48 Overhead Variances Study Appendix 13. Consider the following data for the Riv

Question

48 Overhead Variances

Study Appendix 13. Consider the following data for the Rivera Company:

Factory Overhead

Fixed Variable

Actual incurred $14,200 $13,300

Budget for standard hours allowed

for output achieved 12,500 11,000

Applied 11,600 11,000

Budget for actual hours of input 12,500 11,400

From the above information, fill in the blanks below. Be sure to mark your variances F for favorable

and U for unfavorable.

a. Flexible-budget variance $______ Fixed $______

Variable $______

b. Production-volume variance $______ Fixed $______

Variable $______

c. Spending variance $______ Fixed $______

Variable $______

d. Efficiency variance $______ Fixed $______

Variable $______

Explanation / Answer

1) The formula for calculating the spending variance is Variable overhead spending variance formula = Actual variable overhead - Budgeted variable overhead Fixed overhead spending variance = Actual fixed overhead - Budgeted fixed overhead 2) The formula for calculating the efficiency variance is Variable overhead efficiency variance = Variable overhead cost absorbed - Standard variable overhead for actual activity Fixed overhead efficiency variance = Fixed overhead cost absorbed - Standard fixed overhead for actual activity 3) Volume overhead variance is calculated as Variable overhead volume variance = Variable overhead cost absorbed - Budgeted variable overhead cost Fixed overhead volume variance = Fixed overhead cost absorbed - Budgetd fixed overhead cost 4) Fixed Flexible budget variance = Actual fixed overhead cost - Budgeted fixed overhead cost Variable flexible budget variance = Actual variable overhead cost - Budgeted variable overhead cost a. $1,700 $1,900 (Variable budgeted overhead is favourable) b.$1,700 $2,300 (Variable volume variance is favourable) c. $1,700 $1,900(variable spending variance is favourable) d. $1,700 $2,300(Variable overhead efficiency variance is favourable)

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