Question

ACC 321 BBAs#5 - Problem (chapter 8) The following information was taken from the annual manufacturing overhead cost Budget of the Ferguson Company: Variable manufacturing overhead costs $33,000 Fixed manufacturing overhead costs $20,625 Normal production level in hours 16,500 Normal production level in units 4,125 During the year, 4,000 units were produced, 16.100 hours were worked, and the actual man- ufacturing overhead was $54,000. Actual fixed manufacturing overhead costs equaled bud- geted fixed manufacturing overhead costs. Overhead is applied on the basis of direct labor hours Required: a) Calculate the variable, fixed & total predetermined mfg. overhead rates b) Determine the applied mfg. c) Was mfg. overhead cost for the year d) Analyze and calculate spending, efficiency, & production and fixed overhead costs for the year. lume variances as they apply to both variable e) Discuss the results and who is responsi

Answer 1

A)Overhead Rates =Estimated overhead /Estimated direct labor hours

Variable [33000/16500]	$ 2 per DLH
Fixed      [20625/16500]	$ 1.25 per DLH
Predetermined overhead rate	$ 3.25 per DLH

B)

Applied overhead =Actual Output *standard hours per unit * Overhead rate

Standard hours per unit = 16500 / 4125 = 4 Hours per unit

Variable [4000*4*2]	32000
Fixed      [4000*4*1.25]	20000
Total Applied overhead	52000

C)

manufacturing overhead
Actual	54000	Applied	52000
Balance	2000 UnderApplied

Overhead is Under Applied by 2000

D)

	Variable	Fixed
Spending Variance	Actual cost -[Actual Hours *Standard variable overhead rate] 33375 - [16100*2] 33375- 32200 1175 U	Actual cost-Budgeted cost 20625 - 20625 0 None
Efficiency variance	Standard variable overhead rate[Actual hours -standard hours for actual output] 2[16100 - 16000] 2 * 100 200 U	-
Volume variance	-	Budgeted fixed overhead -Applied fixed overhead 20625-20000 625 U
Total Variance	1375 U	625 U

Standard hours per unit = 16500 / 4125 = 4 Hours per unit

standard hours for actual output =Actual output 4000 units * 4 = 16000

e)

All of the variance calculated comes out to be unfavorable (neither is favorable ) So it means Management or production department is inefficient in their workings.

Production department is responsible for all such variances.