Question

Thompson Foods processes bags of organic frozen fruits sold at specialty grocery stores Click the loon to view additional information) Read the reviret Requirement 1. How much variable overhead would have been allocated to production? How much foed overhead would have been allocated to production? The variable overhead allocated to production is $ 31,125 Now determine the fixed overhead allocated to production The fxed overhead allocated to production is $ 697 200 Requirement 2. Compute the variable MOH rate variance and the variable MOH efficiency variance. What do these variances tel managers? Begin by determing the formula for the variable MOH rate variance, then calculate the variable overhead rate variance (Enter the result as a positive number. Enter rates to two decimal places. Label the variance as favorable (F) or unfavorable (UN) Variable overhead Actual hours Au to . Standard rate . rate variance 41800 x 0.75) D U Choose from any list or enter any number in the input fields and then click Check Answer

Answer 1

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Req. 1
Variable overhead allocated (166,000 x .25) x $0.75	$                                                                                 31,125
Fixed overhead allocated (166,000 x .25) x $16.80	$                                                                              697,200
Req. 2
Total Actual Overheads	a	$                             673,890
Total Actual Fixed overheads	b	$                             630,000
Total Actual variable overheads	a-b=c	$                               43,890
Actual Direct Labor hours	d	41,800
Actual Rate of overheads-variable		$                                    1.05
Standard hours allowed (SHA)	166,000*0.25	41,500
Variable MOH rate variance (a)	AH x (AR - SR)	41,800*($1.05-$0.75)	$   12,540	Unfavorable
Variable MOH efficiency variance (b)	SR x (AH - SHA)	$0.75*(41,800-41,500)	$         225	Unfavorable
(a)     This variance tells managers that the company actually incurred more on variable manufacturing overhead than they would have expected given the actual hours used.
(b)     This variance tells managers that the company used more direct labor hours than anticipated for the actual volume of output.
Req. 3
Fixed overhead budget variance (a)	Actual FOH – Budgeted FOH	$630,000-$625,000	$     5,000	Unfavorable
Fixed overhead volume variance (b)	Budgeted FOH – Standard FOH allocated	$625,000-$697,200	$   72,200	Favorable
(a)     This variance tells us that the company spent more than anticipated on fixed overhead costs.
(b) This variance tells managers that the company produced more cases than originally expected.