Question
In: Accounting
Taylor Inc. uses a standard cost system. The company has the following results for the current...
| Taylor Inc. uses a standard cost system. The company has the following results for the current period: |
| Budget | Actual | |||||
| Fixed overhead | $ | 160,000 | $ | 160,000 | ||
| Units | 6,500 | units | 6,000 | units | ||
| Direct labour-hours (DLH) | 13,333 | hours | 12,500 | hours | ||
| Standard quantity of DLH per unit | 2.0152 | hours | ||||
|
Variable overhead is applied at $27.50 per direct labour-hour. Actual variable overhead was $310,600. |
| Required: |
| 1. |
Compute the fixed overhead budget variance and the volume variance. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).) |
| 2. | “Because the actual overhead and the budgeted overhead are the same the volume variance is 0.” True or false? Show calculations. | ||||
|
| 3. |
Compute the total variable overhead variance. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).) |
Solutions
Expert Solution
1) Fixed Overhead Budget Variance = Budgeted Fixed OH - Actual Fixed OH
= $160,000 - $160,000 = $0 (i.e. None)
Budgeted Fixed Overhead rate per unit = Budgeted Fixed OH/Budgeted Units
= $160,000/6,500 units = $24.61538 per unit
Applied Fixed Overhead = Budgeted Fixed OH rate per unit*Actual units
= $24.61538*6,000 units = $147,692
Fixed Overhead Volume Variance = Applied Fixed Overhead - Budgeted Fixed Overhead
= $147,692 - $160,000 = $12,308 U
Therefore fixed overhead volume variance is $12,308 Unfavorable and fixed overhead budget variance is None.
2) The given statement is false because fixed overhead volume variance is not 0 (as calculated in part 1) but fixed overhead budget variance is 0 as the actual overhead and the budgeted overhead are the same.
3) Standard direct labor hours = Actual units*Std quantity of DLH per unit
= 6,000 units*2.0152 per unit = 12,091.20 hrs
Standard variable overhead variance for actual units = 12,091.20 hrs*$27.50 per hour
= $332,508
.Total Variable Overhead Variance = Standard Variable OH - Actual Variable OH
= $332,508 - $310,600 = $21,908 Favorable
ekkarill92 answered 1 year agoRelated Solutions
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