Question

Rogen Corporation manufactures a single product. The standard cost per unit of product is shown below.

Direct materials—3 pound plastic at $6.00 per pound		$ 18.00
Direct labor—1.5 hours at $11.00 per hour		16.50
Variable manufacturing overhead		10.50
Fixed manufacturing overhead		7.50
Total standard cost per unit		$52.50

The predetermined manufacturing overhead rate is $12 per direct labor hour ($18.00 ÷ 1.5). It was computed from a master manufacturing overhead budget based on normal production of 7,800 direct labor hours (5,200 units) for the month. The master budget showed total variable costs of $54,600 ($7.00 per hour) and total fixed overhead costs of $39,000 ($5.00 per hour). Actual costs for October in producing 4,500 units were as follows.

Direct materials (13,690 pounds)		$ 84,878
Direct labor (6,590 hours)		75,126
Variable overhead		61,560
Fixed overhead		21,540
Total manufacturing costs		$243,104

The purchasing department buys the quantities of raw materials that are expected to be used in production each month. Raw materials inventories, therefore, can be ignored.

Compute the overhead controllable variance and the overhead volume variance.

Overhead controllable variance		$
Overhead volume variance		$

Answer 1

Solution :

Controllable Variance
Actual overhead	$83,100.00
Budgeted overhead [(4500*1.5*$7)+$39,000]	$86,250.00
Controllable variance	$3,150.00	F

Fixed overhead volume variance
Budgeted fixed overhead	$39,000.00
Fixed overhead cost applied	$33,750.00
Fixed overhead volume variance	$5,250.00	U