Question

The overhead budget for Hugh Demand Ltd for the year to 30 June 2016 wasestimated on 20,000 direct labour hours.

Using this base, the overhead recovery rate per direct labour hour was determined as:

Fixed costs ($216,000)   $10.80

Variable costs $ 8.10

   $18.90

Actual results achieved for the year were:

Fixed costs $220,500

Variable costs $170,940

Direct labour hours 21,000 hours

Required:

Calculate the factory overhead spending (budget) variance and capacity(volume) variance.

Specify whether the Spending Variance and the Capacity Variance are Favourable orUnfavourable.

Your answer:

Actual		Flexible Budget					Applied
$		Fixed		$			hrs x $
$		Variable		$
$				$			$
	$			$
	Overhead Spending Variance			Overhead Capacity Variance
			$
			Over applied Total Variance

Answer 1

Calculation af hixcd Ovenhead Spending Vaniance Budycted hxed Ohced) Ptual ized ovenbead Eixed Ouerhead Budyeted kazniane $ 16000- 4 $R20,500 $4-500 UnfavoUable Fixed Ovenhead Cost Vaniance = Standand howns fon actual outpu X Bvdyeted Eized Ovehead pen bau Actual 6zed Ovenhead 20000 hour X 310 80per hour - 220500 $160D0- 20500 =$9500 Unfarounahle tixed Ovenheod lapauty Vaniene Actual hoursXBudzeted hxed Oveahead per houe- Budyeted Exed Ovenhead RI000hourx $10.80- $ 216000 = a $ 226800 - $ 216000 $10300 Favowable _fixed Ovenhead Volsme Yosniace = Standaand hour oz actua output X Bucdgeted fixedovestead p hour Budgetd Exed Ovenhed = 20000 haur X $ /0.80 -- $ 216000 $216000- $ R16000 $0

Calculahbn ofE Vaniable Ovenhead Vaniane Variable Ovenhead Expenditune Vaniance Actual How X Buckyeted Vaniable Ovenhead pen hour Actval vanlable Oveahead 1000 haun X $.10-$17090 0t 6OŁT$ - 00TOŁI$ $ 890 Unfavowrable Variable Oveshead £fhciency Vaniance Standand tlouns kn actual output X_Budgctad Vaniable Ovenhead pen hun- Actual howr x Budyekd Vaniable Oveshead pan hous = 30000 hawnr X81o- 2IO00ho x10$810 162000 $/o0 Unfavourable $170100 Vaniable Ovenhead Cost Vaniance : Standond boukr actualoutpu Oveabead 1rea bau : 30000hawX$810-$70990 $162000-$F0970 $ 8990 Unfavounable Budgekd Vaniabe Actual Vaniable Dvenhead