Question

Norwall Company’s budgeted variable manufacturing overhead cost is $1.30 per machine-hour and its budgeted fixed manufacturing overhead is $30,624 per month.

The following information is available for a recent month:

1. The denominator activity of 9,570 machine-hours is used to compute the predetermined overhead rate.
2. At a denominator activity of 9,570 machine-hours, the company should produce 3,300 units of product.
3. The company’s actual operating results were:

Number of units produced		4,570
Actual machine-hours		10,090
Actual variable manufacturing overhead cost	$	14,630
Actual fixed manufacturing overhead cost	$	35,300

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. Compute the standard hours allowed for the actual production.

3. Compute the variable overhead rate and efficiency variances and the fixed overhead budget and volume variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Round your intermediate calculations and final answers to 2 decimal places.)

Norwall Company's budgeted variable manufacturing overhead cost is $1.30 per machine-hour and its budgeted fixed manufacturing overhead is $30,624 per month. The following information is available for a recent month: a. The denominator activity of 9,570 machine-hours is used to compute the predetermined overhead rate. b. At a denominator activity of 9,570 machine-hours, the company should produce 3,300 units of product. c. The company's actual operating results were: Number of units produced Actual machine-hours Actual variable manufacturing overhead cost Actual fixed manufacturing overhead cost 4,570 10,090 $ 14,630 $ 35,300 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. Compute the standard hours allowed for the actual production. 3. Compute the variable overhead rate and efficiency variances and the fixed overhead budget and volume variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Round your intermediate calculations and final answers to 2 decimal places.) Predetermined overhead rate Variable element Fixed element 2. Standard hours allowed for the actual production 3. Variable overhead rate variance Variable overhead efficiency variance per MH per MH per MH MHS

Answer 1

Solution 1:

Computation of Predetermined overhead rate - Norwall Company Particulars Amount Budgeted variable manufacturing overhead ($1.30*9570) $12,441.00 Budgeted fixed manufacturing overhead $30,624.00 Total Manufacturing overhead $43,065.00 \/Budgeted direct labor hours 9570 Predetermined overhead rate $4.50 $1.30 Less: Variable overhead rate (Per direct labor hour) Fixed manufacturing overhead rate (per direct labor hour) $3.20 Sheet161 (7) Sheet832 Sheet834 Sheet836 Sheet

Solution 2:

Standard hours allowed = 9570/3300* 4570 = 13,253

Solution 3:

Variable overhead actual rate = $14630 / 10090 = $1.45

Variable overhead rate variance = (SP - AP) *Actual Hours = ($1.30 - $1.45) *10090= $1513 Unfavorable

Variable overhead Efficiency variance = (Standard hours - Actual Hours) *SP = (13253- 10090)*$1.30 = $4111.90 Favorable

Fixed overhead budget Variance = Budgeted Fixed Overhead - Actual Fixed overhead = $30624 - $35300 = $4676 Unfavorable

Fixed Overhead Volume Variance = ($3.20*13253) - $30624= $11785.60 Favorable