Question

The Platter Valley factory of Bybee Industries manufactures field boots. The cost of each boot includes direct materials, direct labor, and manufacturing (factory) overhead. The firm traces all direct costs to products, and it assigns overhead cost to products based on direct labor hours. The company budgeted $15,000 variable factory overhead cost and 2,500 direct labor hours to manufacture 5,000 palrs of boots In March. The factory used 2,700 direct labor hours In March to manufacture 4,800 pairs of boots and spent $15,600 on variable overhead during the month. For March, the Platter Valley factory of Bybee Industries budgeted $90,000 for fixed factory overhead cost. Its practical capacity Is 2,500 direct labor hours per month (to manufacture 5,000 pairs of boots). The factory used 2,700 direct labor hours in March to manufacture 4,800 pairs of boots. The actual fixed overhead cost Incurred for the month was $92,000. The Platter Valley factory of Bybee Industries currently uses a four-variance analysis of the total factory overhead cost varlance but is thinking of changing to a three-variance analysis. Required: 1. Compute the total overhead spending varlance, the (variable overhead) efficiency variance, and the production volume variance for March and Indicate whether each varlance is favorable (F) or unfavorable (U). 2. Prepare the appropriate journal entries at the end of March to record each of the following: (a) the total overhead spending varlance, (b) the (variable overhead) efficiency variance, and (c) the production volume variance. Assume that all overhead costs are recorded in a single account called "Factory Overhead." Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the total overhead spending variance, the (variable overhead) efficiency variance, and the production volume variance for March and indicate whether each variance is favorable (F) or unfavorable (U). Spending Variance Efficiency Variance Unfavorable Production Volume Variance Unfavorable EUnfavorable

Answer 1

solutions Standard rate of variable overhead = overhead cost Direct labour hours 15000 = $6 per direct labor hours. Standard hour of labor per unit 2500 5000 = o.shows per unit. fixed oreshead = Standard rate 9oooo 2500 = $36 perdirect labor hours Total budgeted overhead for actual production =4800X0-5 X6 + 90000 = $ Toyuoo. fixed overhead applied = 4800 XO 5836 - $86400

for overhead Total flexible budget variance - Actual production - actual overhead = lounou - (15600 +92000) = $ 3200 u production volume variance = Fixed overhead applied - Budgeted fixed overhead - 86 400 - 90000 = $3600 u Total factory overhead cest vanance = 3200 + 3600 $ 6800 U

Variable overhead during month oreshead rate Actual variable Direct laboo hours 15600 2700 = $5.7777 per hour. rasiable overhead Spending vastance = (6-5.7777 x 2700 = 600 variable overhead efficiency rasiance = (2400-2700) x6 = (-300x6 = $1800 U Fixed overhead budget variance = Rudgeted fixed oves head - Actual fixed overhead = 90000 92.000 $ 2000 U production volaume variance-fixed overhead applied- - Budgeted fixed oveshead = 86400-90000 = $3600 U