Question

OH Variance At the beginning of the year, your company thought . Each product would use 3 direct labor hours. . Fixed overhead would be $900,000 for the year. Fixed overhead would be applied based on machine hours and would be $2.50 per machine hour. .Variable overhead would be applied based on direct labor hours and would be $4.00 per direct labor hour e46,000 units would be produced At the end of the year, what happened that year was: 48,000 units were produced. . actual direct labor cost incurred was $645,000 for 110,000 actual hours worked direct materials cost $1,262,000 actual overhead incurred totaled $1,600,000: $600,000 variable and $1,000,000 fixed Required: 1) What is the variable overhead spending variance 2) What is the variable overhead efficiency variance_ 3) What is the fixed overhead production volume variance 4) What is the fixed overhead spending variance 5) What is the standard per unit for machine hours 6) How much was the static budget for variable overhead 7) What is the flexible budget variance for variable overhead 8) What is the flexible budget variance for fixed overhead

Answer 1

Standard
Output	46000 units
Direct labour Hour	3 hr. per unit	138000 hr.
Fixed overhead	$900,000	$2.5 per machine hour
Machine Hour	$900000/2.5	360000 hr.
Variable Overhead	$4 per direct labour hour	138000 X 4	552000
Standard Fixed Overhead Absorption Rate	$900000/46000	19.57
Actual
Actual output	48000 units
Actual Direct labour Cost	$645,000
Actual Hours Worked	110000 hrs.
Actual Direct Material Cost	$1,262,000
Actual Variable Overhead	$600,000
Variable Overhead Rate	$600000/110000	$5.45 per hour
Actual Fixed Overhead	$1,000,000
1. Variable Overhead Spending Variance
(Actual Overhead Rate- Standard Overhead Rate ) X Actual Hours Worked
(5.45-4) X 110000
159500	Adverse
2. Variable Overhead Efficiency Variance
(Actual Hours Worked- Standard Hours ) X Standard Overhead Rate
(110000-138000) X 4
-112000	Favourable
3. Fixed Overhead Production Volume Variance
(Actual Ouput- Budgeted Output) X Standard Fixed Overhead Absorption Rate
(48000-46000) X 19.57
39140	Favourable
4. Fixed Overhead Spending Variance
(Actual Fixed Overhead- Budgeted Fixed Overhead)
(900000-1000000)
-100000	Favourable
5. Standard per unit for Machine Hour
(Standard Machine hours / Standard Ouput)
(360000/46000)
7.83 hrs. per unit
6. Flexible Budget variance for variable overhead
(Actual Variable Overhead - Flexible Budget Overhead)
{(Actual Variable Overhead - (Standard Variable Overhead Rate per hour X Actual Hours Worked)}
{(600000- (4 X 110000)}
(600000-440000)
160000	Adverse
7. Static Budget for variable overhead
(Flexible Budget Overhead + Variable Overhead Efficiency Variance)
(440000+112000)
552000
8. Flexible Budget variance for Fixed overhead
(Actual Fixed Overhead - Flexible Budget Overhead)
{(Actual Fixed Overhead - (Standard Fixed Overhead Absorption Rate X Actual Ouput)}
{(1000000- (19.57 X 48000)}
(1000000-939360)
60640	Adverse