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Ayala Corporation accumulates the following data relative to jobs started and finished during the month of...

Ayala Corporation accumulates the following data relative to jobs started and finished during the month of June 2017. Costs and Production Data Actual Standard Raw materials unit cost $2.25 $2.10 Raw materials units used 10,600 10,000 Direct labor payroll $120,960 $120,000 Direct labor hours worked 14,400 15,000 Manufacturing overhead incurred $189,500 Manufacturing overhead applied $193,500 Machine hours expected to be used at normal capacity 42,500 Budgeted fixed overhead for June $55,250 Variable overhead rate per machine hour $3.00 Fixed overhead rate per machine hour $1.30 Overhead is applied on the basis of standard machine hours. 3.00 hours of machine time are required for each direct labor hour. The jobs were sold for $400,000. Selling and administrative expenses were $40,000. Assume that the amount of raw materials purchased equaled the amount used. Compute the overhead controllable variance and the overhead volume variance.

Solutions

Expert Solution

A) overhead controllable variance = Actual overhead cost - Standard cost For actual Output

                 = 189500 -190250

                 = - 750 F   (enter as 750 F if needs to be entered as positive values)

working:

Actual overhead cost = 189500

standard machine hours allowed per standard direct labor allowed = 15000 standard direct labor hours *3 machine hours are required for each direct labor hour

                    = 45000 machine hours

Standard cost For actual Output = (standard machine hours* standard variable overhead cost) +Fixed overhead cost

                       (45000*3 ) +55250

                         135000+55250

                         190250

B)Overhead Volume variance = Budgeted fixed overhead - Standard fixed overhead allowed for standard machine hours allowed

                           = 55250 - (1.30 *45000)

                           = 55250 -- 58500

                          = -3250 F        (enter as 3250 F if needs to be entered as positive values)


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