Question

In: Accounting

Patel and Sons, Inc., uses a standard cost system to apply overhead costs to units produced....

Patel and Sons, Inc., uses a standard cost system to apply overhead costs to units produced. Practical capacity for the plant is defined as 50,000 machine hours per year, which represents 25,000 units of output. Annual budgeted fixed overhead costs are $250,000 and the budgeted variable overhead cost rate is $4 per unit. Factory overhead costs are applied on the basis of standard machine hours allowed for units produced. Budgeted and actual output for the year was 20,000 units, which took 41,000 machine hours. Actual fixed overhead costs for the year amounted to $245,000 while the actual variable overhead cost per unit was $3.90.

a. Based on the information provided above, what was the fixed overhead spending (budget) variance for the year?

b. What was the fixed overhead production volume variance for the year?

c. Based on the information provided above, what was the variable overhead spending variance for the year?

d. What was the variable overhead efficiency variance for the year?

Solutions

Expert Solution

a) Fixed OH spending Var = Budgetted Fixed OH - Actual Fixed OH

= 250000-245000 = 5000 favorable

b) Fixed OH volume var = Recovered Fixed OH - Budgetted Fixed OH

Recover Rate = Budgetted Fixed OH / Budgetted Hrs = 250000/50000 = $ 5 per machine hrs

FIxed OH Vol Var = (41000*5) - 250000 = 205000 - 250000 = 45000 unfavorable

c) Variable OH spending Var = (Std rate - Actual rate) Actual Machine hrs

Budgetted Machine hrs = 50000, Budgetted Unit = 25000, So Machine Hr per Unit = 2(50000/25000) hr Budgeted Variable OH = 4 per unit, so budgeted Variable OH per machine hr = 4/2 = 2 per machine hr

Standard variable OH for 20000 units = 20000* machine hr per unit * Variable OH per machine hr = 20000*2*2 = 80000

Actual OH = 3.9*20000= 78000, Actual Machine Hrs = 41000, So Variable OH per machine hr = 78000/41000 = 1.9024

Therefore, Variable OH Spending Var = (Std OH rate per Machine hr-Actual OH rate per Mac hr)* Actual Mac Hrs

= (2-1.9024)41000 =4001.6 = 4000 approx favourable

d) Variable OH efficiency var = (Std Mac hrs - Actual mac hrs)*Std OH rate per mac hrs

= (40000-41000)*2 = 2000 unfavourable

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

Patel and Sons, Inc., uses a standard cost system to apply overhead costs to units produced....
Patel and Sons, Inc., uses a standard cost system to apply overhead costs to units produced. Practical capacity for the plant is defined as 55,500 machine hours per year, which represents 27,750 units of output. Annual budgeted fixed overhead costs are $277,500 and the budgeted variable overhead cost rate is $3.80 per unit. Factory overhead costs are applied on the basis of standard machine hours allowed for units produced. Budgeted and actual output for the year was 21,600 units, which...
Patel and Sons Inc. uses a standard cost system to apply factory overhead costs to units produced.
  Patel and Sons Inc. uses a standard cost system to apply factory overhead costs to units produced. Practical capacity for the plant is defined as 50,000 machine hours per year, which represents 25,000 units of output. Annual budgeted fixed factory overhead costs are $250,000 and the budgeted variable factory overhead cost rate is $4 per unit. Factory overhead costs are applied on the basis of standard machine hours allowed for units produced. Budgeted and actual output for the year...
Patel and Sons Inc. uses a standard cost system to apply factory overhead costs to units...
Patel and Sons Inc. uses a standard cost system to apply factory overhead costs to units produced. Practical capacity for the plant is defined as 53,100 machine hours per year, which represents 26,550 units of output. Annual budgeted fixed factory overhead costs are $265,500 and the budgeted variable factory overhead cost rate is $3.00 per unit. Factory overhead costs are applied on the basis of standard machine hours allowed for units produced. Budgeted and actual output for the year was...
Patel and Sons Inc. uses a standard cost system to apply factory overhead costs to units...
Patel and Sons Inc. uses a standard cost system to apply factory overhead costs to units produced. Practical capacity for the plant is defined as 50,000 machine hours per year, which represents 25,000 units of output. Annual budgeted fixed factory overhead costs are $250,000 and the budgeted variable factory overhead cost rate is $4 per unit. Factory overhead costs are applied on the basis of standard machine hours allowed for units produced. Budgeted and actual output for the year was...
Angie Manufacturing uses a standard cost system in which manufacturing overhead is applied to units of...
Angie Manufacturing uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of standard machine-hours. At standard, each unit of product requires one machine-hour to complete. The standard variable overhead is $1.75 per machine-hour and Budgeted Fixed Manufacturing Costs are $300,000 per year. The denominator level of activity is 150,000 machine-hours, or 150,000 units. Actual data for the year were as follows: Actual variable overhead cost $ 211,680 Actual fixed manufacturing overhead...
Kansas Company uses a standard cost accounting system. In 2020, the company produced 27,700 units. Each...
Kansas Company uses a standard cost accounting system. In 2020, the company produced 27,700 units. Each unit took several pounds of direct materials and 1.6 standard hours of direct labor at a standard hourly rate of $12.00. Normal capacity was 50,400 direct labor hours. During the year, 131,500 pounds of raw materials were purchased at $0.93 per pound. All materials purchased were used during the year. If the materials quantity variance was $19,665 unfavorable, what was the standard materials quantity...
Kansas Company uses a standard cost accounting system. In 2017, the company produced 27,500 units. Each...
Kansas Company uses a standard cost accounting system. In 2017, the company produced 27,500 units. Each unit took several pounds of direct materials and 1.6 standard hours of direct labor at a standard hourly rate of $11.00. Normal capacity was 49,500 direct labor hours. During the year, 130,000 pounds of raw materials were purchased at $0.90 per pound. All materials purchased were used during the year. (a)                 If the materials price variance was $1,300 favorable, what was the standard...
Required information [The following information applies to the questions displayed below.] Patel and Sons Inc. uses...
Required information [The following information applies to the questions displayed below.] Patel and Sons Inc. uses a standard cost system to apply factory overhead costs to units produced. Practical capacity for the plant is defined as 53,700 machine hours per year, which represents 26,850 units of output. Annual budgeted fixed factory overhead costs are $268,500 and the budgeted variable factory overhead cost rate is $3.20 per unit. Factory overhead costs are applied on the basis of standard machine hours allowed...
Required information [The following information applies to the questions displayed below.] Patel and Sons Inc. uses...
Required information [The following information applies to the questions displayed below.] Patel and Sons Inc. uses a standard cost system to apply factory overhead costs to units produced. Practical capacity for the plant is defined as 50,000 machine hours per year, which represents 25,000 units of output. Annual budgeted fixed factory overhead costs are $250,000 and the budgeted variable factory overhead cost rate is $4 per unit. Factory overhead costs are applied on the basis of standard machine hours allowed...
Required information [The following information applies to the questions displayed below.] Patel and Sons Inc. uses...
Required information [The following information applies to the questions displayed below.] Patel and Sons Inc. uses a standard cost system to apply factory overhead costs to units produced. Practical capacity for the plant is defined as 50,000 machine hours per year, which represents 25,000 units of output. Annual budgeted fixed factory overhead costs are $250,000 and the budgeted variable factory overhead cost rate is $4 per unit. Factory overhead costs are applied on the basis of standard machine hours allowed...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT