In: Accounting
Angie Manufacturing uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of standard machine-hours. At standard, each unit of product requires one machine-hour to complete. The standard variable overhead is $1.75 per machine-hour and Budgeted Fixed Manufacturing Costs are $300,000 per year. The denominator level of activity is 150,000 machine-hours, or 150,000 units. Actual data for the year were as follows:
Actual variable overhead cost | $ | 211,680 | |
Actual fixed manufacturing overhead cost | $ | 315,000 | |
Actual machine-hours | 126,000 | ||
Units produced | 120,000 | ||
Required:
a. What are the predetermined variable and fixed manufacturing overhead rates for the year?
b. Compute the variable overhead rate and efficiency variances for the year.
c. Compute the fixed manufacturing overhead budget and volume variances for the year.
a) | Predetermined variable OH rate | $ 1.75 | ||||
Predetermined fixed OH rate | $ 2.00 | ($ 300000 / 150000) |
b)
Data for Variable OH variances | ||||||||||
Budget (1 unit) | Standard (120000 units) | Actual (120000 units) | ||||||||
Hour | Rate | Amount | Hour | Rate | Amount | Hour | Rate | Amount | ||
1 | $ 1.75 | $ 1.75 | 120000 | $ 1.75 | $ 210,000.00 | 126000 | $ 1.68 | $ 211,680.00 | ||
Variable OH rate variance = | (Standard Rate - Actual Rate) x Actual Hours | |||||||||
= | ($ 1.75 - $ 1.68) x 126000 | |||||||||
= | $ 8,820.00 | (Favorable) | ||||||||
Variable OH effi. Variance = | (Standard Hours - Actual Hours) x Standard Rate | |||||||||
= | (120000 - 126000) x $ 1.75 | |||||||||
= | $ 10,500.00 | (Unfavorable) |
c)
Data for Fixed OH variance | |||
Budgeted output | 150000 | ||
Recovery Rate | $ 2.00 | ||
Budgeted OH | $ 300,000.00 | ||
Actual output | 120000 | ||
Actual OH | $ 315,000.00 | ||
Recovered OH | $ 240,000.00 |
Fixed OH budget variance = | Budgeted OH - Actual OH | |||
= | $ 300000 - $ 315000 | |||
= | $ 15,000.00 | (Unfavorable) | ||
Fixed OH volume variance = | Recovered OH - Budgeted OH | |||
= | $ 240000 - $ 300000 | |||
= | $ 60,000.00 | (Unfavorable) |
is this okay?