Question

In: Accounting

Johnson Corporation has an expected monthly capacity of 9,000 units but only 5,700 units were produced...

Johnson Corporation has an expected monthly capacity of 9,000 units but only 5,700 units were produced and 6,000 direct labor hours were used during August due to Covid-19. The actual variable overhead for August was $48,165, and the actual fixed overhead was $140,220.

Standard cost data follow:

Standard cost per unit

(One unit Takes one Labor Hour)

Direct materials

$9.00

Direct labor

15.00

Variable overhead

8.00

Fixed overhead

16.00

Total

$48.00

1) What is the Variable Manufacturing Overhead Spending Variance? State if it is Favorable (FA) or Unfavorable (UN).

2) What is the Variable Manufacturing Overhead Efficiency Variance? State if it is Favorable (FA) or Unfavorable (UN).

3) What is the Fixed Manufacturing Overhead Spending Variance? State if it is Favorable (FA) or Unfavorable (UN).

4) What is the Fixed Manufacturing Overhead Volume Variance? State if it is Favorable (FA) or Unfavorable (UN).

5) How can you make the volume variance more favorable (if your answer was favorable) or less unfavorable (if your answer was unfavorable)? Explain

Solutions

Expert Solution

Budgeted Units= 9,000

Budgeted Fixed Manufacturing Overhead = 9,000*$16 = $144,000

Actual Units = 5,700

Actual direct labour hour = 6,000

Actual Variable overhead rate = $8.0275 ($48,165/6,000)

Standard Hour = 5,700unit*1 hour= 5,700 hours

1. Variable Manufacturing Overhead Spending Variance = Actual Hour(Standard Rate - Actual Rate)

  = 6,000($8-$8.0275) = 6,000*$0.0275 = 165 Unfavourable

2. Varible Manufacturing Overhead Efficiency Variance = Standard Rate(Standard Hour- Actual Hours)

= $8(5,700-6,000)= $8*300 = $2,400 Unfavourable

3.Fixed Manufacturing Overhead Spending Variance= Budgeted Fixed Overhead - Actual Fixed Overhead

= $144,000 - $140,220 = $3,780 Favourable

4.Fixed Manufacturing Overhead Volume Variance=Standard Fixed OH Rate per Unit (Actual unit- Budgeted unit)

= $16(5,700-9,000) = $16*3,300= $52,800 Unfavourable

5. Fixed Manufacturing Overhead Volume Variance is Unfavourable.

Fixed Manufacturing Overhead is caused by production volume.To reduce unfavourable we have to reduce the budgeted production.   

ekkarill92 answered 2 years ago
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