In: Accounting
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
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