Question

E8-26

ComplexChemComplexChem​,

​Inc., produces chemicals for large biotech companies. It has the following data for manufacturing overhead costs during August

20172017​:

Variable Fixed

Actual costs incurred $30,500 $15,500 Costs allocated to products $32,000 $14,200 Flexible budget — $13,200 Actual input x budgeted rate $32,200 —

Requirement

Fill in the blanks. Use F for favorable and U for​ unfavorable:

​(If no variance exists leave the dollar value blank. Label the variance as favorable​ (F), unfavorable​ (U) or never a variance​ (N).)

				Variable
(1)			Spending variance
(2)			Efficiency variance
(3)			Production-volume variance
(4)			Flexible-budget variance
(5)			Underallocated(overallocated) manufacturing overhead
				VARIABLE	FIXED
-1	Spending variance			$	$
-2	Efficiency variance
-3	Production-volume variance
-4	Flexible-budget variance
-5	Underallocated (overallocated)
	manufacturing overhead

Answer 1

Answer:

Particulars	Variable	Fixed
1) Spending Variance	$1500 F	$200 U
2) Efficiency Variance	$3800 U	-
3) Production Volume Variance	-	$1000 F
4) Flexible Budget Variance	$1900 U	$1300 U
5) Under/over Allocated Manufacturing Overhead	$1900 Under	$1300 Under

Variable Manufacturing Overhead :-

Actual Cost incurred = $30500

Cost Allocated to Product = $32000

Actual input * Budgeted Rate = $32200

1) Spending variance = $30500 - $32200 = $1700 F

2) Efficiency Variance = $32200 - $32000 = $200 U

3) Flexible Budget Varianace = Spending Variance + Efficiency Variance

= $1700 F + $200 U

= $1500 F

Fixed Manufacturing Overhead :-

Actual Cost Incurred = $15500

Cost allocated to Products = $14200

Flexible Budget = $13200

1) Spending Variance = $15500 - $13200 = $2300 U

2) Production Volume Variance = $13200 - $14200 = $1000 F

3) Flexible Budget Variance = Sepnding Variance + Production Volume Variance

= $2300 U + $1000 F

= $1300 U