Question

World Company expects to operate at 80% of its productive capacity of 50,000 units per month. At this planned level, the company expects to use 24,400 standard hours of direct labor. Overhead is allocated to products using a predetermined standard rate of 0.610 direct labor hour per unit. At the 80% capacity level, the total budgeted cost includes $53,680 fixed overhead cost and $273,280 variable overhead cost. In the current month, the company incurred $320,000 actual overhead and 21,400 actual labor hours while producing 37,000 units.

(1) Compute the overhead volume variance. Classify each as favorable or unfavorable.
(2) Compute the overhead controllable variance. Classify each as favorable or unfavorable.

ook W CULITUS TAVUldble or Complete this question by entering your answers in the tabs below. Required 1 Required 2 rint Compute the overhead volume variance. Classify as favorable or unfavorable. (Indic. selecting for favorable, unfavorable, and no variance. Round "OH costs per DL hour" Fixed Overhead Applied Fixed overhead applied Volume Variance Volume variance Required 2 >

Answer 1

Req. 1
Fixed Overhead Applied
Fixed OH per DL hr. (53680/24400)	2.2
Standard DL hours	22570
Fixed OH applied	49654
Volume variance.
Total fixed OH applied	49654
Total budgeted fixed OH	53680
Fixed OH volume variance	4026	Unfavorable

Req. 2
Overhead controllable variance.
Total actual overhead		$ 320,000
Flexible budget overhead
Variable	252784
Fixed	53,680
Total		306464
Overhead controllable variance		$ 13,536	Unfavorable

Answer 2

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