Question

In: Accounting

The following information is available regarding the company’s overhead. The company uses standard costing to account...

The following information is available regarding the company’s overhead. The company uses standard costing to account for both variable and fixed overhead in its operations, both of which are applied on the basis of machine hours.

Fixed Manufacturing Overhead Incurred 23,180
Denominator Machine Hours per Master Budget 1,000 hours
Variable Overhead Rate per Machine Hour 42 per Machine Hour
Budgeted Fixed OVerhead per Master Budget 20,000
Fixed Overhead Volume Variance 4,000 F
Variable Overhead Spending Variance 2,282 F
Variable Overhead Efficiency Variance 2,478 F

Determine the following:

1) Variable manufacturing overhead incurred
2) Standard machine hours allowed for actual output
3) Fixed overhead rate (per machine hour)
4) Budgeted variable overhead (per master budget)
5) Total budgeted overhead (per master budget)
6) Applied variable overhead
7) Applied fixed overhead
8) Fixed overhead spending variance
9) Actual machine hours used

Solutions

Expert Solution

Solution 1:

Fixed overhead rate = Budgeted fixed overhead / Budgeted hours = $20,000 / 1000 = $20 per hour

Fixed overhead volume variance = $4,000 F

Fixed overhead applied = Budgeted overhead + Fixed overhead volume variance = $20,000 + $4,000 = $24,000

Standard hours for actual production = $24,000 / 20 = 1200 hours

Standard variable overhead = SH * SR = 1200 * $42 = $50,400

Actual variable overhead = standard variavble overhead + Variable overhead spending variance + Variable overhead efficiency variance

= $50,400 - $2,282 - $2,478 = $45,640

Solution 2:

Standard machine hours allowed for actual output = 1200 hours

Solution 3:

Fixed overhead rate = $20,000 / 1000 = $20 per hour

Solution 4:

Budgeted variable overhead (Master budget) = 1000*$42 = $42,000

Solution 5:

Total budgeted overhead = $42,000 + $20,000 = $62,000

Solution 6:

Applied variable overhead = 1200*$42 = $50,400

Solution 8:

Fixed overhead spending variance = Budgeted fixed overhead - Actual fixed overhead = $20,000 - $23,180 = $3,180 U

Solution 9:

Variable overhead efficiency variance = $2,478

(SH - AH) * SR = $2,478

(1200 - AH) * $42 = $2,478

AH = 1141 hours


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