Question

Problem 23- Rogen Corporation manufactures a single product. The standard cost er unit of product is shown below Direct materiai-1 pound plastic at $5.00 per pound $6.00 Direct labor0.5 hours $11.00 per hour Variable manufacturing overhead 2.75 Fixed manufacturing overhead Total standard cost per unit $16.50 The predetermined manufacturing overhead rate is $10 per direct labor hour($5.00 -0.5). It was computed from a master manufacturing overhead budget based on normal production of 2.500 direct labor hours 15,000 units) for the month. The master budget showed total variable costs of $13,750 ($5.50 per hour and total fixed overhead costs of $11,250 (14.50 per hour). Actual cost for October in producing 4.200 were as follows Direct materials (4,300 pounds) Direct labor (2.000 hours) Varrhead Fixed overhead Total manufacturing costs $26,230 22.400 14,700 3.100 $71,430 The purchasing department by the cu aw materials that are expected to be used in production each month. Raw materials inventories, therefore, can be ignored

Answer 1

Solution:

Overhead controllable variance = Budgeted overhead for actual production - actual overhead

= ($11,250 + 4200*0.50*$5.50) - ($14,700 + $8,100)

= $22,800 - $22,800 = 0

Overhead volume variance = Fixed overhead applied - Budgeted fixed overhead = (4200*0.5*$4.50) - $11,250 = $1,800 U