Question

You have been given the following list of variances for the Pennadi Company: Direct materials price variance $ 16,800 U Direct materials quantity variance 12,000 U Direct labour rate variance 16,270 F Direct labour efficiency variance 27,000 U Variable overhead spending variance 3,120 U Variable overhead efficiency variance 6,000 U Fixed overhead budget variance 5,000 U Fixed overhead volume variance 53,250 F You have also been given the following information: Actual units produced 25,000 Budgeted units of production (normal volume) 20,000 Standard labour-hours for actual output 12,500 Standard material units for actual output 400,000 Actual direct labour costs $ 235,730 Actual cost of direct materials $ 496,800 Overhead is applied using direct labour-hours. Variable overhead is applied at the rate of $10 per direct labour-hour. The materials purchase price was $0.828.(Attempt the following questions in the order listed.)

6.	How many actual direct labour-hours were worked?

7.	What was the standard cost per unit of output produced, assuming that variable costing was used?

8.	Calculate the budgeted fixed overhead cost allocation rate. (Round your answer to 2 decimal places.)

9.	Calculate the actual, budgeted, and allocated fixed overhead costs.

10.	Calculate the underapplied or overapplied fixed overhead cost.

Answer 1

Solution 6:

Actual direct labor cost = $235,730

Standard labor hours for actual output = 12500

Standard variable overhead rate = $10 per direct labor hour

Variable overhead efficiency variance = $6,000 U

(SH - AH) * SR = -$6000

(12500 - AH) * $10 = -6000

AH = 13100 hours

Therefore actual hours of labor worked = 13100 hours

Solution 7 :

Standard cost per unit of output produced = Direct material per unit + Direct labor per unit + Variable overhead per unit

Standard material for actual output = 400,000

Actual price of direct material = $0.828

Actual cost of direct material = $496,800

Actual quantity purchase for direct material = $496,800 / $0.828 = 600000 units

Direct material price variance = $16,800 U

(SP - AP) *AQ Purchased = -$16,800

(SP - $0.828) * 600000 = $16,800

SP = $0.80 per unit

Actual output of finished goods = 25000 units

Standard material units for actual output = 400000

Standard material required for 1 unit = 400000 / 25000 = 16 units

Standard material cost for one finished goods of output = 16* $0.80 = $12.80

Direct labor efficiecny variance = $27,000 U

(SH - AH) * SR = -$27000

(12500 - 13100) * SR = -27000

SR = $45 per hour

Standard labor hour for 1 unit = 12500 / 25000 = 0.50 hours

standard direct labor cost per unit = $45 * 0.50 = $22.50 per unit

Standard variable overhead per unit = $10 * 0.50 = $5 per unit

Standard cost per unit of output produced = $12.80 + $22.50 + $5 = $40.30 per unit

Solution 8:

Fixed overhead volume variance = $53,250 F

Overhead applied - Budgeted overhead = $53,250

(Standard hours for actual output * Allocation rate) - (Standard hours for budgeted output * Allocation rate) = $53,250

(12500*Allocation rate) - (20000/2 * Allocation rate) = $53,250

Allocation rate = $21.30 per hour

Solution 9:

Budgeted fixed overhead = 10000 * $21.30 = $213,000

Fixed overhead budget variance = $5,000 U

Budgeted fixed overhead - Actual fixed overhead = -$5,000

$213,000 - Actual fixed overhead = -$5,000

Actual fixed overhead = $218,000

Allocated fixed overhead = 12500 * $21.30 = $266,250

Solution 10:

Overapplied fixed overhead cost = Allocated overhead - Actual overhead

= $266,250 - $218,000 = $48,250