Question
In: Accounting
Brookster Inc. used a standard costing system for its production process. Fixed overhead is allocated based...
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?
Solutions
Expert Solution
(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
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