In: Accounting
Lackawanna Licorice Company uses a standard cost accounting system and applies production overhead to products on the basis of machine hours. The following information is available for the year just ended: |
Actual variable overhead: $202,920 |
Actual total overhead: $558,030 |
Actual machine hours worked: 26,700 |
Standard variable-overhead rate per hour: $7.90 |
Standard fixed-overhead rate per hour: $13.20 |
Planned activity during the period: 26,000 machine hours |
Actual production: 15,700 finished units |
Machine-hour standard: Two completed units per machine hour |
Required: |
1. | Calculate the budgeted fixed overhead for the year. |
2. |
Compute the variable-overhead spending variance. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance). Do not round intermediate calculation.) |
3. |
Calculate the company's fixed-overhead volume variance. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance).) |
4-a. |
Did the company spend more or less than anticipated for fixed overhead? |
Company spent more Company spent less |
4-b. |
What was the difference in actual and anticipated overhead? |
5. |
Was variable overhead underapplied or overapplied during the year? By how much? (Do not round intermediate calculations.) |
Req 1 | |||||||
Planned Activity: 26000 MH | |||||||
Fixed OH rate: $ 13.20 per hour | |||||||
Budgeted Fixed OH: 26000 MH @ 13.20 = $343200 | |||||||
Req 2: | |||||||
Std Variable OH rate per hour: $ 7.90 per hour | |||||||
Actual Hours: 26700 MH | |||||||
Actual variable OH: $202,920 | |||||||
Vvariable OH spending = Actul MH worked*Std OH rate - Actual Varriable OH | |||||||
26700*7.90 - 202,920 = 8010 F | |||||||
Req 3: | |||||||
Std Fixed OH for actuall output: 15700*2 hours @ 13.20 = $ 414,480 | |||||||
Budgeted Fixed OH: $ 343200 | |||||||
Fixed OH Volume variancec= Std Fixed OH - Budgeted Oh | |||||||
414480-343200 = 71280 F | |||||||
Req 4-a | |||||||
Budgeted Fixed OH: | 343200 | ||||||
Actual fixed OH: | 355110 | ||||||
Company spent more than anticipated. | |||||||
Req 4-b: | |||||||
Fixed OH Budget Variance= Budgeted OH -Actual OH | |||||||
343200-355110 = 11910 U | |||||||
Q5. | |||||||
Variable OH actual incurred | 202920 | ||||||
Add: Variable OH applied | 210930 | ||||||
(26700 MH @7..90) | |||||||
Over-applied | 8010 | ||||||