Cheney Company established a predetermined variable overhead cost rate at $21.00 per direct labor hour. The...
Cheney Company established a predetermined variable overhead cost rate at $21.00 per direct labor hour. The actual variable overhead cost rate was $19.20 per hour. The planned level of labor activity was 76,000 hours of labor. The company actually used 80,000 hours of labor. Required Determine the total flexible budget variable overhead cost variance and indicate the effect of the variance by selecting favorable (F) or unfavorable (U). (Select "None" if there is no effect (i.e., zero variance).)
Homework Answers
|
Calculation of budgeted overheads |
|
|
Predetermined direct labour overheads rate |
$21 |
|
Actual no of labour hours |
80,000 |
|
Total budgeted overheads cost (A) |
$1,680,000 |
|
Calculation of Actual overheads cost |
|
|
Actual overheads rate per hour |
$19.20 |
|
Actual no of labour hours |
80,000 |
|
Total actual overheads (B) |
$1,536,000 |
|
Flexible budget cost variance (C=A-B) |
$144,000 F |
|
Since budgeted overheads cost is more than actual overheads cost the variance is Favourable |
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