Question

The (partial) cost sheet for the single product manufactured at Vienna Company follows.

Direct labor	(9 hours @ $25)	$	225
Variable overhead	(9 hours @ $2)		18
Fixed overhead	(9 hours @ $4)		36

The master budget level of production is 66,000 direct-labor hours, which is also the production volume used to compute the fixed overhead application rate. Other information available for operations over the past accounting period include the following.

Actual variable overhead incurred	$	116,000
Actual fixed overhead incurred		277,600
Direct labor efficiency variance		146,000	U
Variable overhead price variance		14,000	F

Required:
a. What was the variable overhead efficiency variance?
b. What was the fixed overhead price variance?
c. What was the fixed overhead production volume variance?

(For all requirements, 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.)

Answer 1

variable overhead efficiency variance = (actual quantity-standard quantity)*standard price

variable overhead efficiency variance = (65000-59160)*2 = 11680 U

working

a) labor price variance = (actual quantity*actual price)-(actual quantity*standard price)

-14000 = 116000-(actutal quantity*2)

actual quantity = 130000/2 = 65000

labor efficiency variance = (actual quantity*standard price)-(standard quantity*standard price)

146000 = (65000*25)-(standard quantity*25)

146000 = 1625000- 25standard quantity

standard quantity = 59160

variable overhead efficiency variance = (actual quantity-standard quantity)*standard price

variable overhead efficiency variance = (65000-59160)*2 = 11680 U

Fixed overhead price variance = (actual fixed overhead-budgeted fixed overhead)

price variance = (277600-66000*4) = 13600 U

Fixed overhead production volume variance = budgeted fixed overhead-applied overhead

production volume variance = (66000*4-59160*4) = 27360 U