Variable Overhead Variances Assume that the best cost driver that Sony has for v

ID: 2472407 • Letter: V

Question

Variable Overhead Variances

Assume that the best cost driver that Sony has for variable factory overhead in the assembly department is machine hours.

During April, the company budgeted 480,000 machine hours and $4,000,000 for its Texas plant's assembly department.

The actual variable overhead incurred was $4,180,000, which was related to 500,000 machine hours.

Do not round until your final answers. Round your answers to the nearest dollar.

(a) Determine the variable overhead spending variance. 13,333 U

(b) Determine the variable overhead efficiency variance. ______ U

Actual hours worked x (Actual overhead rate - standard overhead rate)
= Variable overhead spending variance

Standard overhead rate=$4000000/480000

=$8.3333/hr

Actual overhead rate=$4180000/500000

=$8.36/hr

Variable overhead spending variance =Actual hours worked x (Actual overhead rate - standard overhead rate)

Variable overhead spending variance=5,00000(8.36-8.333333)

Variable overhead spending variance=13333U

Standard overhead rate x (Actual hours - standard hours)
= Variable overhead efficiency variance

Variable overhead efficiency variance=8.333333(5,00,000-480,000)

Variable overhead efficiency variance=1,66,667U

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