The condensed form of Nordstrop Company’s flexible budget for manufacturing overhead follows:
Cost | Machine-Hours | |||||||
Formula | ||||||||
Overhead Costs | (per machine-hour) | 7,500 | 8,500 | 9,500 | ||||
Variable cost | $ | 1.35 | $ | 10,125 | $ | 11,475 | $ | 12,825 |
Fixed cost | 15,000 | 15,000 | 15,000 | |||||
Total overhead cost | $ | 25,125 | $ | 26,475 | $ | 27,825 | ||
The following information is available for a recent period:
Number of units produced | 4,050 | |
Actual machine-hours | 8,200 | |
Actual variable overhead costs | $ | 12,000 |
Actual fixed overhead costs | $ | 16,000 |
Required:
1. Compute the predetermined overhead rate and break it down into variable and fixed cost elements. (Round your answers to 2 decimal places.)
2. What were the standard hours allowed for the year’s actual output? (Do not round intermediate calculations.)
3. Compute the variable overhead spending and efficiency variances and the fixed overhead budget and volume variances. (Do not round intermediate calculations. Round your answers to 2 decimal places. Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).)
Answers
>Predetermined Overhead rate = $
1.35 + ($15000 / 7500 machine hours) = 1.35 + 2 = $ 3.35 per
machine hours
>variable cost rate = $ 1.35 per machine hour
>fixed cost rate = $ 2.00 per machine hour
Variable Overhead Spending Variance |
||||||
( |
Standard Cost |
- |
Actual Cost |
) |
||
( |
$ 10,935.00 |
- |
$ 12,000.00 |
) |
||
-1065 |
||||||
Variance |
$ 1,065.00 |
Unfavourable-U |
Variable Overhead Efficiency Variance |
||||||
( |
Standard Hours |
- |
Actual Hours |
) |
x |
Standard Rate |
( |
8100 |
- |
8200 |
) |
x |
$ 1.35 |
-135 |
||||||
Variance |
$ 135.00 |
Unfavourable-U |
Fixed Overhead Production Budget Variance |
||||||
( |
Budgeted Fixed Overhead |
- |
Actual Fixed Overhead incurred |
) |
||
( |
$ 15,000.00 |
- |
$ 16,000.00 |
) |
||
-1000 |
||||||
Variance |
$ 1,000.00 |
Unfavourable-U |
Fixed Overhead Production Volume Variance |
||||||
( |
Standard Fixed Overhead or Fixed Overhead absorbed |
- |
Budgeted Fixed Overhead |
) |
||
( |
$ 16,200.00 |
- |
$ 15,000.00 |
) |
||
1200 |
||||||
Variance |
$ 1,200.00 |
Favourable-F |
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