Question

Zelda Corp. makes pottery for people to store items in, Most of the indirect costs used to make these pots are associated with the manufacturing process. This means that Samantha Inc. allocates variable and fixed manufacturing overhead on the basis of machine hours. On January 1st, Zelda Corp. planned on making 4,500 clay pots for the month. They believed it would take 10,125 machine hours and 2,250 direct labor hours to make these pots. They believed their total manufacturing overhead would be $95,175, with $60,750 coming from variable manufacturing overhead. On February 1st, found that for January they had made 4,450 clay pots and that on average, each pot took 2.3 machine hours and .6 direct labor hours to make. Their manufacturing overhead ended up being $101,933, with $42,570 coming from fixed manufacturing overhead. Using this information please conduct a 4 variance analysis for both Variable and Fixed Manufacturing Overhead.

Answer 1

		Budget		Actual
	Output	4500		4450
	Direct lab hours(per unit)			0.6
	Machine hour (per unit)			2.3
	Total lab hours	2250		2670	(actual output*0.6)
	Machine hours	10125		10235	(actual output*2.3)
	Variable OH	60750		59363	(101933-42570)
	Fix OH	34425	(95175-34425)	42570
	Total OH	95175		101933
	Calculation of Standard Variable OH
		Using Machine hour as base	Using Labour hour as base
A	Budgeted Variable OH	60750	60750
B	Budgeted hours	10125	2250
A/B	Rate	6	27
	Variable Overhead Spending Variance:	Using Machine hour as base	Using Labour hour as base
	Actual variable OH expenses	59363	59363
	Less: Actual hours* Standard variable OH rate	61410	72090
	Variance ( Favourable)	-2047	-12727
	Variable overhead efficiency variance	Using Machine hour as base	Using Labour hour as base
	Standard OH at actual production	60075	60075	(60750/4500)*4450
	Less:Actual hours*standard rate	61410	72090
	Variance (unfavourable)	-1335	-12015
	Fixed Overhead Expenditure Variance = Actual Fix OH - Budgeted Fix OH
	Actual Fix OH	42570
	Standard Fix OH	-34425
	Unfavourable	8145
	Fixed Overhead Volume Variance = Budgeted Fix OH - Absorbed Fix OH
	Absorbed Fix OH = (Standard Fix OH/Standard units)*Actual output
	Absorbed Fix OH	34042.5	(34425/4500)*4450
	Budgeted Fix OH	34425
	Absorbed Fix OH	-34042.5
	Unfavourable	382.5

All variances have been mentioned whether they are favourable or unfavourable