. Use any of the methods explained in the chapter to compute the following varia
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Question
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Use any of the methods explained in the chapter 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).)
A) Variable- Overhead Spending
B) Variable overhead efficiency
C) Fixed overhead budget variance
d) Fixed overhead volume variance
The following data are the actual results for Marvelous Marshmallow Company for August. Use any of the methods explained in the chapter 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). A) Variable- Overhead Spending B) Variable overhead efficiencyC) Fixed overhead budget variance) Fixed overhead vExplanation / Answer
A. Variable overhead spending variance = actual hours worked [ Actual overhead rate* - standard overhead rate]
= 60750 hours [ 10-9]
= 60750
* Actual overhead rate = 607500 / 60750 = 10
B. Variable overhead efficiency = Standard overhead rate [ Actual hours - Standard hours]
= 9 [ 60750 - 60000 [ 15000 *4]]
= 6750
C. Fixed overhead budget variance = Actual fixed overhead - budgeted fixed overhead
= 183000 - 180000 = 3000 favourable
d. Fixed overhead volume variance = [ actual activity - budgeted activity] fixed over head absorption rate
Fixed overhead absorption rate = Budgeted fixed overheads / budgeted units
= 180000 / 15000 = 12
Fixed overhead volume variance = [ 183000 - 180000 ] * 12 = 36000.
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