Question

In: Accounting

Lambda Company, which produces tool boxes, uses a standard cost system and carries all inventories at...

Lambda Company, which produces tool boxes, uses a standard cost system and carries all inventories at standard. The standard manufacturing overhead costs per switch are based on direct labour hours and are shown below: Variable overhead (5 hours @ $12 per direct manufacturing labour hour) $ 60 Fixed overhead (5 hours @ $15* per direct manufacturing labour hour) 75 Total overhead per box $135 *Based on capacity of 200,000 direct manufacturing labour hours per month. The following information is available for the month of December: • 46,000 boxes were produced although 40,000 boxes were scheduled to be produced. • 225,000 direct manufacturing labour hours were worked at a total cost of $5,625,000. • Variable manufacturing overhead costs were $2,750,000. • Fixed manufacturing overhead costs were $3,050,000.

Calculate:

The variable overhead spending variance for December

The variable manufacturing overhead efficiency variance for December

The fixed manufacturing overhead spending variance for December

The fixed overhead production volume variance for December was

What amount should be credited to the allocated manufacturing overhead control account for the month of December?

Under the 2-variance method, the flexible budget variance for December was

Under the 3-variance method, the spending variance for December was

Expert Solution

VARIABLE OVERHEAD SPENDING VARIANCE

= actual total variable overhead incurred - budgeted variable overhead based on actual input

= (AP × AQ) - (SP× AQ)

Actual manufacturing variable overhead is given = 2750000

Budgeted variable overhead based on actual input = 225000 (Labour hous) × 12 (Labour hour rate)

= 2700000

= 2750000 - 270000 = 50000 unfavourable

VARIABLE MANUFACTURING OVERHEAD EFFICIENCY VARIANCE

Budgeted variable overhead based on actual inputs - standard variable overhead allowed for production

(AQ × SP) - (SQ × SP)

(AQ × SP) = 225000 × 12 = 2700000

(SQ × SP) = (46000 × 5) × 12 = 2760000

2700000 - 2760000 = - 60000 favourable

FIXED MANUFACTURING OVERHEAD SPENDING VARIANCE

Actual fixed overhead incurred - budgeted fixed overhead

3050000 - 3375000 = -325000 favourable

FIXED OVERHEAD PRODUCTION VOLUME VARIANCE

Budgeted fixed overheads - standard fixed overhead applied

3000000- (15 × 225000) = 375000 favorable

ekkarill92 answered 2 years ago

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