Question

In: Accounting

The manufacturing overhead costs are applied to products on the basis of machine time. Unfortunately, due...

The manufacturing overhead costs are applied to products on the basis of machine time. Unfortunately, due to system glitch, several numbers and labels have been omitted from the analysis of fixed overhead below. Supply the missing numbers and labels to help out:

1) Assume 6 minutes of machine time is standard per unit of production. How many units were actually produced in this situation?

Actual Fixed Overhead Cost

Flexible Budget Overhead Cost

Fixed Overhead Cost Applied to Work in Progress

(a)

(b)

302,100 MH x $1.08 = (c)

Budget variance, $1,880 U

(d)

Total variance, $388 F

(e

Solutions

Expert Solution

6 minutes of machine time is standard per unit of production. How many units were actually produced in this situation?

Actual units produced          3,021,000
Fixed Overhead Cost Applied to Work in Progress (302100*1.08) $         326,268
Fixed Overhead Cost Applied to Work in Progress $         326,268
Less: Total variance $                  388
Actual Fixed Overheads $         325,880
Actual Fixed Overheads $         325,880
Less: Budget variance $              1,880
Budgeted Fixed Overheads (or Flexible Budget Overhead Cost) $         324,000
Minus sign indicate Favorable variance.
Budgeted Fixed Overheads (or Flexible Budget Overhead Cost) $         324,000
Fixed Overhead Cost Applied to Work in Progress $         326,268
Fixed Overhead Volume Variance $            (2,268)
Indicate Favorable
MH means machine hours
Budgeted overhead rate per unit (6 minutes = 6/60 = 0.10 hours) (1.08 *0.10 ) $              0.108
Fixed Overhead Cost Applied to Work in Progress $         326,268
Divided by: Budgeted overhead rate per unit $              0.108
Actual units produced          3,021,000
Budgeted Fixed Overheads $         324,000
Divided by: Budgeted overhead rate per unit $              0.108
Budgeted units          3,000,000

Proof of answer

Minus sign indicate Favorable variance.
Budgeted Fixed Overheads $              324,000
Actual Fixed Overheads $              325,880
Budgeted units              3,000,000
Actual units              3,021,000
Overhead rate =( Budgeted Fixed Overheads / Budgeted units)
Applied Fixed Overhead = (Budgeted Fixed Overhead Rate * Actual units)
Budgeted Fixed Overhead Rate (324000/3000000) $                0.1080
Budgeted Fixed Overheads 324000
Less: Applied Fixed Overhead (0.108*3021000) -326268
Fixed Overhead Volume Variance $                (2,268)
Indicate Favorable
Actual Fixed Overheads 325880
Less: Budgeted Fixed Overheads -324000
Fixed Overhead Budget Variance $                  1,880
Indicate Unfavorable
Actual Fixed Overheads 325880
Less: Applied Fixed Overhead (0.108*3021000) -326268
Total Fixed Overhead Variance $                    (388)
Indicate Favorable

ekkarill92 answered 6 months ago
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