Concept explainers
1
Predetermined
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.
2
Show applied figures of $272,000 Manufacturing overhead account
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
Analysis of $15,400 under applied overhead figure into variable overhead rate, efficiency variance, the fixed overhead budget and 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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Explanation of variable overhead variance, variable overhead efficiency variance,
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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- 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_forwardRefer to Exercise 8.27. At the end of the year, Meliore, Inc., actually produced 310,000 units of the standard model and 115,000 of the deluxe model. The actual overhead costs incurred were: Required: Prepare a performance report for the period. In an attempt to improve budgeting, the controller for Meliore, Inc., has developed a flexible budget for overhead costs. Meliore, Inc., makes two types of products, the standard model and the deluxe model. Meliore expects to produce 300,000 units of the standard model and 120,000 units of the deluxe model during the coming year. The standard model requires 0.05 direct labor hour per unit, and the deluxe model requires 0.08. The controller has developed the following cost formulas for each of the four overhead items: Required: 1. Prepare an overhead budget for the expected activity level for the coming year. 2. Prepare an overhead budget that reflects production that is 10 percent higher than expected (for both products) and a budget for production that is 20 percent lower than expected.arrow_forward
- Refer to the data in Exercise 9.15. Required: 1. Compute overhead variances using a two-variance analysis. 2. Compute overhead variances using a three-variance analysis. 3. Illustrate how the two- and three-variance analyses are related to the four-variance analysis. Oerstman, Inc., uses a standard costing system and develops its overhead rates from the current annual budget. The budget is based on an expected annual output of 120,000 units requiring 480,000 direct labor hours. (Practical capacity is 500,000 hours.) Annual budgeted overhead costs total 787,200, of which 556,800 is fixed overhead. A total of 119,400 units using 478,000 direct labor hours were produced during the year. Actual variable overhead costs for the year were 230,600, and actual fixed overhead costs were 556,250. Required: 1. Compute the fixed overhead spending and volume variances. How would you interpret the spending variance? Discuss the possible interpretations of the volume variance. Which is most appropriate for this example? 2. Compute the variable overhead spending and efficiency variances. How is the variable overhead spending variance like the price variances of direct labor and direct materials? How is it different? How is the variable overhead efficiency variance related to the direct labor efficiency variance?arrow_forwardRefer to Cornerstone Exercise 8.13. In March, Nashler Company produced 163,200 units and had the following actual costs: Required: 1. Prepare a performance report for Nashler Company comparing actual costs with the flexible budget for actual units produced. 2. What if Nashler Companys actual direct materials cost were 1,175,040? How would that affect the variance for direct materials? The total cost variance?arrow_forwardRefer to the data in Problem 9.34. Vet-Pro, Inc., also uses two different types of direct labor in producing the anti-anxiety mixture: mixing and drum-filling labor (the completed product is placed into 50-gallon drums). For each batch of 20,000 gallons of direct materials input, the following standards have been developed for direct labor: The actual direct labor hours used for the output produced in March are also provided: Required: 1. Compute the direct labor mix and yield variances. (Round standard price of yield to four significant digits.) 2. Compute the total direct labor efficiency variance. Show that the total direct labor efficiency variance is equal to the sum of the direct labor mix and yield variances. Vet-Pro, Inc., produces a veterinary grade anti-anxiety mixture for pets with behavioral problems. Two chemical solutions, Aranol and Lendyl, are mixed and heated to produce a chemical that is sold to companies that produce the anti-anxiety pills. The mixture is produced in batches and has the following standards: During March, the following actual production information was provided: Required: 1. Compute the direct materials mix and yield variances. 2. Compute the total direct materials usage variance for Aranol and Lendyl. Show that the total direct materials usage variance is equal to the sum of the direct materials mix and yield variances.arrow_forward
- Variances 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_forwardABC Inc. spent a total of $48,000 on factory overhead. Of this, $28,000 was fixed overhead. ABC Inc. had budgeted $27,000 for fixed overhead. Actual machine hours were 5.000. Standard hours for units made were 4,800. The standard variable overhead rate was $4.10. What is the variable overhead rate variance?arrow_forwardCalculating 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_forward
- 10-52 Materials and Labor Variances Refer to the information for Deporte Company above. Required: Compute the materials and labor variances associated with the changeover activity, labeling each variance as favorable or unfavorable. Use the following information for Exercises 10-52 and 10-53: Deporte Company produces single-colored T-shirts. Materials for the shirts are dyed in large vats. After dying the materials for a given color, the vats must be cleaned and prepared for the next batch of materials to be colored. The following standards for changeover for a given batch have been established: During the year, 79,500 pounds of material were purchased and used for the changeover activity. There were 30,000 batches produced, with the following actual prime costs:arrow_forwardCalculating factory overhead: two variances Monrovia Manufacturing Inc. normally produces 10,000 units of product A each month. Each unit requires 4 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 10 and 5 per unit, respectively. Cost and production data for June 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_forward
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