Question

World Company expects to operate at 80% of its productive capacity of 50,000 units per month. At this planned level, the company expects to use 24,400 standard hours of direct labor. Overhead is allocated to products using a predetermined standard rate of 0.610 direct labor hours per unit. At the 80% capacity level, the total budgeted cost includes $53,680 fixed overhead cost and $273,280 variable overhead cost. In the current month, the company incurred $320,000 actual overhead and 21,400 actual labor hours while producing 37,000 units.

(1) Compute the overhead volume variance.
(2) Compute the overhead controllable variance.

Complete this question by entering your answers in the tabs below.

Compute the overhead volume variance. Classify as favorable or unfavorable. (Round "OH costs per DL hour" to 2 decimal places.)

Fixed OH per DL hr.

	Fixed Overhead Applied Fixed OH per DL hr. Standard DL hours Fixed Overhead applied Volume Variance Total budgeted fixed OH Total fixed overhead applied Volume variance

Compute the overhead controllable variance. Classify as favorable or unfavorable.

Fixed

	Total actual overhead Flexible budget overhead Fixed Variable Total 0 Overhead controllable variance

Answer 1

• Requirements

Fixed Overhead Applied
Fixed OH per DL hr.	$                     2.20	=53680/24400
Standard DL hours	22570	=37000*0.61
Fixed Overhead applied	$          49,654.00	=2.2*22570
Volume Variance
Total budgeted fixed OH	$          53,680.00
Total fixed overhead applied	$          49,654.00
Volume variance	$             4,026.00	Unfavourable

Total actual overhead		$   320,000.00
Flexible budget overhead
Fixed	$          53,680.00
Variable	$        252,784.00
Total		$   306,464.00
Overhead controllable variance		$      13,536.00	Unfavourable

Total actual overhead		320000
Flexible budget overhead
Fixed	53680
Variable	=+(273280/24400)*(37000*0.61)
Total		=53680+252784