Newark Plastics Corporation developed its overhead application rate from the annual budget. The budget is based on an expected total output of 648,000 units requiring 3,240,000 machine hours. The company is able to schedule production uniformly throughout the year. Machine hours is the cost driver for overhead costs. A total of 59,000 units requiring 275,400 machine hours were produced during May. Actual overhead costs for May amounted to $823,800. The actual costs, as compared to the annual budget and to one-twelfth of the annual budget, are as follows: Variable overhead: Indirect material Indirect labor Fixed overhead: Supervision Utilities Depreciation Total NEWARK PLASTICS CORPORATION Annual Budget Total Amount $2,397,600 1,749,600 1,555,200 1,490,400 2,332,800 $9,525,600 Per Unit d. Variable-overhead efficiency variance. e. Fixed-overhead volume variance. $ 3.70 2.70 2.40 2.30 3.60 $14.70 Per Machine Hour $0.74 0.54 0.48 0.46 0.72 $2.94 Required: 1. Prepare a schedule showing the following amounts for Newark Plastics for May. a. Applied overhead costs. b. Variable-overhead spending variance. c. Fixed-overhead budget variance. Monthly Budget $199,800 145,800 129,600 124,200 194,400 $793,800 Actual Costs for May $217,800 145,800 123,600 142,200 194,400 $823,800
Newark Plastics Corporation developed its overhead application rate from the annual budget. The budget is based on an expected total output of 648,000 units requiring 3,240,000 machine hours. The company is able to schedule production uniformly throughout the year. Machine hours is the cost driver for overhead costs. A total of 59,000 units requiring 275,400 machine hours were produced during May. Actual overhead costs for May amounted to $823,800. The actual costs, as compared to the annual budget and to one-twelfth of the annual budget, are as follows: Variable overhead: Indirect material Indirect labor Fixed overhead: Supervision Utilities Depreciation Total NEWARK PLASTICS CORPORATION Annual Budget Total Amount $2,397,600 1,749,600 1,555,200 1,490,400 2,332,800 $9,525,600 Per Unit d. Variable-overhead efficiency variance. e. Fixed-overhead volume variance. $ 3.70 2.70 2.40 2.30 3.60 $14.70 Per Machine Hour $0.74 0.54 0.48 0.46 0.72 $2.94 Required: 1. Prepare a schedule showing the following amounts for Newark Plastics for May. a. Applied overhead costs. b. Variable-overhead spending variance. c. Fixed-overhead budget variance. Monthly Budget $199,800 145,800 129,600 124,200 194,400 $793,800 Actual Costs for May $217,800 145,800 123,600 142,200 194,400 $823,800
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter9: Evaluating Variances From Standard Costs
Section: Chapter Questions
Problem 16E: Thomas Textiles Corporation began November with a budget for 60,000 hours of production in the...
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Transcribed Image Text:Newark Plastics Corporation developed its overhead application rate from the annual budget. The budget is based on an expected
total output of 648,000 units requiring 3,240,000 machine hours. The company is able to schedule production uniformly throughout
the year. Machine hours is the cost driver for overhead costs.
A total of 59,000 units requiring 275,400 machine hours were produced during May. Actual overhead costs for May amounted to
$823,800. The actual costs, as compared to the annual budget and to one-twelfth of the annual budget, are as follows:
Variable overhead:
Indirect material
Indirect labor
Fixed overhead:
Supervision
Utilities
Depreciation
Total
NEWARK PLASTICS CORPORATION
Annual Budget
Total
Amount
$2,397,600
1,749,600
Applied overhead costs
1,555,200
1,490,400
2,332,800
$9,525,600
Per
Unit
Applied overhead costs.
$ 3.70
2.70
2.40
2.30
3.60
$14.70
Per
Machine
Hour
$0.74
0.54
Required:
1. Prepare a schedule showing the following amounts for Newark Plastics for May
a. Applied overhead costs.
b. Variable-overhead spending variance.
c. Fixed-overhead budget variance.
d. Variable-overhead efficiency variance.
e. Fixed-overhead volume variance.
0.48
0.46
0.72
$2.94
Req 1A Req 1B and 1D Req 1C and 1E
Monthly
Budget
$199,800
145,800
129,600
124,200
194,400
$793,800
Actual Costs
for May
$217,800
145,800
123,600
142, 200
194,400
$823,800
Transcribed Image Text:Req 18 and 1D Req 1C and 1E
Variable-overhead Spending Variance and Efficiency Variance. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "N
enter "0" for no effect (i.e., zero variance). Round "Projected Overhead" and "Flexible Budget" to 2 decimal places.)
Req 1A
Variable Overhead
Machine hours
Fixed Overhead
$
Machine hours
Actual
Overhead
Complete this question by entering your answers in the tabs below.
$
Spending Variance
Actual
Overhead
<Reg 1A
Budget Variance
Flexible
Budget
Budgeted
Overhead at
Actual Hours
Req 18 and 10
$
$
0.00
Req 1A Req 18 and 1D Req 1C and 1
Fixed-overhead Budget Variance and Volume Variance. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter
"0" for no effect (ie, zero variance). Round "Applied Overhead" to 2 decimal places.)
Req 10 and 1E >
Efficiency Variance
Volume
Variance
Beyy 30 and 18
Flexible Budget
(Applied
Overhead)
$
$
$
$
Applied Overhead
0.00
0.00
0
0
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