FrontGrade Systems allocates manufacturing over- head based on machine hours. Ea

Question

FrontGrade Systems allocates manufacturing over- head based on machine hours. Each connector should require 11 machine hours. According to the static budget, FrontGrade expected to incur the following:

1,100 machine hours per month (100 connectors x 11 machine hours per connector)

$5,500 in variable manufacturing overhead costs

$8,250 in fixed manufacturing overhead costs

During August, FrontGrade actually used 1,000 machine hours to make 110 connectors and spent $5,600 in variable manufacturing costs and $8,300 in fixed manufacturing over- head costs.

1. Front Grade

Explanation / Answer

Hi,

Please find the answer as follows:

Part A:

Standard Variable Manufacturing Overhead Rate = Variable Manufacturing Costs/Machiner Hours = 5500/1100 = 5 Per Machine Hour

Option A is correct.

Part B:

Variable Overhead Spending Variance = Actual Hours*(Actual Rate - Standard Rate) = 1000*(5600/1000 - 5) = 600 (U)

Part C:

Variable Overhead Efficiency Variance = Standard Rate*(Actual Hours - Standard Hours) = 5*(1000 - 110*11) = 1050 (F)

Thans

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