Rexford Components shows the following overhead information for the current peri

Question

Rexford Components shows the following overhead information for the current period: Actual overhead incurred Budgeted fixed overhead Standard variable overhead rate per direct labor-hour Standard hours allowed for actual production Actual labor-hours used 5106,740, 2/3 of which is variable 5 31,296 5 27 2,800 hours 2,660 hours Required: What are the variable overhead price and efficiency variances and fixed overhead price variance? (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.) Variable overhead Price variance Efficiency variance ixed overhead Price variance

Explanation / Answer

Answer 1.

Actual variable overhead cost = $106,740 * 2/3 = $71,160
Actual labor-hours used = 2,660
Standard variable overhead rate per direct labor-hour = $27
Standard hours allowed = 2,800

Variable Overhead Price Variance = Actual variable overhead cost - Actual labor-hours used * Standard variable overhead rate per direct labor-hour
Variable Overhead Price Variance = $71,160 - 2,660 * $27
Variable Overhead Price Variance = $660 Favorable

Variable Overhead Efficiency Variance = Standard variable overhead rate per direct labor-hour * (Actual labor-hours used - Standard hours allowed)
Variable Overhead Efficiency Variance = $27 * (2,660 - 2,800)
Variable Overhead Efficiency Variance = $3,780 Favorable

Answer 2.

Actual fixed overhead cost = $106,740 * 1/3 = $35,580
Standard fixed overhead cost = $31,296

Fixed Overhead Price Variance = Actual fixed overhead cost - Standard fixed overhead cost
Fixed Overhead Price Variance = $35,580 - $31,296
Fixed Overhead Price Variance = $4,284 Unfavorable

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