Question

The following information is provided to assist you in evaluating the performance of the production operations of Studio Company:

Units produced (actual)	52,000
Master production budget
Direct materials	$129,030
Direct labor	109,480
Overhead	164,220
Standard costs per unit
Direct materials	$1.65 × 2 gallons per unit of output
Direct labor	$14 per hour × 0.2 hour per unit
Variable overhead	$12.00 per direct labor-hour
Actual costs
Direct materials purchased and used	$134,470 (79,100 gallons)
Direct labor	132,246 (9,480 hours)
Overhead	172,200 (61% is variable)

Variable overhead is applied on the basis of direct labor-hours.

Required:

Calculate all variable production cost price and efficiency variances and fixed production cost price and production volume variances. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)

	Price Variance Efficiency Variance Production Volume Variance Direct materials Direct labor Variable overhead Fixed overhead

Answer 1

Solution :

Solution 4:

Nos of units in master budget = $129,030 / $3.30 = 39100 units

Variable overhead in master budget = 39100*0.2*$12 = $93,840

Budgeted fixed overhead = $164,220 - $93,840 = $70,380

Fixed overhea rate = $70,380 / (39100*0.20) = $9 per hour

Fixed Overhead Cost Variance

Actual Fixed OH Cost

Budgeted Fixed Overhead

Standard Cost (FOH Applies)

SH*

BR

$67,158.00

$70,380.00

10400

$9.00

$93,600.00

$3,222.00

Favorable

$23,220.00

Favorable

Fixed overhead Budget Variance

Fixed overhead volume variance

Fixed overhead Budget Variance

$3,222.00

Favorable

Fixed overhead volume variance

$23,220.00

Favorable

Total Fixed overhead variance

$26,442.00

Favorable