Norwall Company\'s variable manufacturing overhead should be $1.45 per standard

Question

Norwall Company's variable manufacturing overhead should be $1.45 per standard machine-hour and its fixed manufacturing overhead should be $48,608 per month. The following information is available for a recent month: a. The denominator activity of 17,360 machine-hours is used to compute the predetermined overhead rate. b. At the 17,360 standard machine-hours level of activity, the company should produce 6,200 units of product. c. The company's actual operating results were: Number of units produced Actual machine-hours Actual variable manufacturing overhead cost Actual fixed manufacturing overhead cost 7,210 18,580 $ 25,083 $ 51,300 Required 1. Compute the predetermined overhead rate and break it down into variable and fixed cost elements. Round your answers to 2 decimal places.) Predetermined overhead rate Variable element Fixed element per MH per MH per MH

Explanation / Answer

1)Predetermined overhead rate = (48608/17360)+1.45

                     = 2.8 +1.45

                    = $ 4.25 per MH

Variable = 1.45

Fixed = 2.8

2)Standard hours allowed = 17360 *7210/ 6200 = 20188 MH

3)VariABle overhead rate variance = AH [AR -SR]

                            = 25083 - [18580 * 1.45]

                            = 25083 - 26941

                         = -1858 F

Efficiency variance =   SR [AH-SH]

                = 1.45 [ 18580 - 20188]

                = - 2331.6 F

Fised overhead budget variance =actual - budget

                    = 51300-48608= 2692 U

Volume variance = Budget -standard

                  = 48608 - (20188*2.8 )]

                  = 48608 - 56526.4

                = - 7918.4 F

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