In all of the exercises involving variances, use “F” and “U” to designate favorable and unfavorable variances, respectively.
Calculating factory overhead
The standard capacity of a factory is 8,000 units per month. Cost and production data follow:
Standard application rate for fixed overhead. . . . . . . . . . . . . . . . . . . . . $0.50 per unit
Standard application rate for variable overhead . . . . . . . . . . . . . . . . . $1.50 per unit
Production–Month 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,400 units
Production–Month 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,200 units
Actual factory overhead–Month 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15,100
Actual factory overhead–Month 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $17,200
Calculate the amount of factory overhead allowed for the actual volume of production each month and the variance between budgeted and actual overhead for each month.
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