Ayala Corporation accumulates the following data relative to jobs started and fi

Question

Ayala Corporation accumulates the following data relative to jobs started and finished during the month of June 2014. Overhead is applied on the basis of standard machine hours. 2.50 hours of machine time are required for each direct labor hour. The jobs were sold for S475,000. Selling and administrative expenses were $35,700. Assume that the amount of raw materials purchased equaled the amount used. Compute the overhead controllable variance and the overhead volume variance. click if you would like to Show Work for this question:

Explanation / Answer

Total manufacturing Variance = Manufacturing overhead incurred - manufacturing overhead applied

=$139,427 - $146,150

= -$6723 (U)

1.overhead controllable variance =Actual Variable factory overhead - Budgeted Variable overhead allowance based on standard hours allowed

=Actual Variable factory overhead -(standard hours for actul units produces* variable factory overhead rate)

=(15,964*2.5 machine hour *$2.5) - (15,300*2.5 machine hour *$2.5))

= 4150 (U)

Fixed factory overhead volume variance= (standard hours for 100% normal capacity- standard hours for actual units produces) * fixed factory overhead rate

=(39,710 hours-14800 labour hrs*2.5 machine hrs) * $1.2

= $3252 (F)

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