Concept explainers
1
Standard machine hours allowed for the actual number of units produced.
Introduction:
2
The total budgeted fixed overhead cost for the period.
Introduction: Overhead means the ongoing business expenses which are not directly incurred while producing product or service. Overhead is important while preparing budget but it is also used to determine the amount company must charge in order to incur profit.
3
The fixed portion of predetermined overhead rate.
Introduction: Overhead means the ongoing business expenses which are not directly incurred while producing product or service. Overhead is important while preparing budget but it is also used to determine the amount company must charge in order to incur profit.
4
The fixed overhead volume variances.
Introduction: Overhead means the ongoing business expenses which are not directly incurred while producing product or service. Overhead is important while preparing budget but it is also used to determine the amount company must charge in order to incur profit.
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MANAGERIAL ACCOUNTING F/MGRS.
- (Appendix 10A) Which of the following is true concerning labor variances that are not material in amount? a. They are closed to Cost of Goods Sold. b. They are prorated among Work in Process, Finished Goods, and Cost of Goods Sold. c. They are prorated among Materials, Work in Process, Finished Goods, and Cost of Goods Sold. d. They are reported on the balance sheet at the end of the year. e. All of these.arrow_forwardDirect labor time variance Maywood City Police uses variance analysis to monitor police staffing. The following table identifies three common police activities, the standard time to perform each activity, and their actual frequency to establish the expected cost to serve these activities. Police Activity Standard Hours per Activity Actual Activities for Year Total Employee Hours Theft 0.60 7,000 4,200 Arrest 1.50 18,000 27,000 Patrol activities 0.30 9,000 2,700 33,900 The police are paid 25 per hour. The actual amount of hours per activity for the year were as follows: Police Activity Actual Hours per Activity Theft 0.75 Arrest 2.00 Patrol activities 0.40 A. Determine the total budgeted cost to perform the three police activities. B. Determine the total actual cost to perform the three police activities. C. Determine the direct labor time variance. D. What does the time variance suggest?arrow_forwardVariances Refer to Cornerstone Exercise 9.6. Required: 1. Calculate the variable overhead spending variance using the formula approach. (If you compute the actual variable overhead rate, carry your computations out to five significant digits and round the variance to the nearest dollar.) 2. Calculate the variable overhead efficiency variance using the formula approach. 3. Calculate the variable overhead spending variance and variable overhead efficiency variance using the three-pronged graphical approach. 4. What if 26,100 direct labor hours were actually worked in February? What impact would that have had on the variable overhead spending variance? On the variable overhead efficiency variance? Standish Company manufactures consumer products and provided the following information for the month of February: Required: 1. Calculate the fixed overhead spending variance using the formula approach. 2. Calculate the volume variance using the formula approach. 3. Calculate the fixed overhead spending variance and volume variance using the three-pronged graphical approach. 4. What if 129,600 units had actually been produced in February? What impact would that have had on the fixed overhead spending variance? On the volume variance?arrow_forward
- Calculating factory overhead: two variances Munoz Manufacturing Co. normally produces 10,000 units of product X each month. Each unit requires 2 hours of direct labor, and factory overhead is applied on a direct labor hour basis. Fixed costs and variable costs in factory overhead at the normal capacity are 2.50 and 1.50 per direct labor hour, respectively. Cost and production data for May follow: a. Calculate the flexible-budget variance. b. Calculate the production-volume variance. c. Was the total factory overhead under- or overapplied? By what amount?arrow_forwardDirect materials variances Bellingham Company produces a product that requires 2.5 standard pounds per unit. The standard price is 3.75 per pound. If 15,000 units used 36,000 pounds, which were purchased at 4.00 per pound, what is the direct materials (A) price variance, (B) quantity variance, and (C) cost variance?arrow_forward(Appendix) Overhead variances—four variance Mobile Manufacturing Inc. manufactures a small electric motor that is a replacement part for the more popular gas furnaces. The standard cost card shows the product requirements as follows: Factory overhead rates are based on normal 100% capacity and the following flexible budgets: The company produced 3,500 units, using 18,375 direct labor hours and incurring the following overhead costs: Required: Calculate the factory overhead: variable-spending, variable-efficiency, fixed-spending, and production-volume variances. Does the net variance represent under- or overapplied factory overhead?arrow_forward
- Calculating amount of factory overhead applied to work in process The overhead application rate for a company is 2.50 per unit, made up of 1.00 for fixed overhead and 1.50 for variable overhead. Normal capacity is 10,000 units. In one month, there was an unfavorable flexible budget variance of 200. Actual overhead for the month was 27,000. What was the amount of the budgeted overhead for the actual level of production?arrow_forwardVariance interpretation You have been asked to investigate some cost problems in the Assembly Department of Ruthenium Electronics Co., a consumer electronics company. To begin your investigation, you have obtained the following budget performance report for the department for the last quarter. Ruthenium Electronics Co.Assembly Department Quarterly Budget Performance Report Standard Quantity at Standard Rates Actual Quantity at Standard Rates Quantity Variances Direct labor 157,500 227,500 70,000 U Direct materials 297,500 385,000 87,500 U Total 455,000 612,500 157,500 U You also obtained the following reports: Ruthenium Electronics Co.Purchasing Department Quarterly Budget Performance Report Actual Quantity at Standard Rates Actual Quantity at Actual Rates Price Variance Direct materials 437,500 385,000 (52,500) F Ruthenium Electronics Co.Fabrication Department Quarterly Budget Performance Report Standard Quantity at Standard Rates Actual Quantity at Standard Rates Quantity Variances Direct labor 245,000 203,000 (42,000) F Direct materials 140,000 140,000 0 Total 385,000 343,000 (42,000) F You also interviewed the Assembly Department supervisor. Excerpts from the interview follow: Q: What explains the poor performance in your department? A: Listen, youve got to understand what its been like in this department recently. Lately, it seems no matter how hard we try, we cant seem to make the standards. Im not sure what is going on, but weve been having a lot of problems lately. Q: What kind of problems? A: Well, for instance, all this Quarter weve been requisitioning purchased parts from the material storeroom, and the parts just didnt fit together very well. Im not sure what is going on, but during most of this quarter, weve had to scrap and sort purchased partsjust to get our assemblies put together. Naturally, all this takes time and material. And thats not all. Q: Go on. A: All this Quarter the work we've been receiving from the Fabrication Department has been shoddy. I mean, maybe around 20% of the stuff that comes in from Fabrication just cant be assembled. The fabrication is all wrong. As a result we've had to scrap and rework a lot of the stuff. Naturally, this has just shot our quantity variances. Interpret the variance reports in light of the comments by the Assembly Department supervisor.arrow_forward(Appendix) Calculating factory overhead: four variances Atlanta Adhesives Inc. budgets 15,000 direct labor hours for the year. The total overhead budget is expected to amount to 42,000. The standard cost for a unit of the companys product estimates the variable overhead as follows: The actual data for the period follow: Using the four-variance method, calculate the overhead variances. (Hint: First compute the budgeted fixed overhead rate.)arrow_forward
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