Please help with a step by step solution for homework problem for chapter 16 . The textbook I am using is Fundamental of Cost Accounting sixth edition. My question is in reference to exercise 16-65. Part A and Part B. The answer I submitted was incorrect
McDormand, Inc reported a $3,200 unfavorable price variance for variable overhead and a $32,000 unfavorable price variance for fixed overhead. The flexible budget had $1,080,000 variable overhead based on 36,000 direct labor hours; only 34,080 were worked. Total actual overhead was $1,829,600. The number of estimated hours for computing the fixed overhead application rate totaled 38,600.
Required:
a. Prepare a variable overhead price analysis :
Price variance:
Efficiency variance:
Variable overhead cost variance:
b. Prepare a fixed overhead analysis:
Price variance:
Production volume variance:
Fixed overhead cost variance:
Your help is very much appreciated.
Solution:
A)
1) Variable overhead price variance = (Actual hours * Standard variable overhead rate ) - Actual variable overhead cost
(-)3,200 = (34,080 *1,080,000/36,000) -Actual variable overhead cost
Actual variable overhead cost = 1,022,400 +3,200
Actual variable overhead cost = 1,025,600
2) Variable overhead efficiency variance =(Standard hours for actual output - Actual hours ) + Standard variable overhead rate
=(36,000 - 34,080)*1,080,000/36,000
=1,920 * 30
=57,600(Favorable)
3) Variable overhead cost variance = (Standard hours for actual output * Standard variable overhead rate) - Actual variable overhead
=(36,000 * 1,080,000/36,000 ) - 1,025,600
=1,080,000 - 1,025,600
=54,400(favorable)
Variable overhead price variance | 3,200 (unfavorable) |
Variable overhead efficiency variance | 57,600(favorable) |
variable overhead cost variance | 54,400(Favorable) |
B)
1)Fixed overhead price variance = Budgeted fixed overhead - Actual fixed overhead cost
(-)32,000 = Budgeted fixed overhead -(1,829,600 - 1,025,600)
Budgeted fixed overhead = 804,000 - 32,000
Budgeted fixed overhead = $ 772,000
Standard fixed overhead rate = 772,000 / 38,600
= 20
2) Fixed overhead volume variance = (Standard hours for actual output - Budgeted hours)*Standard fixed overhead rate
=(36,00 - 38,600) *20
= 52,000(Unfavorable)
3)Fixed overhead cost variance = Fixed overhead price variance + Fixed overhead volume variance
=(-)32,000+(-)52,000
=84,000
Fixed overhead price variance | $32,000(Unfavorable) |
Fixed overhead volume variance | $52,000(Unfavroable) |
Fixed overhead cost variance | $84,000(unfavorable) |
Please help with a step by step solution for homework problem for chapter 16 . The...
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