Question

Grand Clothing is a manufacturer of designer suits. For June 2017, each sut is budgeted to take 5 labor-hours. The budgeted number of suits to be manufactured in June 2017 is 1.200 Grand Clothing allocates fixed manufacturing overhead to each suit using budgeted direct manufacturing labor hours per suit Data pertaining to foed manufacturing overhead costs for June 2017 are budgeted $72,000, and actual, $63,920. In June 2017 there were 1240 suts started and completed. There were no beginning or ending inventories of sults. Requirements 1. Compute the spending variance for fixed manufacturing overhead Comment on the results. 2. Compute the production volume variance for June 2017. What inferences can Grand Clothing draw from this variance? Requirement 1. Compute the spending variance for food manufacturing overhead Comment on the results Begin by computing the following amounts for the food manufacturing overhead. Flexible Budget Same Budgeted Same Budgeted Lump Sum Lump Sum Actual Costs Regardless of Regardless of Allocated Incurred Output Level Output Level Overhead Enter any number in the edit fields and then click Check Answer

Answer 1

Same budgted Lumsum Regardless Output Actul Cost Incurred Flexible Budget Allocated OH $ 63,920.0 $72,000.0 $72,000.0 $ 74,400.0 (72000*1240/1200 1 FOH Spending Variance Actual Fixed OH - Budgted fixed OH =63920-72000 $8,080.0 Favourable This Indiacte Manufacturing unit was succeful in reducing FOH by elimination of inefficiences. 2 Production Volume Variance =Allocate FOH - Budgted FOH =74400-72000 $2,400.0 Favourable Favourable variance indicates the actual output is more than the budgted output. * Kindly Comment down for any clarifications/ queries and please upvote.