The following data is given for the Bahia Company: Budgeted production 1,077 uni
ID: 2343754 • Letter: T
Question
The following data is given for the Bahia Company:Budgeted production
1,077 units
Actual production
959 units
Materials:
Standard price per pound
$1.81
Standard pounds per completed unit
12
Actual pounds purchased and used in production
11,163
Actual price paid for materials
$22,884
Labor:
Standard hourly labor rate
$15.00 per hour
Standard hours allowed per completed unit
4.0
Actual labor hours worked
4,938.85
Actual total labor costs
$75,317
Overhead:
Actual and budgeted fixed overhead
$1,125,010
Standard variable overhead rate
$28.00 per standard labor hour
Actual variable overhead costs
$138,288
Overhead is applied on standard labor hours.
Determine the factory overhead volume variance.
Explanation / Answer
[Factory overhead volume variance = Budgeted allowance based on standard hours allowed – Overhead charged to production]
Total Variable factory overhead / Direct labor hours
= $138,288 / 4,938.85 =28$
= $28.0 variable factory overhead rate
Total fixed factory overhead / Direct labor hours
= $22,884 / 4,938.85
= $4.63 fixed factory overhead rate
Total factory overhead rate at actual.
($28 + $4.63) = $32.63
actual cost = $32.63*4938.85=$161154
Budgeted
Total Variable factory overhead / Direct labor hours
= $15 variable factory overhead rate
Total fixed factory overhead / Direct labor hours
= $23392.44 / 4038
= $5.79 fixed factory overhead rate
Total factory overhead rate at actual.
($15+$5.79) = $20.79
Budgeted cost = 20.79*4038 =$83950.02
hence the
over head volume variance = 83950.02 - 161154 = (-$77204) unfavourable
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