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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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Variable Overhead Spending and Efficiency Variances, Columnar and Formula Approaches

Aretha Company provided the following information:

Chapter 10, Problem 39BEB, Variable Overhead Spending and Efficiency Variances, Columnar and Formula Approaches Aretha Company

Required:

  1. 1. Using the columnar approach, calculate the variable overhead spending and efficiency variances.
  2. 2. Using the formula approach, calculate the variable overhead spending variance.
  3. 3. Using the formula approach, calculate the variable overhead efficiency variance.
  4. 4. Calculate the total variable overhead variance.

1.

To determine

Compute the value of variable overhead spending and efficiency variances with the help of columnar approach.

Explanation

Variance:

The amount obtained when actual cost is deducted from budgeted cost is known as variance. Variance is calculated to find whether the cost is over applied or under applied.

Use the following formula to calculate overhead spending variance with the help of columnar approach:

Overhead Spending Variance=((Actual Hours×Standard Variable Overhead)Actual Overhead)

Substitute 69,200 hours for actual hours, $4.70 for standard variable overhead and $335,750 for actual overhead in the above formula.

Overhead Spending Variance=((69,200 hours×$4.70)$335,750)=$10,510(U)

Therefore, the overhead spending variance by columnar approach is $10,510 (U)

2.

To determine

Compute the value of variable overhead spending variance.

3.

To determine

Compute the value of variable overhead efficiency variance.

4.

To determine

Compute the value of total variable overhead variance.

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