Starlight Glassware Company has the following standards and flexible-budget data
ID: 2462517 • Letter: S
Question
Starlight Glassware Company has the following standards and flexible-budget data.
Standard variable-overhead rate $ 6.00 per direct-labor hour
Standard quantity of direct labor 2 hours per unit of output
Budgeted fixed overhead $ 96,000
Budgeted output 24,000 units
Actual results for February are as follows: Actual output 19,000 units
Actual variable overhead $ 304,000
Actual fixed overhead $ 92,000
Actual direct labor 45,000 hours
Required: Use the variance formulas to compute the following variances. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance).)
Variable overhead spending variance
Variable overhead efficiency variance
Fixed overhead budget variance
Fixed overhead volume variance
Explanation / Answer
Solution :
Hours
Rate
total
Variable cost
Standard
38000
6.00
228000
19000*2
actual
45000
6.75556
304000
304000/45000
Variable Overhead EFFICIENCY variace
(AH-SH)*SR
42000
U
(45000-38000)*6
Variable Overhead spending Variance
total actual variable overhead - total standard variable over head
76000
U
304000-228000
Fixed overhead budget variance
actual fixed overhead - Budgeted fixed overhead
4000
F
92000-96000
Fixed overhead volume variance
applied fixed overhead - budgeted fixed overhead
16000
F
(96000/24000)*19000-92000
Hours
Rate
total
Variable cost
Standard
38000
6.00
228000
19000*2
actual
45000
6.75556
304000
304000/45000
Variable Overhead EFFICIENCY variace
(AH-SH)*SR
42000
U
(45000-38000)*6
Variable Overhead spending Variance
total actual variable overhead - total standard variable over head
76000
U
304000-228000
Fixed overhead budget variance
actual fixed overhead - Budgeted fixed overhead
4000
F
92000-96000
Fixed overhead volume variance
applied fixed overhead - budgeted fixed overhead
16000
F
(96000/24000)*19000-92000
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