Question

Mosaic Company applies overhead using machine hours and reports the following information.

Actual machine hours used (AH)		4,900		hours
Standard machine hours (for actual production) (SH)		5,400		hours
Actual variable overhead rate per hour (AVR)	$	4.55
Standard variable overhead rate per hour (SVR)	$	4.40

QS 23-18A Total variable overhead cost variance LO P5

Compute the total variable overhead cost variance and classify it as favorable, unfavorable or no variance.

Compute the variable overhead spending variance and the variable overhead efficiency variance and classify each as favorable, unfavorable or no variance.

Answer 1

Working Notes:
	Standard Overhead Cost
	Standard Time	Standard Rate	Standard Cost per unit
	5400	$                       4.40	$                   23,760
	ACTUAL OVERHEAD EXPENSES
	Actual Time	Actual Rate	Actual Cost
	4900	$                       4.55	$                   22,295
	Hrs	Per Hours
Solution:
	Variable OVH Cost variance =	V-OVH std. Cost	-	V-OVH Actual Cost
	Variable OVH Cost variance =	$                   23,760	-	$                22,295
	Variable OVH Cost variance =	$                     1,465	Favorable
	Variable OVH Spending variance =	Act. Hrs Worked	X   (	Act Ovh. Rate	-	Std. Overhead rate	)
	Variable OVH Spending variance =	4,900	X   (	$                     4.55	-	$                              4.40	)
	Variable OVH Spending variance =	4,900	X	$                     0.15
	Variable OVH Spending variance =	$                   735.00	Unfavorable
	Variable OVH Efficiency variance =	Std. Oveh Rate	X   (	Actual Hrs	-	Standard Hours	)
	Variable OVH Efficiency variance =	$                       4.40	X   (	4900	-	5400	)
	Variable OVH Efficiency variance =	$                       4.40	X	500
	Variable OVH Efficiency variance =	$                     2,200	Favorable