Question

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Exercise 21-21 Overhead controllable and volume variances; overhead variance report LO P3 James Corp. applies overhead on the basis of direct labor hours. For the month of May, the company planned production of 10,000 units (80% of its production capacity of 12,500 units) and prepared the following overhead budget: Operating Levels Overhead Budget Production in units 808 10,000 Standard direct 1abor hours 27,000 Budgeted overhead Variable overhead costs $ 16,200 27,000 Indirect materials Indirect labor 5,400 5,400 54,000 Power Maintenance Total variable costs Fixed overhead costs Rent of factory building Depreciation-Machinery Supervisory salaries 23,000 10,800 14,800 Total fixed costs 48,600 Total overhead costs $102,600 During May, the company operated at 90% capacity (11,250 units) and incurred the following actual overhead costs: During May, the company operated at 90% capacity (11,250 units) and incurred the following actual overhead costs: Overhead Costs $ 16,200 29,875 6,075 6,710 23,000 Indirect materials Indirect labor Power Maintenance Rent of factory building Depreciation-Machinery Supervisory salaries 10,800 18,200 $110,860 Total actual overhead costs 1. Compute the overhead controllable variance. 2. Compute the overhead volume variance. 3. Prepare an overhead variance report at the actual activity level of 11,250 units Complete this question by entering your answers in the tabs below. Required 3 Required 1 Required 2 Compute the overhead controllable variance. Classify as favorable or unfavorable. Controllable variance Total actual overhead Flexible budget overhead Variable Fixed Total Overhead controllable variance Required 2 Required 1 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute the overhead volume variance. Classify as favorable or unfavorable. (Do not round intermediate calculatic Volume Variance Total budgeted fixed OH Total fixed overhead applied Volume variance Required 3 Required 1 Overhead Variance Report For Month Ended May 31 80% of capacity Expected production volume 90% of capacity Production level achieved Favorable Volume variance Variances Controllable Variance Flexible Budget Actual Results Fav./Unfav. Variable overhead costs: Indirect materials 16,200 Indirect labor Power Maintenance Total variable costs 16,200 Fixed overhead costs: Rent of factory building Depreciation-Machinery Supervisory salaries Total fixed costs Total overhead costs

Answer 1

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Sign of amount can be +/- per question: Solution: 1) Total Actual Overhead Controllable Variance: 110860 Flexible Budget overhead: Variable (54000/10000) *11250 Fixed Total Overhead Controllable Variance 60,750 48,600 109350 1,510 Unfavorable $ 2) Total Budgeted Fixed Overhead Volume Variance: 48,600 Total Fixed overhead applied (48600/10000) 11250 Volume variance 54,675 6,075 Favorable $

Overhead Variance Report 3) Expected production volume Production level achieved Volume variance Controllable Variance Variable overhead costs: Indirect Materials (item/10000)*11250 Indirect Labor 80% of Capacity 90% of Capacity $ Favorable 6,075 Variance Fav./Unfav. Flexible Actual 18,225 $ 16,200 $ 2,025 Favorable 30,375 $ 29,875 $ 500 Favorable 6,075 $ 6,075 $ Power 6,075 $ No Variance Maintenance $ 6,710 $ 635 Unfavorable Total Variable cost 58,860 $ $ 60,750 $ 1,890 Favorable Fixed overhead costs: Rent of factory building Depreciation - Machinery Supervisory salaries 23,000 $ 23,000 No Variance 10,800 $ 14,800 $ 10,800 $ No Variance 18,200 $ 3,400 Unfavorable Total Fixed costs 52,000 $ 3,400 Unfavorable 48,600 110860 $ Total Overhead costs 109350 1,510 Unfavorable