64 The following information applies to the questions displayed belowJ Sedona Co

Question

64 The following information applies to the questions displayed belowJ Sedona Company set the following standard costs for one unit of its product for 2017 Direct material (28 Ibs. $2.58 per Ib.) Direct labor (10 hrs. $22.08 per hr.) Factory variable overhead (18 hrs. $4.08 per hr.) Factory fixed overhead (1e hrs. e $1.68 per hr) 16.80 Standard cost $ 58.08 220. 40.00 5326.08 The S5 60 S4 00 .$160, total overhead rate per direct labor hour is based on an expected operating level equal to 75% of the factory's capacity of 50,000 units per month. The following monthly flexible budget information is also available. Budgeted output (units) Budgeted labor (standard hours) 350,000 375,000 400,000 (dollars) Fixed overhead Total $1,488,89e $1,58e,eee $1,600,880 680,880 600,e288 $2,000,8ee $2,180,800 $ 6e0,eee 2,280,88e Dmg the aument month, the company operated at 70% of capacity, employees worked 340.000 hours, and the following Variable overhead costs $1,375,880 Fixed overhead costs Total overhead costs $2,803,680 AH Actual Hours SH-Standard AVR Actual Variable Rate SVR- SFR Standard Fixed Rate

Explanation / Answer

1. Compute the variable overhead spending and efficiency variances. Actual Variable OH Cost Flexible Budget Standard Cost (VOH applied) AH X AVR AH x SVR SH x SVR 340,000 x $4.04 340,000 x $4.00 350000 $4.00 $1,375,000.00 $1,360,000.00 $1,400,000.00 $15,000.00 $40,000.00 Variable overhead Spending Variance $15,000.00 UF Variable overhead efficiency Variance $40,000.00 F Total Variable overhead Variance $25,000.00 F 2 Compute the fixed overhead spending and volume variances and classify each as favorable or unfavorable Actual Fixed OH cost Fixed OH (Fixed Budgeted) Standard Cost (FOH applied) SH x SFR 350000 $1.60 $628,600.00 $600,000.00 $560,000.00 $28,600.00 $40,000.00 Fixed overhead Spending Variance $28,600.00 UF Fixed overhead Volume Variance $40,000.00 UF Total Fixed overhead Variance $68,600.00 UF .3 Compute the controllable variance Variable overhead Spending Variance $15,000.00 UF Variable overhead efficiency Variance $40,000.00 F Fixed overhead Spending Variance $28,600.00 UF Controllable Variance $3,600.00 UF

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