Question

18 Operating Levels (% of capacity) Flexible 65 758 70% Budget Budgeted output (units) Budgeted Part 2 of 42,250 45,500 48,750 labor 455,000 487,500 422,500 2 (standard hours) Budgeted overhead (dollars) points eBook Variable $1,267,500 $1,365,000 $1,462,500 overhead Fixed 682,500 682,500 682,500 Hint overhead Total $1,950,000 $2,047,500 $2,145,000 overhead Print During the current month, the company operated at 65% of capacity, employees worked 400,000 hours, and the following actual overhead costs were incurred Variable $1,224,000 overhead costs Fixed overhead 730,000 costs Total overhead $1,954,000 costs Actual Hours SH Standard Hours AVR= Actual Variable Rate SVR Standard Variable Rate AH SFR Standard Fixed Rate

Answer 1

Solution 1:

Variable Overhead Cost Variance
Actual Cost					Standard cost for actual quantity					Standard Cost
AH *	AR =				AH *	SR =				SH *	SR =
400000	$3.06	$1,224,000.00			400000	$3.00	$1,200,000.00			422500	$3.00	$1,267,500.00
			$24,000.00	U				$67,500.00	F
			Variable overhead rate variance					Variable overhead efficiency variance
Variable overhead rate variance					$24,000.00	U
Variable overhead efficiency variance					$67,500.00	F
Variable overhead cost variance					$43,500.00	F

Solution 2:

Fixed Overhead Cost Variance

Actual Fixed OH Cost

Budgeted Fixed Overhead

Standard Cost (FOH Applies)

SH*

BR

$730,000.00

$682,500.00

422500

$1.50

$633,750.00

$47,500.00

U

$48,750.00

U

Fixed overhead Budget Variance

Fixed overhead volume variance

Fixed overhead Budget Variance

$47,500.00

U

Fixed overhead volume variance

$48,750.00

U

Total Fixed overhead variance

$96,250.00

U

Solution 3:

Controllable Variance
Actual overhead	$1,954,000.00
Budgeted overhead	$1,950,000.00
Controllable variance	$4,000.00	U