Sheffield Company manufactures deep-sea fishing rods, which it distributes internationally through a chain of wholesalers. The following data are taken from the budget prepared at the beginning of the year by Sheffield’s controller. The company applies overhead on the basis of machine hours. Annual Budget May Budget Variable manufacturing overhead $2,202,000 $223,000 Fixed manufacturing overhead $1,200,240 $100,020 Direct labor hours 50,640 4,220 Machine hours 220,200 22,300 During the month of May, Sheffield used 4,430 direct labor hours and 21,870 machine hours. The flexible budget for the month allowed 4,330 direct labor hours and 21,390 machine hours. Actual fixed manufacturing overhead incurred was $105,600; variable manufacturing overhead incurred was $216,400. (a) Calculate the variable overhead spending and efficiency variances for May. (Round per unit value to 2 decimal places, e.g. 52.75 and final answers to 0 decimal places, e.g. 5,725. If variance is zero, select "Not Applicable" and enter 0 for the amounts.) Variable overhead spending variance $enter the variable overhead spending variance in dollars select an option Variable overhead efficiency variance $enter the variable overhead efficiency variance in dollars select an option (b) Calculate the fixed overhead spending variance for May. (If variance is zero, select "Not Applicable" and enter 0 for the amounts.) Fixed overhead spending variance $enter the fixed overhead spending variance in dollars select an option
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.
Sheffield Company manufactures deep-sea fishing rods, which it distributes internationally through a chain of wholesalers. The following data are taken from the budget prepared at the beginning of the year by Sheffield’s controller. The company applies
| Annual Budget | May Budget | ||||
|---|---|---|---|---|---|
|
Variable manufacturing overhead
|
$2,202,000 | $223,000 | |||
|
Fixed manufacturing overhead
|
$1,200,240 | $100,020 | |||
|
Direct labor hours
|
50,640 | 4,220 | |||
|
Machine hours
|
220,200 | 22,300 |
During the month of May, Sheffield used 4,430 direct labor hours and 21,870 machine hours. The flexible budget for the month allowed 4,330 direct labor hours and 21,390 machine hours. Actual fixed manufacturing overhead incurred was $105,600; variable manufacturing overhead incurred was $216,400.
(a) Calculate the variable overhead spending and efficiency variances for May. (Round per unit value to 2 decimal places, e.g. 52.75 and final answers to 0 decimal places, e.g. 5,725. If variance is zero, select "Not Applicable" and enter 0 for the amounts.)
|
Variable overhead spending variance
|
$enter the variable overhead spending variance in dollars | select an option | |
|---|---|---|---|
|
Variable overhead efficiency variance
|
$enter the variable overhead efficiency variance in dollars | select an option |
(b) Calculate the fixed overhead spending variance for May. (If variance is zero, select "Not Applicable" and enter 0 for the amounts.)
| Fixed overhead spending variance | $enter the fixed overhead spending variance in dollars | select an option |
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