Exercise 7-28 OH variances eBook Learning Objective 2 The manager of the Texas D

Question

Exercise 7-28
OH variances

eBook

Learning Objective 2

The manager of the Texas Department of Transportation has determined that it typically takes 30 minutes for the department's employees to register a new car. In Bexar County, the predetermined fixed overhead rate was computed on an estimated 10,000 direct labor hours per month and is $9 per direct labor hour, whereas the predetermined variable overhead rate is $3 per direct labor hour.

During July, 18,800 cars were registered in Bexar County and 9,500 direct labor hours were worked in registering those vehicles. For the month, variable overhead was $27,700 and fixed overhead was $90,800.

a. Compute overhead variances using a four-variance approach.

VOH Spending Variance $ SelectFavorableUnfavorableItem 2
VOH Efficiency Variance $ SelectFavorableUnfavorableItem 4
Total VOH Variance $ SelectFavorableUnfavorableItem 6
FOH Spending Variance $ SelectFavorableUnfavorableItem 8
FOH Volume Variance $ SelectFavorableUnfavorableItem 10
Total FOH Variance $ SelectFavorableUnfavorableItem 12

b. Compute overhead variances using a three-variance approach
OH Spending Variance $
OH Efficiency Variance $ SelectFavorableUnfavorableItem 15
OH Volume Variance $ SelectFavorableUnfavorableItem 17
Total OH Variance $ SelectFavorableUnfavorableItem 19

c. Compute overhead variances using a two-variance approach.

Budget Variance $ SelectFavorableUnfavorableItem 21
Volume Variance $ SelectFavorableUnfavorableItem 23
Total OH Variance $ SelectFavorableUnfavorableItem 25

Explanation / Answer

Mr.Andrew Gemperline

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