680 hours

Now we can calculate fixed overhead production volume variance

= applied fixed overheads - ( budgeted overheads to be applied based on production)

= (4×77000)-(4×70680)

= $ 25280 unfavorable

Thus the correct answer is $ 25280 unfavorable