Question

In: Accounting

Lackawanna Licorice Company uses a standard cost accounting system and applies production overhead to products on...

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.)

      

Solutions

Expert Solution

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

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