Question

Walkenhorst Company's machining department prepared its 2019 budget based on the following data: 40,000 units 2 Practical capacity Standard machine hours per unit Standard variable factory overhead Budgeted fixed factory overhead $3.00 per machine hour $424,000 The department uses machine hours to apply factory overhead to production. In 2019, the department used 85,800 machine hours and incurred $689,000 in total manufacturing overhead cost to manufacture 42,070 units. Actual fixed overhead cost for the year was $437,000. Required: Determine for the year: 1. The fixed, variable, and total factory overhead application rates (per machine hour). (Round your answers to 2 decimal places.) 2. The total flexible budget, for factory overhead cost based on output achieved in 2019. 3. The production volume variance. State whether this variance was favorable (F) or unfavorable (U). 4. The total overhead spending variance. State whether this variance was favorable (F) or unfavorable (U). 5. The overhead efficiency variance. State whether this variance was favorable (F) or unfavorable (U). 6. The variable overhead spending variance and the fixed overhead spending variance. State whether each variance is favorable (F) or unfavorable (U). & Answer is not complete. Fixed overhead application rate Variable overhead application rate Total factory overhead application rate Total flexible budget for overhead cost Production volume variance Total overhead spending variance Overhead efficiency variance Variable overhead spending variance Fixed overhead spending variance Favorable Unfavorable Unfavorable Favorable Unfavorable

Answer 1

Answer

Ans 1
Variable factory overhead	$3	per machine hour
Fixed overhead application rate	$5.3	per machine hour
(424,000/40,000*) =10.6/2
Total factory overhead application rate	$8.3
Ans 2
Flexible Budget for overhead cost	676420
Std machine hours allowed for actual production =42,070*2=84,140
(84140*3)+424000
Ans 3
Fixed overhead production volume variance	30,058
Budgeted - Applies fixed overhead	30058	F
476,000 - (84,140*5.3)
Ans 4
Total Overhead Spending Variance	7,600	U
Actual Overhead -Overhead applied on actual hours
(689,000-(424,000 +(85,800*3)
Ans 5
Overhead efficiency variance	4980	U
(Std rate*actual hours)-Flexible Budget
(424,000 + (85,800*3)) - 676420
Ans 6
Variance overhead spending variance	-5400
Actual Variance overhead-(Std rate*actual hours)	5400	F
(689,000 - 437,000)-(3*85,800)
Fixed overhead spending variance	13000	U
Actual - Budgeted
437,000 - 424,000