Manuel Company predicts it will operate at 80% of its productive capacity. Its overhead allocation base is DLH and its standard amount per allocation base is 0.5 DLH per unit. The company reports the following for this period. Flexible Budget at 80% Capacity Actual Results
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
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Manuel Company predicts it will operate at 80% of its productive capacity. Its overhead allocation base is DLH and its
standard amount per allocation base is 0.5 DLH per unit. The company reports the following for this period.
Production (in units)
Overhead
Variable overhead
Fixed overhead
Total overhead
Flexible Budget at 80%
Capacity
52,750
1. Standard overhead rate
2. Standard overhead applied
3. Overhead variance
$ 290,125
52,750
$ 342,875
Actual
Results
48,400
$ 341,300
Exercise 8-17 (Algo) Computing standard overhead rate and total overhead variance LO P4
1. Compute the standard overhead rate. Hint: Standard allocation base at 80% capacity is 26,375 DLH, computed as 52,750 units x 0.5
DLH per unit.
2. Compute the standard overhead applied.
3. Compute the total overhead variance. (Indicate the effect of the variance by selecting favorable, unfavorable, or no variance.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9c3c988d-c4b0-481d-a3e4-184a7936e096%2Fd5834977-2035-4f84-ac9e-a609997d8239%2F7e3jeb_processed.png&w=3840&q=75)
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Manuel Company predicts it will operate at 80% of its productive capacity. Its
| Flexible Budget at 80% Capacity | Actual Results | |
|---|---|---|
| Production (in units) | 52,750 | 48,400 |
| Overhead | ||
| Variable overhead | $ 290,125 | |
| Fixed overhead | 52,750 | |
| Total overhead | $ 342,875 | $ 341,300 |
(1) Compute the overhead volume variance. Indicate variance as favorable or unfavorable.
(2) Compute the overhead controllable variance. Indicate variance as favorable or unfavorable.
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