Question

Hellier Contractors paints interiors of residences and commercial structures. The firm's management has established cost standards per 100 square feet of area to be painted.

Direct material ($18 per gallon of paint)	$1.50
Direct labor	2.00
Variable overhead	0.60
Fixed overhead (based on 600,000 square feet per month)	1.25

Management has determined that 400 square feet can be painted by the average worker each hour. During May, the company painted 600,000 square feet of space and incurred the following costs:

Direct material (450 gallons purchased and used)	$ 8,300.00
Direct labor (1,475 hours)	12,242.50
Variable overhead	3,480.00
Fixed overhead	7,720.00

Answer the following questions related to the Manufacturing Overhead Variances.

Note: for the Variable overhead variances, use DLH as the allocation base.

21. Determine the Fixed overhead spending variance (do not include a negative sign or words in your answer)

22. Determine the Volume variance (do not include a negative sign or words in your answer)

23. Determine the Total Fixed Overhead Variance (do not include a negative sign or words in your answer)

24. Was the Total Fixed Overhead Variance favorable or unfavorable?

25. Identify other cost drivers (other than SF) that could be used as a basis for measuring activity and computing variances for this company. Check all that could apply to this company.

Number of brush cleanings

number of hours of use of the paint spayers

number of hours worked

number of jobs worked per month

number of rooms painted

Answer 1

21)

Fixed Overhead Expenditure/Spending/Budget Variance
Budgeted Fixed Overheads (600,000 SFT / 100 * $1.25 Standard Rate)	$7,500
Actual Fixed Overheads	$7,720
Fixed Overhead Expenditure Variance	$220 Unfavorable

22)

Fixed Overhead Volume Variance
Budgeted Fixed Manufacturing Overheads	$7,500
Fixed Overhead Cost Applied (600,000 sf / 100 * $1.25)	$7,500
Fixed Overhead Volume Variance	$0	NONE

23)

Total Fixed Overhead Variance = Fixed Overhead Expenditure Variance $220 Unfavorable + Fixed Overhead Volume Variance 0

= $220 Unfavorable

24)

number of hours of use of the paint sprayers

number of hours worked

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