Pearlman Incorporated makes a single product--an electrical motor used in many long-haul trucks. The company has a standard cost system in which it applies overhead to this product based on the standard labor-hours allowed for the actual output of the period. Data concerning the most recent year appear below:?Budgeted (Planned) Overhead:???Budgeted variable manufacturing overhead$101,460??Budgeted fixed manufacturing overhead283,860??Total budgeted manufacturing overhead$385,320??????Budgeted production (a)30,000 units?Standard hours per unit (b)1.90 labor-hours?Budgeted hours (a) × (b)57,000 labor-hours?????Applying Overhead:???Actual production (a)29,000 units?Standard hours per unit (b)1.90 labor-hours?Standard hours allowed for
the actual production (a) × (b)55,100 labor-hours?????Actual Overhead and Hours:???Actual variable manufacturing overhead$69,938??Actual fixed manufacturing overhead270,860??Total actual manufacturing overhead$340,798??Actual hours57,800 labor-hours?Actual variable overhead rate$1.21 per labor-hourRequired:a. Determine the variable overhead rate variance for the year.b. Determine the variable overhead efficiency variance for the year.c. Determine the fixed overhead budget variance for the year.d. Determine the fixed overhead volume variance for the year.
What will be an ideal response?
a. Variable component of the predetermined overhead rate (SR) = $101,460/57,000 labor-hours
= $1.78 per labor-hour
Variable overhead rate variance = (AH × AR) - (AH × SR)
= ($69,938) - (57,800 labor-hours × $1.78 per labor-hour)
= ($69,938) - ($102,884)
= $32,946 F
or
Variable overhead rate variance = AH × (AR - SR)
= 57,800 labor-hours × ($1.21 per labor-hour - $1.78 per labor-hour)
= 57,800 labor-hours × (-$0.57 per labor-hour)
= $32,946 F
b. Labor efficiency variance = (AH - SH) × SR
= (57,800 labor-hours - 55,100 labor-hours) × $1.78 per labor-hour
= (2,700 labor-hours) × $1.78 per labor-hour
= $4,806 U
c. Budget variance = Actual fixed overhead - Budgeted fixed overhead
= $270,860 - $283,860 = $13,000 F
d. Fixed component of the predetermined overhead rate = $283,860/57,000 labor-hours
= $4.98 per labor-hour
Volume variance = Budgeted fixed overhead - Fixed overhead applied to work in process
= $283,860 - ($4.98 per labor-hour × 55,100 labor-hours)
= $283,860 - ($274,398)
= $9,462 U
or
Volume variance = Fixed component of the predetermined overhead rate x (Denominator hours - Standard hours allowed for the actual output)
= $4.98 per labor-hour x (57,000 labor-hours - 55,100 labor-hours)
= $4.98 per labor-hour x (57,000 labor-hours - 55,100 labor-hours)
= $4.98 per labor-hour x (1,900 hours)
= $9,462 U
You might also like to view...
A company purchased machinery by issuing 2,000 shares of $3 par value common stock. Since the company is new, there is no established market price for its stock. How would the company record the transaction?
a. In terms of the par value of the stock issued. b. At the fair market value of the machine. c. At the cost recorded by the previous owner of the machine. d. Recording the transaction would be postponed until a market price for the stock could be determined.
Casivant Corporation makes a product that uses a material with the following direct material standards: Standard quantity 3.8pounds per unitStandard price$4.00per poundThe company produced 7,300 units in November using 28,710 pounds of the material. During the month, the company purchased 30,800 pounds of the direct material at a total cost of $117,040. The direct materials purchases variance is computed when the materials are purchased.?The materials price variance for November is:
A. $5,548 U B. $6,160 F C. $5,548 F D. $6,160 U
A closed database architecture shares data easily
Indicate whether the statement is true or false
The advantages of the _________ risk assessment approach are that it provides the most detailed examination of the security risks of an organization's IT system and produces strong justification for expenditure on the controls proposed
What will be an ideal response?