Question

You brought your work home one evening, and your nephew spilled his chocolate milk shake on the variance report you were preparing. Fortunately, knowing that overhead was applied based on machine hours, you were able to reconstruct the obliterated information from the remaining data. Fill in the missing numbers below. (Round your per machine hour and per unit answers to two decimal places. Indicate the effect of the variance by selecting "Positive" or "Negative". Select "None" and enter "O" for no effect (i.e., zero variance).) 5 hours 9.00 $ $ $ 31,625 41,125 11,500 Standard machine hours per unit of output Standard variable-overhead rate per machine hour Actual variable-overhead rate per machine hour Actual machine hours per unit of output Budgeted fixed overhead Actual fixed overhead Budgeted production in units Actual production in units Variable-overhead spending variance Variable-overhead efficiency variance Fixed-overhead budget variance Fixed-overhead volume variance Total actual overhead Total budgeted overhead (flexible budget) Total budgeted overhead (static budget) Total applied overhead $ $ 34,000 Unfavorable 126,000 Favorable 9,500 Unfavorable $ $ 381,125 $ 458,400

Answer 1

Standard Machine Hours per unit of Output	5	hours
Standard variable -overhead rate per machine hour	$ 9.00
Actual variable - overhead rate per machine hour (Working note 1)	$10
Actual machine hours per unit of output (Working note 3)	3.5hr/unit
Budgeted fixed overhead	$31,625
Actual fixed overhead	$41,425
Budgeted production in units	11,500
Actual production in units (Working note 2)	9,600 units
Variable-overhead spending Variance	$34,000	Unfavorable
Variable-overhead efficiency Variance	$126,000	Favorable
Fixed- overhead Budget Variance	$9,500	Unfavorable
Fixed- overhead Volume Variance (Working note 6)	$5225	Unfavorable
Total Actual Overhead	$381,125
Total Budgeted overhead (flexible budget) (Working note 4)	$463,625
Total Budgeted overhead (static budget) (Working note 5)	$549,125
Total applied overhead	$458,400

1. Actual Overhead = Total actual overhead - Actual Fixed Overhead
   = $381,125 - $41,125 = $340,000
   Variable overhead spending variance = Actual Variable overhead - ( actual hours * standard rate)
   Actual hours = ($340,000 - $34,000 ) / 9 = $34,000 hours
   Actual variable Overhead rate = Actual Variable overhead / Actual Hours
   = $340,000 / 34,000 = $10/hour
2. Fixed Overhead rate = Budgeted fixed overhead / Budgeted machine hours
   = $31,625 / (11,500 * 5 hr/unit) = $0.55/hour
   Total Standard overhead rate = Standard variable overhead rate + Fixed overhead rate
   = 9 + 0.55 = $9.55
   Total applied Overhead = Total standard hours * Total standard overhead rate
   Total standard hours = $458,400 / 9.55 = 48,000 hours
   Actual Production in Units = Total Standard hours / Standard hours/unit
   = 48,000 / 5 = 9,600 units
3. Actual machine hours per unit of output = Total actual machine hours / Actual Production
   = 34,000 hours / 9,600 = 3.5hr/unit
4. Total budgeted overhead (flexible budget) = Budgeted fixed overhead + (standard variable rate * standard hours)
     = $31,625 + (9 * 48,000) = $31,625 + $432,000) = $463,625
   Standard Hours = 5 * 9,600 = 48,0000 hours
5. Total budgeted overhead (static budget) = Total standard overhead rate * budgeted production * standard hour/unit
   = $9.55 * 11,500 * 5 = $549,125
6. Applied fixed overhead = fixed overhead rate * actual production *  standard hour/unit
   = 0.55 * ( 9,600 * 5) = $26,400
   Fixed overhead volume variance = Budgeted fixed overhead - applied fixed overhead
   = $31,625 - $26,400 = $5225 unfavorable