Question

Montreal Inc. manufactures garden hoses for large stores. The standard costs for a dozen garden hoses are as follows: Direct materials Direct labour 24 m x $2 per metre = $48.00 3.40 hours x $12 per hour = $40.80 During February, Montreal Inc. worked on three separate orders of garden hoses. Job cost records for the month disclose the following: Lot 4503 4504 4505 Units in Lot 1,060 dozen 1,570 dozen 15,380 dozen Materials Used Hours Worked 25,652 m 2,920 37,994 m 5,090 372,196 m 2,830 You have been able to gather the following information: 1. 2. 3. Montreal Inc. purchased 102,000 m of material during February at a cost of $224,400. The material price variance is recorded when goods are purchased, and all inventories are carried at standard cost. The payroll department reported that production employees were paid $12.5 per hour. There was no beginning work in process. During February, lots 4503 and 4504 were completed, and all materials were issued for lot 4505, which was 60% complete in terms of labour. Montreal Inc. applies fixed and variable overhead based on machine hours. Below are the results for Montreal Inc. for the month of February: 4. The normal activity in machine hours Flexible budget variable overhead per machine hour Actual variable overhead cost incurred Actual fixed overhead cost incurred Variable overhead cost applied to production Variable overhead efficiency variance (unfavourable) Fixed overhead budget variance (unfavourable) 39,500 $2.60 117,000 302,000 117,500 8,000 2,000

1. Variable overhead spending?

2. Variable overhead efficiency variance?

3. Total variable overhead variance?

4. Fixed overhead spending variance?

5. Fixed overhead volume variance?

6. Total fixed overhead variance?

Answer 1

	Complete Analysis on Variance- overhead
	Variable OH spending variance	Budgted variable OH -Actual Variable OH incurred
Answer2	Variable OH Efficiency variance= Unfavorable $ 8000
	Actual Variable OH cost incurred $ 117000
	Calculate Budgeted variable OH
	Budgeted variable OH	1,09,000
	(117000-8000)
	Variable OH Efficiency variance= Unfavorable $ 8000= $117000- Bugeted Variable OH
	Variable OH spending variance	Budgted variable OH -Actual Variable OH incurred
	Budgeted variable OH $	1,09,000
	Actual Variable OH cost incurred $ 117000
Answer1	Variable OH spending variance$	8,000	Unfavorable
	($109000-$117000)
	Total variable OH variance	Amnt$
	Variable OH Efficiency variance= Unfavorable $ 8000	8,000
	Variable OH spending variance$	8,000
Answer3	Total variable OH variance $	16,000
Answer4	Fixed OH spending variance Unfavrable	2,000
	Actual fixed cost incurred	3,02,000
	Budgeted Fixed Overhead	3,00,000
	$(302000-2000)
Answer5	Fixed overhead volue variance ($300000-$343233)	43,233	favorable
	Budgeted Fixed Overhead	3,00,000
	Abosrbed fixed OH ( Need to derived number as below)	3,43,233
	Budgeted Fixed Overhead	3,00,000	A
	The normal activity in Machine Hrs	39,500	B
	Rate $ / hr (A/B)	7.59
	Variable OH cost applied to production	1,17,500	c
	Flexible Budeted variable OH per machine Hr$/Hr	2.60	d
	Actual machine Hr	45,192.3	(c/d)
	Abosrbed fixed OH (45192*$7.59 hr)	3,43,233
Answer6	Total Fixed OH variance	Amnt$
	Variable OH Efficiency variance= Unfavorable	8000	Unfavorable
	Fixed overhead volue variance	43,233	favorable
	Total Fixed OH variance	35,233	favorable