a) Variable efficiency overhead variance: (Standard hours- Actual hours)* Standard Rate
=(500*10-500*8)*20=(5000-4000)*20=1000*20=20000F
b) Variable spending overhead variance: (Standard Rate- Actual Rate)* Actual hours
=(20-18)*4000 = 2*4000 = 8000F
c) Spending variance is appropriate variance for evaluating the manager in charge of set up department because paying a higher / lower average actual overhead price per unit of the activity base than the standard price allowed per unit of the activity base. and. larger / smaller waste and shrinkage associated with the resources involved than expected.
d) Journal entry to record variable overhead set up costs is
Finished goods inventory A/c Dr 28000
To variable overhead eficiency variance 20000
To Variable overhead rate variance 8000
e) Calculation of Expenditure variance for fixed set up overhead costs
Fixed Overhead Expenditure variance= Budgeted hours * Standard rate - Actual hours * Actual rate
=(400*112.5 - 500* 84)= 3000F
This helps the MC for controlling costs
f) Fixed overhead volume variance is Standard hours* Standard rate - budgeted hours* Standard rate
=48000-48000 = 0
Question 3 Magic Corporation (MC) produces special carbon fibre basketball hoops. These hoops are produced in...
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