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dolphi86 [110]
3 years ago
11

Overhead Variances, Four-Variance Analysis Oerstman, Inc., uses a standard costing system and develops its overhead rates from t

he current annual budget. The budget is based on an expected annual output of 124,000 units requiring 496,000 direct labor hours. (Practical capacity is 516,000 hours.) Annual budgeted overhead costs total $813,440, of which $585,280 is fixed overhead. A total of 119,300 units using 494,000 direct labor hours were produced during the year. Actual variable overhead costs for the year were $260,700, and actual fixed overhead costs were $555,750. Required: 1. Compute the fixed overhead spending and volume variances. Fixed Overhead Spending Variance $ Fixed Overhead Volume Variance $ 2. Compute the variable overhead spending and efficiency variances. Do not round intermediate calculations Variable Overhead Spending Variance $ 33,460 Unfavorable Variable Overhead Efficiency Variance $ 884 Unfavorable
Business
1 answer:
son4ous [18]3 years ago
4 0

Answer:

Explanation:

1).

Fixed overhead rate = Budgeted fixed overhead / Budgeted direct labor hours = $585,280 / 496000 = $1.18 per hour

Standard hour per unit = 496000 / 124000 = 4 hours per unit

Standard hours for actual production = 119300 * 4 = 477200 hours

Budgeted fixed overhead = $585,280

Actual fixed overhead = $555,750

Fixed overhead applied = SH * Standard rate of fixed overhead = 477200 * $1.18 = $563,096

Fixed overhead spending variance = Budgeted fixed overhead - Actual fixed overhead

= $585,280 - $555,750 = $29,530 F

Fixed overhead volume variance = Fixed overhead applied - Budgeted fixed overhead

= $563,096  - $585,280 = $22,184 U

2).

Standard rate of variable overhead = ($813,440 - $585,280) / 496000 = $0.46 per hour

Actual rate of variable overhead = $260,700 / 494000 = $0.5277327935 per hour

Variable overhead spending variance = (SR - AR) * AH = ($0.46 - $0.5277327935) * 494000 = $33,460 U

Variable overhead efficiency variance = (SH - AH) * SR = (477200 - 494000) * $0.46 = $7,728 U

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