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 |
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