Question

Franklin Glass Works uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of direct labour-hours. Each unit requires two standard hours of labour for completion. The denominator activity for the year was based on budgeted production of 200,000 units. Total overhead was budgeted at £900,000 for the year, and the fixed overhead rate was £3.00 per unit. The actual data pertaining to the manufacturing overhead for the year are presented below: Actual production 198,000 units. Actual direct labour-hours 440,000 direct labour-hours. Actual variable overhead £352,000. Actual fixed overhead £575,000.

The standard hours allowed for the actual production for the year is?

The fixed overhead applied to Franklin's production for the year is?

Franklin’s Total variable overhead cost variance is?

Franklin's variable overhead spending variance for the year is?

Franklin's variable overhead efficiency variance for the year is?

Franklin's Total Fixed overhead cost variance is?

Franklin's fixed overhead volume variance for the year is?

Franklin's fixed overhead budget variance for the year is?

Answer 1

The standard hours allowed for the actual production for the year is?	396000
The fixed overhead applied to Franklin's production for the year is?	£ 5,94,000.00
Franklin’s Total variable overhead cost variance is?	£      55,000.00
Franklin's variable overhead spending variance for the year is?	£      22,000.00
Franklin's variable overhead efficiency variance for the year is?	£      33,000.00
Franklin's Total Fixed overhead cost variance is?	£      25,000.00	Favorable
Franklin's fixed overhead volume variance for the year is?	£        6,000.00	Unfavorable
Franklin's fixed overhead budget variance for the year is?	£      19,000.00	Favorable

Workings

Franklin’s Total variable overhead cost variance is?

Budgeted Fixed Overhead=200,000 units *  £3.00 per unit==£600,000

Budgeted Variable overhead for 200,000 units =£900,000-£600,000=£300,000

Standard overhead rate
Budgeted Variable overhead	£300,000
Budgeted Direct Labor hour 200000 unit * 2hr per units	400000
Standard overhead rate =£300,000/400000	.75 per Hr
Standard hour for 198000 units =198000*2	396000
Overhead Applied based on standard hour 396000 hrs *.75 per hr (A)	£ 2,97,000.00
Actual variable overhead (B)	£ 3,52,000.00
Total variable overhead cost variance =A-B	£      55,000.00

Franklin's variable overhead spending variance for the year is?

Actual Direct Labor	440000
Overhead Applied 440000*.75 A	£ 3,30,000.00
Actual variable overhead (B)	£ 3,52,000.00
variable overhead spending variance (A-B)	£      22,000.00	Unfavorable

Overhead based on standard hour 396000 hrs *.75 per hr (A)	£ 2,97,000.00
Overhead Applied 440000*.75 A	£ 3,30,000.00
variable overhead efficiency variance (A-B)	£      33,000.00	Unfavorable

Franklin's Total Fixed overhead cost variance is?
Budgeted Fixed overhead variance (A)	£ 6,00,000.00
Actual fixed overhead variance( B )	£ 5,75,000.00
Franklin's Total Fixed overhead cost variance is? (A-B)	£      25,000.00	Favorable

Franklin's fixed overhead volume variance for the year is?
Absorbed fixed overheads 198000* £3.00 per unit	£ 5,94,000.00
Budgeted Fixed overhead variance (A)	£ 6,00,000.00
Franklin's fixed overhead volume variance for the year is? (A-B)	£        6,000.00	Unfavorable

Franklin's fixed overhead budget variance for the year is?
Absorbed fixed overheads 198000* £3.00 per unit	£ 5,94,000.00
Actual Fixed Overhead	£ 5,75,000.00
Franklin's fixed overhead budget variance for the year is?	£      19,000.00	Favorable