Question

Manitoba Paper Company packages paper for photocopiers. The company has developed standard overhead rates based on a monthly practical capacity of 94,000 direct-labor hours as follows:

  

Standard costs per unit (one box of paper):
Variable overhead (2 hours @ $6)	$	12
Fixed overhead (2 hours @ $10)		20
Total	$	32

   

During June, 39,000 units were scheduled for production; however, only 33,000 units were actually produced. The following data relate to June.

   

1. Actual overhead incurred totaled $1,328,400, of which $428,400 was variable and $900,000 was fixed.

2. Actual direct-labor cost incurred was $1,700,000 for 68,000 actual hours of work.

   

Required:

Prepare two exhibits similar to Exhibits 11-6 and 11-8 in the chapter, which show the following variances. State whether each variance is favorable or unfavorable, where appropriate. (Select "None" and enter "0" for no effect (i.e., zero variance). Round "per hour" answers to 2 decimal places.)

  

1. Variable-overhead spending variance.

2. Variable-overhead efficiency variance.

3. Fixed-overhead budget variance.

4. Fixed-overhead volume variance.

  

Variable-Overhead Spending And Efficiency Variances (Hours = Direct-Labor Hours) (1) (2) (3) (4) Actual Variable Overhead Projected Variable Overhead Flexible Budget: Variable Overhead Variable Overhead Applied To Work-In-Process Actual Hours (AQ) × Actual Rate (AVR) Actual Hours (AQ) × Standard Rate (SVR) Standard Allowed Hours (SQ) × Standard Rate (SVR) Standard Allowed Hours (SQ) × Standard Rate (SVR) × × × × hours per hour hours per hour hours per hour hours per hour Variable-overhead spending variance Variable-overhead efficiency variance

	Fixed-Overhead Budget And Volume Variances (Hours = Direct-Labor Hours) (1) (2) (3) Actual Fixed Overhead Budgeted Fixed Overhead Fixed Overhead Applied To Work In Process Standard Allowed Hours × Standard Fixed-Overhead Rate × hours per hour Fixed-overhead budget variance Fixed-overhead volume variance

Answer 1

Note:

1)Actual Rate= Actual Variable overhead/Actual direct Labour hour

=428400/68000

=$6.3

2) Standard Allowed Hours =Standard hour per unit *Actual output

=2*33000

=66000

3) Std. Fixed Cost= (Total Budgeted Fixed Cost/ Total Budgeted Unit*Actual Unit)

=(390000*20)/39000*33000

=$660000