Book1 Home nsert Page Layout Formulas DataRevlew ds Cut E Wr

Book1 Home nsert Page Layout Formulas DataRevlew ds Cut E Wrap Text Copy v ?? ?1? [t|t] Merge & Center, Paste B Iu Format Office Update To keep up-to-date with security updates, fixes, and improvements, choose Check for Updates. 42 ASC Company has the following standards and flexible budget data: Standard variable overhead rate Standard quantity of direct labor Budgeted fxed overhead rate Budgeted output Standard variable overhead Standard fixed overhead 6.00 per direct labor hour 2 hours per unit of output 100,000 25000 units S 12.00 per unit 4.00 per unit $ Actual results for November are gven below: Actual output Actual variable overhead Actual fixed overhead Actual direct labor 30,000 units S 360,000 S 106,000 56,000 Direct labor hours Required: Calculate the following variances and state if they are favorable or unfavorable Variable manufacturing overhead spending variance (2.5 Marks) I Favorable/ Unfavorable Variable manufacturing overhead efficiency variance 2.5 Marks Favorable Unfavorable c) Fixed manufacturing overhead spending variance (2.5 Marks) Favorable / Unfavorable Fixed manufacturing overhead volume variance Favorable / Unfavorable Sheet1 Sheet2+ eady

Solution

Standard output for actual hours = (Budgeted output/Budgeted hours) x Actual hours

= (25,000/50,000) x 56,000

= 28,000 units

Standard variable overheads = Standard output for actual hours x Standard overhead rate per unit

= 28,000 x 12

= $336,000

Absorbed variable overheads = Actual output x Standard overhead rate per unit

= 30,000 x 12

= $360,000

(a) Variable manufacturing overhead spending variance = Standard variable overheads - Actual variable overheads

= 336,000 - 360,000

= $24,000 ( Unfavorable)

(b) Variable manufacturing overhead efficiency variance = Absorbed variable overheads - Standard variable overheads

= 360,000 - 336,000

= $24,000 (favorable)

Budgeted fixed overheads = Budgeted output x Standard overhead rate per unit

= 25,000 x 4

= $100,000

Absorbed fixed overheads = Actual output x Standard overhead rate per unit

= 30,000 x 4

= $120,000

(c) Fixed manufacturing overhead spending variance = Budgeted fixed overheads - Actual fixed overheads

= 100,000 - 106,000

= $6,000 (unfavorable)

Fixed manufacturing overhead volume variance = Absorbed fixed overheads - Budgeted fixed overheads

= 120,000 - 100,000

= $20,000 (favorable)