1.
Compute the total overhead spending variance, the efficiency variance, and the fixed overhead production volume variance.
1.
Explanation of Solution
Operational control is the power to carry out those functions of orders over subordinate forces concerning the organization and use of instructions and compels the assignment of tasks, the assignment of goals and the giving of the instructive path requisite for the task.
A cost variance is the difference between the cost actually incurred and the amount of costs money earmarked or scheduled that should have been imposed. These variances establish a mandatory part of many reporting tools for the management.
Overhead costs, sometimes referred to as overhead or operating expenses, are those costs that are associated with running a business that cannot be connected to constructing or manufacturing a product or a service. They are the expenses the business incurs in staying in business, irrespective of its level of achievement.
The total overhead cost variance for the period is equal to the difference between actual overhead cost incurred and the
The overhead total flexible-
The fixed overhead spending (budget) variance is the difference between budgeted and actual fixed
Calculate Standard variable factory overhead rate per direct labor hour (DLH):
Calculate Standard fixed factory overhead rate per direct-labor hours (DLH):
The standard factory overhead rate per direct labor hour (DLH) is $42.00/DLH ($6.00 + $36.00).
Calculate Standard direct-labor hours (DLH) per unit:
The three
Actual Cost | Flexible Budget Based on Inputs (AQ × SP) | Flexible Budget Based on Output (SQ × SP) | Applied (SQ × SP) |
15,600 | 2,700 × $6 = $ 16,200 | 2,400 × $6 = $14,400 | 2,400 × $42 = $100,800 |
Add: 92,000 | 90,000 | 90,000 | |
$107,600 | $106,200 | $104,400 |
The formula to calculate the variable overhead spending (budget) variance is as follows:
Calculate the variable overhead spending (budget) variance:
Hence, the variable overhead spending (budget) variance is $1,400 U.
The formula to calculate variable overhead efficiency variance is as follows:
Calculate the variable overhead efficiency variance:
Hence, the variable overhead efficiency variance is $1,800 U.
The formula to calculate the fixed overhead production volume variance is as follows:
Calculate the fixed overhead production volume variance:
Hence, the fixed overhead production volume variance is $3,600 U.
2.
Compute the spending variances both for variable and fixed; the efficiency variance, and the fixed overhead production volume variance.
2.
Explanation of Solution
Operational control is the power to carry out those functions of orders over subordinate forces concerning the organization and use of instructions and compels the assignment of tasks, the assignment of goals and the giving of the instructive path requisite for the task.
Overhead costs, sometimes referred to as overhead or operating expenses, are those costs that are associated with running a business that cannot be connected to constructing or manufacturing a product or a service. They are the expenses the business incurs in staying in business, irrespective of its level of achievement.
A cost variance is the difference between the cost actually incurred and the amount of costs money earmarked or scheduled that should have been imposed. These variances establish a mandatory part of many reporting tools for the management.
The formula to calculate the variable overhead spending (budget) variance is as follows:
Calculate the variable overhead spending (budget) variance:
Hence, the variable overhead spending (budget) variance is $600 F.
The formula to calculate variable overhead efficiency variance is as follows:
Calculate the variable overhead efficiency variance:
The formula to calculate fixed overhead spending (budget) variance is as follows:
Calculate fixed overhead spending (budget) variance:
Hence, the fixed overhead spending (budget) variance for March is $2,000 F
Fixed variance in the overhead production volume is the difference between the budgeted fixed overhead over the period and the standard fixed overhead applicable to production.
The formula to calculate the fixed overhead production volume variance is as follows:
Calculate the fixed overhead production volume variance:
Calculate total overhead spending variance, total overhead efficiency variance and the fixed overhead production volume variance:
Particulars | ||
Overhead Spending Variance: | ||
Variable Overhead Spending Variance | ||
Fixed Overhead Spending Variance | ||
Overhead Efficiency Variance: | ||
Variable overhead efficiency variance | ||
Overhead production volume variance: | ||
Fixed Overhead Production Volume Variance | ||
Total Overhead Variance |
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Chapter 15 Solutions
CUSTOM COST MANAGEMENT
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