Better Fitness Gear applies overhead on the basis of direct labor hours. Five direct labor hours...

Better Fitness Gear applies overhead on the basis of direct labor hours. Five direct labor hours are required for each unit produced. Planned production for the period was set at 8,000 units. Budgeted fixed manufacturing overhead for the period is budgeted at $20,000 and variable manufacturing overhead is budgeted at $100,000. The 48,500 hours worked during the period resulted in production of 9,500 units. Actual manufacturing overhead cost incurred was $156,000.

Required:

Calculate the three overhead variances:

a. Total Spending Variance

b. Total Efficiency Variance

c. Total Volume Variance

d. Proof: Total Factory Overhead Variances

e. Interpret your variances

Solutions

Expert Solution

Spending Variance= Budgeted Overhead- Actual Overhead

=$138,750- $156,000

=($17,250)

Total Efficiency Variance= Budgeted labour hours-Actual Labour Hours

= 5Hours*9500 - 48,500

= 47,500-48,500

= (1,000)

Total Volume variance- 9500 units- 8000 units= 1500 Units.

Though company has able to increase their production capacity from 8000 to 9500 units but still they have utlised more labour and spent more on manfutured overhead, Here it has assumed theActual fixed manufacturing Overhead is considered same as the budgeted one i.e $20,000.

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

MAnufacturing overhead is applied on the basis of direct labor hours. The direct labor hours for...

MAnufacturing overhead is applied on the basis of direct labor hours. The direct labor hours for the period are 500 and the estimated manufacturing overhead is 2000. actual direct labor hours were 160 and actual overhead was 1000. Compute the manufacturing overhead applied during this period.

James Corp. applies overhead on the basis of direct labor hours. For the month of May,...

James Corp. applies overhead on the basis of direct labor hours. For the month of May, the company planned production of 10,000 units (80% of its production capacity of 12,500 units) and prepared the following overhead budget: Operating Levels Overhead Budget 80% Production in units 10,000 Standard direct labor hours 36,000 Budgeted overhead Variable overhead costs Indirect materials $ 21,600 Indirect labor 36,000 Power 7,200 Maintenance 3,600 Total variable costs 68,400 Fixed overhead costs Rent of factory building 20,000 Depreciation—Machinery...

James Corp. applies overhead on the basis of direct labor hours. For the month of May,...

James Corp. applies overhead on the basis of direct labor hours. For the month of May, the company planned production of 10,000 units (80% of its production capacity of 12,500 units) and prepared the following overhead budget: Operating Levels Overhead Budget 80% Production in units 10,000 Standard direct labor hours 26,000 Budgeted overhead Variable overhead costs Indirect materials $ 15,600 Indirect labor 26,000 Power 7,800 Maintenance 2,600 Total variable costs 52,000 Fixed overhead costs Rent of factory building 22,000 Depreciation—Machinery...

James Corp. applies overhead on the basis of direct labor hours. For the month of May,...

James Corp. applies overhead on the basis of direct labor hours. For the month of May, the company planned production of 10,000 units (80% of its production capacity of 12,500 units) and prepared the following overhead budget: Operating Levels Overhead Budget 80% Production in units 10,000 Standard direct labor hours 30,000 Budgeted overhead Variable overhead costs Indirect materials $ 21,000 Indirect labor 30,000 Power 6,000 Maintenance 3,000 Total variable costs 60,000 Fixed overhead costs Rent of factory building 14,000 Depreciation—Machinery...

James Corp. applies overhead on the basis of direct labor hours. For the month of May,...

James Corp. applies overhead on the basis of direct labor hours. For the month of May, the company planned production of 10,000 units (80% of its production capacity of 12,500 units) and prepared the following overhead budget: Operating Levels Overhead Budget 80% Production in units 10,000 Standard direct labor hours 27,000 Budgeted overhead Variable overhead costs Indirect materials $ 16,200 Indirect labor 27,000 Power 5,400 Maintenance 5,400 Total variable costs 54,000 Fixed overhead costs Rent of factory building 23,000 Depreciation—Machinery...

James Corp. applies overhead on the basis of direct labor hours. For the month of May,...

James Corp. applies overhead on the basis of direct labor hours. For the month of May, the company planned production of 10,000 units (80% of its production capacity of 12,500 units) and prepared the following overhead budget: Operating Levels Overhead Budget 80% Production in units 10,000 Standard direct labor hours 27,000 Budgeted overhead Variable overhead costs Indirect materials $ 16,200 Indirect labor 27,000 Power 5,400 Maintenance 5,400 Total variable costs 54,000 Fixed overhead costs Rent of factory building 23,000 Depreciation—Machinery...

James Corp. applies overhead on the basis of direct labor hours. For the month of May,...

James Corp. applies overhead on the basis of direct labor hours. For the month of May, the company planned production of 10,000 units (80% of its production capacity of 12,500 units) and prepared the following overhead budget: Operating Levels Overhead Budget 80% Production in units 10,000 Standard direct labor hours 20,000 Budgeted overhead Variable overhead costs Indirect materials $ 15,000 Indirect labor 20,000 Power 5,000 Maintenance 2,000 Total variable costs 42,000 Fixed overhead costs Rent of factory building 15,000 Depreciation—Machinery...

Overhead is applied on the basis of direct labor hours. Three direct labor hours are required...

Overhead is applied on the basis of direct labor hours. Three direct labor hours are required for each product unit. Planned production for the period was set at 8,000 units. Manufacturing overhead for the period is budgeted at $204,000, of which 30 percent is fixed. The 26,200 hours worked during the period resulted in production of 8,500 units. Manufacturing overhead cost incurred was $220,500. Required: a. Calculate the overhead spending variance: b. Calculate the overhead efficiency variance: c. Calculate the...

The Littlefield Company applies manufacturing overhead costs to products on the basis of direct labor-hours. The...

The Littlefield Company applies manufacturing overhead costs to products on the basis of direct labor-hours. The standard cost card shows that 12 direct labor-hours are required per unit of product. For August, the company budgeted to work 360,000 direct labor-hours and to incur the following total manufacturing overhead costs: Total fixed overhead costs $475,200 Total variable overhead costs $396,000 During August, the company completed 28,000 units of product, worked 344,000 direct labor-hours, and incurred the following total manufacturing overhead costs:...

ABC uses job-order costing. It applies overhead cost to jobs on the basis of direct labor-hours....

ABC uses job-order costing. It applies overhead cost to jobs on the basis of direct labor-hours. The following transactions took place during the year: a) $300,000 of raw materials were purchased on account b) Raw materials were issued into production: $90,000 direct materials and $40,000 indirect materials c) Labor costs incurred: $40,000 direct, $130,000 indirect, sales commissions $50,000, administrative salaries $100,000 d) Utility costs for the factory were $60,000 e) Depreciation recorded was $300,000 (70% related to factory; 30% related...

Subjects