In: Accounting
Brookster Inc. used a standard costing system for its production process. Fixed overhead is allocated based on machine hours. Budgeted fixed overhead for the month was $16,910 for budgeted capacity of 8,900 machine hours. Actual fixed overhead was $17,500 for 1,800 units of output. The standard time allowed was 5 machine hours per unit of output.
Required:
(a) Compute SQ in total:
(b) Compute the Standard Price for fixed overhead:
(c) Compute the Fixed Overhead Spending Variance and Fixed Overhead Production-Volume Variance. Be sure to label your variances as favorable (F) or unfavorable (U).
(d) Is overhead under or over allocated? By how much?
(a) Compute SQ in total:
SQ is the standard quantity of input allowed for actual output = 9,000 hours
Total budgeted machine hours | = | 8,900 | hours (a) |
Machine hours per unit of output | = | 5 | hours (b) |
Total output based on budgeted machine hours available | = | 1,780 | units (c=a/b) |
Actual output | = | 1,800 | units (d) |
Standard quantity (SQ) | = | 9,000 | hours (e=d*b) |
(b) Compute the Standard Price for fixed overhead: $ 9.51
Total budgeted machine hours | = | 8,900 | hours (a) |
Machine hours per unit of output | = | 5 | hours (b) |
Total output based on budgeted machine hours available | = | 1,780 | units (c=a/b) |
Actual output | = | 1,800 | units (d) |
Standard quantity | = | 9,000 | hours (e=d*b) |
Budgeted fixed overhead | = | $16,910 | (f) |
Standard price of fixed overhead | = | $9.50 | (g = f/c) |
(c) Compute the Fixed Overhead Spending Variance and Fixed Overhead Production-Volume Variance. Be sure to label your variances as favorable (F) or unfavorable (U).
Fixed Overhead Spending Variance | = | $590 (U) | Unfavourable |
Fixed Overhead Production-Volume Variance | = | $190 (F) | Favourable |
Total budgeted machine hours | = | 8,900 | hours (a) |
Machine hours per unit of output | = | 5 | hours (b) |
Total output based on budgeted machine hours available | = | 1,780 | units (c=a/b) |
Actual output | = | 1,800 | units (d) |
Standard quantity | = | 9,000 | hours (e=d*b) |
Budgeted fixed overhead | = | $16,910 | (f) |
Standard price of fixed overhead | = | $9.50 | (g = f/c) |
Actual Quantity at Actual Price | = | $17,500 | (h) |
Actual Quantity at Standard Price | = | $17,100 | (i=d*g) |
Fixed Overhead Spending Variance | = | $590 | (j=h-f) |
Fixed Overhead Production-Volume Variance | = | $190 | (k=i-f) |
(d) Is overhead under or over allocated? By how much?
Overhead is overallocated by $190