BuyFindarrow_forward

Managerial Accounting: The Corners...

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

Solutions

Chapter
Section
BuyFindarrow_forward

Managerial Accounting: The Corners...

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

Lynwood Company produces surge protectors. To help control costs, Lynwood employs a standard costing system and uses a flexible budget to predict overhead costs at various levels of activity. For the most recent year, Lynwood used a standard overhead rate of $18 per direct labor hour. The rate was computed using practical activity. Budgeted overhead costs are $396,000 for 18,000 direct labor hours and $540,000 for 30,000 direct labor hours. During the past year Lynwood generated the following data: (a) Actual production: 100,000 units: (b) Fixed overhead volume variance: $20,000 U; (c) Variable overhead efficiency variance: $18,000 F; (d) Actual fixed overhead costs: $200,000; and (e) Actual variable overhead costs: $310,000.

Required:

  1. 1. Calculate the fixed overhead rate.
  2. 2. Determine the fixed overhead spending variance.
  3. 3. Determine the variable overhead spending variance.
  4. 4. Determine the standard hours allowed per unit of product.

1.

To determine

Compute the value of fixed overhead rate.

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.

Use the following formula to calculate the fixed overhead:

Fixed Overhead Rate=Total RateVariable Overhead Rate1

Substitute $18 for total rate and $12 for variable overhead rate in the above formula.

Fixed Overhead Rate=$18$12=$6

Therefore, the fixed overhead rate is $6

2.

To determine

Calculate the value of fixed overhead spending variance.

3.

To determine

Calculate the value of variable overhead spending variance.

4.

To determine

Calculate the value of standard hours allowed per unit of product.

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

Distinguish buy-side and sell-side systems.

Pkg Acc Infor Systems MS VISIO CD

Why are accruals called spontaneous sources of funds, what are their costs, and why dont firms use more of them...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)