Homework Answers
a. Calculation of flexible-budget variance
| Budgeted | Flexible | Actual | variance | ||
| Production (in units) | 10000 | 9000 | 9000 | ||
| Direct labor hour used 2 hour/unit | 20000 | 18000 | 18500 | ||
| Factory overhead | |||||
| Fixed Overhead (2.5*20000) | 50000 | 50000 | 52000 | 2000 | U |
| variable overhead (1.5*18000) | 30000 | 27000 | 28500 | 1500 | U |
b. Calculation of Production volume variance
Production Volume variance = (Actual Units produced - Budgeted production units)*Budgeted overhead rate per unit
Actual Unit produced = 9000
Budgeted Production units = 10000
Budgeted overhead rate = (2.5+1.5)*Direct labor hour per unit
= 4*2
= 8
Production volume variance = (9000 - 10000)*8
= 8000 U
(c) Total factory overhead = 80500
budgeted overhead = 77000
as Actual overhead > Budgeted overhead
so the overhead was under-applied.
Please check with your answer and let me know.
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