Walkenhorst Company's machining department prepared its 2022 budget based on the following data: Practical capacity Standard machine hours per unit Standard variable factory overhead Budgeted fixed factory overhead 40,000 units 2 $ 3.00 per machine hour $ 440,000 The department uses machine hours to apply factory overhead to production. In 2022, the department used 86,000 machine hours and incurred $700,000 in total manufacturing overhead cost to manufacture 42,090 units. Actual fixed overhead cost for the year was $453,000. Required: Determine for the year: 1. The predetermined fixed, variable, and total factory overhead application rates (per machine hour). (Round your answers to 2 decimal places.) 2. The total factory overhead cost in the flexible budget based on output achieved in 2022. 3. The fixed overhead volume variance. State whether this variance was favorable (F) or unfavorable (U). 4. The variable overhead efficiency variance. State whether this variance was favorable (F) or unfavorable (U). 5. The variable overhead spending (rate) variance and the fixed overhead spending (budget) variance. State whether each variance is favorable (F) or unfavorable (U). 1. Predetermined fixed overhead application rate $ 5.50 Predetermined variable overhead application rate $ 3.00 Total predetermined factory overhead application rate $ 8.50 2. Total overhead cost in the flexible budget $ 692,540 3. Fixed overhead volume variance $ 22,990 Favorable 4. Variable overhead efficiency variance Unfavorable 5. Variable overhead spending (rate) variance Favorable Fixed overhead spending (budget) variance $ 13,000 Unfavorable
Walkenhorst Company's machining department prepared its 2022 budget based on the following data: Practical capacity Standard machine hours per unit Standard variable factory overhead Budgeted fixed factory overhead 40,000 units 2 $ 3.00 per machine hour $ 440,000 The department uses machine hours to apply factory overhead to production. In 2022, the department used 86,000 machine hours and incurred $700,000 in total manufacturing overhead cost to manufacture 42,090 units. Actual fixed overhead cost for the year was $453,000. Required: Determine for the year: 1. The predetermined fixed, variable, and total factory overhead application rates (per machine hour). (Round your answers to 2 decimal places.) 2. The total factory overhead cost in the flexible budget based on output achieved in 2022. 3. The fixed overhead volume variance. State whether this variance was favorable (F) or unfavorable (U). 4. The variable overhead efficiency variance. State whether this variance was favorable (F) or unfavorable (U). 5. The variable overhead spending (rate) variance and the fixed overhead spending (budget) variance. State whether each variance is favorable (F) or unfavorable (U). 1. Predetermined fixed overhead application rate $ 5.50 Predetermined variable overhead application rate $ 3.00 Total predetermined factory overhead application rate $ 8.50 2. Total overhead cost in the flexible budget $ 692,540 3. Fixed overhead volume variance $ 22,990 Favorable 4. Variable overhead efficiency variance Unfavorable 5. Variable overhead spending (rate) variance Favorable Fixed overhead spending (budget) variance $ 13,000 Unfavorable
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter8: Budgeting For Planning And Control
Section: Chapter Questions
Problem 13CE: Nashler Company has the following budgeted variable costs per unit produced: Budgeted fixed overhead...
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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:Walkenhorst Company's machining department prepared its 2022 budget based on the following data:
Practical capacity
40,000 units
2
$ 3.00 per machine hour
$ 440,000
Standard machine hours per unit
Standard variable factory overhead
Budgeted fixed factory overhead
The department uses machine hours to apply factory overhead to production. In 2022, the department used 86,000 machine hours
and incurred $700,000 in total manufacturing overhead cost to manufacture 42,090 units. Actual fixed overhead cost for the year was
$453,000.
Required:
Determine for the year:
1. The predetermined fixed, variable, and total factory overhead application rates (per machine hour). (Round your answers to 2
decimal places.)
2. The total factory overhead cost in the flexible budget based on output achieved in 2022.
3. The fixed overhead volume variance. State whether this variance was favorable (F) or unfavorable (U).
4. The variable overhead efficiency variance. State whether this variance was favorable (F) or unfavorable (U).
5. The variable overhead spending (rate) variance and the fixed overhead spending (budget) variance. State whether each variance is
favorable (F) or unfavorable (U).
1. Predetermined fixed overhead application rate
$
5.50
Predetermined variable overhead application rate
$
3.00
Total predetermined factory overhead application rate
$
8.50
2. Total overhead cost in the flexible budget
$
692,540
3. Fixed overhead volume variance
$
22,990 Favorable
4. Variable overhead efficiency variance
Unfavorable
5. Variable overhead spending (rate) variance
Favorable
Fixed overhead spending (budget) variance
$
13,000 Unfavorable
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