Question

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The Platter Valley factory of Bybee Industries manufactures field boots. The cost of each boot includes direct materials, direct labor, and manufacturing (factory) overhead. The firm traces all direct costs to products, and it assigns overhead cost to products based on direct labor hours.

The company budgeted $15,000 variable factory overhead cost and 2,500 direct labor hours to manufacture 5,000 pairs of boots in March.

The factory used 2,700 direct labor hours in March to manufacture 4,800 pairs of boots and spent $15,600 on variable overhead during the month.

For March, the Platter Valley factory of Bybee Industries budgeted $90,000 for fixed factory overhead cost. Its practical capacity is 2,500 direct labor hours per month (to manufacture 5,000 pairs of boots).

The factory used 2,700 direct labor hours in March to manufacture 4,800 pairs of boots. The actual fixed overhead cost incurred for the month was $92,000.

The Platter Valley factory of Bybee Industries uses a two-variance analysis of the total factory overhead variance.

Required:

1. Compute the total flexible-budget variance for overhead and the production volume variance for March. What was the total factory overhead cost variance for March? Indicate whether each variance is favorable (F) or unfavorable (U).

2. Determine the three components of the total flexible-budget variance for overhead (i.e., the variable overhead spending variance, the variable overhead efficiency variance, and the fixed overhead spending variance); in addition, show the production volume variance for March. Indicate whether each variance is favorable (F) or unfavorable (U).

Answer 1

Stamdand Ratof amialeo5 0p -$46 per dnc la kot stamdand howr of lakor pey wmtshour per amie Staudand Rate op feKd CVqvhead = $90.co。-$36 peγ dt rect labor rS00 Tobol budgeted over head achual producftam = $1,04,400 fixed overke ad applied 4800x»s Total Plex ble budget variante of oveshead Budheted overy head for actual prodaction Actuat Fixed Overhead pppled - udgeted nod OH $96,400-$90, ooo-$3,600 U Flexble budget Vaniamte - proobackiam ve lume $ 3,600 U $ 3,2 out, = 6, 800U

2) IS, 600 Actual vamiable oH Rate- Fixed OH eted Fixed oH -Acual Fixob oH $ 2000 U oH applred - Bucjeted Fixed oH