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Concept explainers
Computing
Learning Objective 4
Refer to the Morgan, Inc. data in Short Exercise S23-9. Last month, Morgan reported the following actual results: actual variable overhead, $10,800; actual fixed overhead, $2,770; actual production of 7,000 units at 0.20 direct labor hours per unit. The standard direct labor time is 0.25 direct labor hours per unit (1,300 static direct labor hours/5,200 static units).
Requirements
1. Compute the overhead variances for the month: variable overhead cost variance, variable overhead efficiency variance, fixed overhead cost variance, and fixed overhead volume variance.
2. Explain why the variances are favorable or unfavorable.
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Chapter 23 Solutions
Horngren's Accounting, Student Value Edition Plus MyLab Accounting with Pearson eText -- Access Card Package (12th Edition)
- Georgia Gasket Co. budgets 8,000 direct labor hours for the year. The total overhead budget is expected to amount to 20,000. 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_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_forwardDetermining Budgeted Overhead The overhead application rate for a company is 10 per unit, made up of 6 per unit of fixed overhead and 4 per unit of variable overhead. Normal capacity is 10,000 units. In one month there was a favorable flexible budget variance of 2,500. Actual overhead for the month was 110,000 and actual units produced were 13,125. Based on this information, determine the amount of the budgeted overhead for the actual level of production.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_forwardRefer 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_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_forward
- Use the following information to complete Brief Exercises 10-25 and 10-26: Tico Inc. produces plastic bottles. Each bottle has a standard labor requirement of 0.03 hour. During the month of April, 900,000 bottles were produced using 25,200 labor hours @ 15.00. The standard wage rate is 13.50 per hour. 10-26 Labor Rate and Efficiency Variances Refer to the information above for Tico Inc. on the previous page Required: Calculate the labor rate and efficiency variances using the columnar and formula approaches.arrow_forwardDirect materials and direct labor variance analysis Lenni Clothing Co. manufactures clothing in a small manufacturing facility. Manufacturing has 25 employees. Each employee presently provides 40 hours of productive labor per week. Information about a production week is as follows: Instructions Determine (A) the standard cost per unit for direct materials and direct labor; (B) the price variance, quantity variance, and total direct materials cost variance; and (C) the rate variance, time variance, and total direct labor cost variance.arrow_forwardDirect Materials and Direct Labor Variance Analysis Shasta Fixture Company manufactures faucets in a small manufacturing facility. The faucets are made from brass. Manufacturing has 40 employees. Each employee presently provides 32 hours of labor per week. Information about a production week is as follows: Standard wage per hour $17.40 Standard labor time per unit 15 min. Standard number of Ibs. of brass 1.9 Ibs. Standard price per Ib. of brass $10.75 Actual price per Ib. of brass $11.00 Actual Ibs. of brass used during the week 13,503 Ibs. Number of units produced during the week 6,900 Actual wage per hour $17.92 Actual hours for the week (40 employees × 32 hours) 1,280 Required: a. Determine the standard cost per unit for direct materials and direct labor. Round the cost per unit to two decimal places. Direct materials standard cost per unit Direct labor standard cost per unit Total standard cost per unit b. Determine the direct materials price variance, direct materials quantity…arrow_forward
- Direct Materials and Direct Labor Variance Analysis Abbeville Company manufactures faucets in a small manufacturing facility. The faucets are made from brass. Manufacturing has 70 employees. Each employee presently provides 40 hours of labor per week. Information about a production week is as follows: $17.40 20 min. 1.20 lb. Standard wage per hr. Standard labor time per faucet Standard number of lb. of brass Standard price per lb. of brass Actual price per lb. of brass Actual lb. of brass used during the week Number of faucets produced during the week Actual wage per hr. Actual hrs. for the week Required: $11.50 $11.75 7,400 lb. 6,000 $17.90 2,800 hrs. a. Determine the standard cost per unit for direct materials and direct labor. Do not round your intermediate calculations and round the cost per unit to two decimal places. Direct materials standard cost per unit Direct labor standard cost per unit Total standard cost per unit materials cost variance. Do not round your intermediatearrow_forwardDirect Materials and Direct Labor Variance Analysis Jericho Fixture Company manufactures faucets in a small manufacturing facility. The faucets are made from brass. Manufacturing has 30 employees. Each employee presently provides 40 hours of labor per week. Information about a production week is as follows: Line Item Description Value Standard number of lbs. of brass 1.5 lbs. Standard price per lb. of brass $12.75 Standard wage per hour $15.60 Standard labor time per unit 20 min. Actual price per lb. of brass $13.00 Actual lbs. of brass used during the week 10,197 lbs. Number of units produced during the week 6,600 Actual wage per hour $16.07 Actual hours for the week (30 employees × 40 hours) 1,200 Required: a. Determine the standard cost per unit for direct materials and direct labor. Round the cost per unit to two decimal places. Line Item Description Cost per Unit Direct materials standard cost per unit $fill in the blank 1 Direct labor standard cost…arrow_forwardDirect Materials and Direct Labor Variance Analysis Abbeville Company manufactures faucets in a small manufacturing facility. The faucets are made from brass. Manufacturing has 40 employees. Each employee presently provides 32 hours of labor per week. Information about a production week is as follows: Standard wage per hr. $10.80 Standard labor time per faucet 10 min. Standard number of lb. of brass 1.30 lb. Standard price per lb. of brass $9.75 Actual price per lb. of brass $10.00 Actual lb. of brass used during the week 11, 600 lb. Number of faucets produced during the week 8, 700 Actual wage per hr. $11.10 Actual hrs. per week 1, 280 hrs. Required: a. Determine the standard cost per faucet for direct materials and direct labor. Round the cost per unit to two decimal places.arrow_forward
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