Patel and Sons Incorporated uses a standard cost system to apply factory overhead costs to units produced. Practical capacity for the plant is defined as 50,000 machine hours per year, which represents 25,000 units of output. Annual budgeted fixed factory overhead costs are $250,000 and the budgeted variable factory overhead cost rate is $4 per unit. Factory overhead costs are applied on the basis of standard machine hours allowed for units produced. Budgeted and actual output for the year was 20,000 units, which took 41,000 machine hours. Actual fixed factory overhead costs for the year amounted to $245,000, while the actual variable overhead cost per unit was $3.90. Based on the information provided above, calculate the following factory overhead variances for the year. Indicate whether each variance is favorable (F) or unfavorable (U). (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.) (a) Total overhead variance (b) Total flexible-budget variance (c) Production volume variance
Patel and Sons Incorporated uses a standard cost system to apply factory overhead costs to units produced. Practical capacity for the plant is defined as 50,000 machine hours per year, which represents 25,000 units of output. Annual budgeted fixed factory overhead costs are $250,000 and the budgeted variable factory overhead cost rate is $4 per unit. Factory overhead costs are applied on the basis of standard machine hours allowed for units produced. Budgeted and actual output for the year was 20,000 units, which took 41,000 machine hours. Actual fixed factory overhead costs for the year amounted to $245,000, while the actual variable overhead cost per unit was $3.90. Based on the information provided above, calculate the following factory overhead variances for the year. Indicate whether each variance is favorable (F) or unfavorable (U). (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.) (a) Total overhead variance (b) Total flexible-budget variance (c) Production volume variance
Principles of Cost Accounting
17th Edition
ISBN:9781305087408
Author:Edward J. Vanderbeck, Maria R. Mitchell
Publisher:Edward J. Vanderbeck, Maria R. Mitchell
Chapter8: Standard Cost Accounting—materials, Labor, And Factory Overhead
Section: Chapter Questions
Problem 17P: Shinto Corp. uses a standard cost system and manufactures one product. The variable costs per...
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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:Patel and Sons Incorporated uses a standard cost system to apply factory overhead costs to units produced. Practical
capacity for the plant is defined as 50,000 machine hours per year, which represents 25,000 units of output. Annual
budgeted fixed factory overhead costs are $250,000 and the budgeted variable factory overhead cost rate is $4 per unit.
Factory overhead costs are applied on the basis of standard machine hours allowed for units produced. Budgeted and
actual output for the year was 20,000 units, which took 41,000 machine hours. Actual fixed factory overhead costs for the
year amounted to $245,000, while the actual variable overhead cost per unit was $3.90.
Based on the information provided above, calculate the following factory overhead variances for the year. Indicate whether each
variance is favorable (F) or unfavorable (U). (Do not round intermediate calculations. Round your answers to the nearest whole
dollar amount.)
(a) Total overhead variance
(b) Total flexible-budget variance
(c) Production volume variance
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