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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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Performance Report for Variable Variances

Potter Company provided the following information:

Chapter 10, Problem 40BEB, Performance Report for Variable Variances Potter Company provided the following information:

Required:

Prepare a performance report that shows the variances for each variable overhead item (inspection and power).

To determine

Construct the performance report which shows the variances of each variable overhead item.

Explanation

Overhead Variance:

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

Performance report of the variances:

  Budget for actualBudget for standard
Overhead cost item

Actual cost

(A)

($)

Actual Hours

(B)

($)

Spending variance

(A-B)

Standard Hours

(C)

($)

Efficiency variance

(B-C)

Inspection162,000154,00018,000 (F)150,00034,000(U)
Power220,600231,000210,400 (U)225,00046,000(U)
Total382,600385,0002,400 (U)375,00010,000(U)

Table (1)

Working Note:

1. Calculation of actual hours of inspection:

Actual Hours=Actual Labor Hours Worked×Actual Rate=77,000 Hours×$2

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