Question

Standards
Lamp Kits $16.000000 per lamp
Direct Labor 2.400000 per lamp (4 lamps/hr.)
Variable Overhead 0.250000 per lamp (4 lamps/hr.)
** Fixed Overhead 10.000000 per lamp
Total $28.650000

** Fixed overhead is based on expected production of 4,009 customized lamps each month.

To keep records of the actual cost of a job, a Job Order Cost System has been developed. Entries
are made to the Job Order System at actual cost (overhead is applied based on actual labor hours)
while entries are made to the accounting system at standard. Variance analysis is used to analyze the
differences.

Job Order Costing Section

On January 1, 20x2, Division S began Job 1101 for the Client, THE BIG CHILDREN STORE. The
job called for 4,000 customized lamps. The following set of transactions occurred from
January 5 until the job was completed:

5-Jan Purchased 4,150 Lamp Kits @ $16.45 per kit.
9-Jan 4,075 sets of Lamp Kits were requisitioned.
17-Jan Payroll of 570 Direct Labor Hours @ $9.40 per hour.
30-Jan Payroll of 620 Direct Labor Hours @ $9.65 per hour.
30-Jan 3,991 lamps were completed and shipped. All materials requisitioned were
used or scrapped.

Month End Overhead Information
Actual Variable Overhead $1,261.40
Actual Fixed Overhead $39,623.45

Note: Show favorable variances as negative numbers

What was the variable overhead efficiency variance ? {16.01}

What was the variable OH spending variance ? {16.02}

What is the fixed OH volume (denominator) variance? {16.03}

What is the fixed OH spending variance? {16.04}

Answer 1

Ans.

What was the variable overhead efficiency variance ? {16.01}

Variable overhead efficiency variance = ( Actual Hours - Standard hour of actual production ) * Standard Rate

Variable overhead efficiency variance = [( 570 + 620) - (0.25 hours * 3,991) ] * $ 1

Variable overhead efficiency variance = ( 1,190 - 997.75 ) * $1 = $ 192.25 (Unfavorable)

What was the variable OH spending variance ? {16.02}

variable OH spending variance = ( Actual Rate - Standard Rate ) * Actual Hours

variable OH spending variance = ( [ ($ 1261.4/1190 - $ 1 ) * 1,190

variable OH spending variance = $ 71.4 ( Unfavourable)

What is the fixed OH volume (denominator) variance? {16.03}

Fixed OH volume variance = Budgeted Overhead - Standard Overhead

Fixed OH volume variance = [ ( 4,009 * $10 ) - ( 3,991 * $10 ) ]

Fixed OH volume variance = $ 180 (Unfavourable)

What is the fixed OH spending variance? {16.04}

Fixed OH spending variance = Actual Overhead - Budgeted Overhead

Fixed OH spending variance = [ $ 39,623.45 - $ 40,090 ]

Fixed OH spending variance = - 466.55 (Favourable)