The following information was taken from the annual manufacturing overhead cost
ID: 2347105 • Letter: T
Question
The following information was taken from the annual manufacturing overhead cost budget of Coen Company.Variable manufacturing overhead costs
$69,300
Fixed manufacturing overhead costs
$41,580
Normal production level in labor hours
23,100
Normal production level in units
5,775
Standard labor hours per unit
4
During the year, 5,600 units were produced, 18,340 hours were worked, and the actual manufacturing overhead was $113,400. Actual fixed manufacturing overhead costs equaled budgeted fixed manufacturing overhead costs. Overhead is applied on the basis of direct labor hours. Coen's volume overhead variance is
Explanation / Answer
Flexible budget level of overhead for actual level of production - Overhead applied to production using standard overhead rate. Variable manufacturing overhead cost = $69,300 Variable manufacturing per hour (69,300 / 23,100) = $3 Fixed manufacturing overhead cost = 41,580 Total manufacturing overhead = $110,880 Estimated labor hours = 23,100 Standard rate (estimeted overhead / estimated hours) = $110,880 / 23,100 hours Standard rate per hour = $4.8 So volume overhead variance = 41,580 + ($3 x 18,340 hours) - ($4.8 x 18,340 hours) = 41,580 + 55,020 - 88,032 Volume overhead variance = $3,920 (Unfavorable)
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