Standard Costing: Jazzy Jeans applies manufacturing overhead using machine hours

Question

Standard Costing:
Jazzy Jeans applies manufacturing overhead using machine hours as the cost driver.
Fixed MOH costs are budgeted at $1,000,000 per month.
Variable MOH costs are budgeted at $52.80 per machine hour.
It takes .25 machine hours to produce a pair of jeans.

Jazzy budgeted production of 10,000 pairs of jeans in December.

Actual activity in November:

1. What was the variable over head spending variance for the month? AQ(AP-SP)

2. What was the variable overhead efficiency variance for the month? SP(AQ-SQA)

3. How much fixed MOH was applied in December?

4. What was the fixed overhead spending variance for the month?

5. What was the fixed overhead volume variance for the month?

Total Variable MOH Costs $134,767.50 Total Fixed MOH Costs $988,000.00 Actual pairs of jeans made 10,500 Actual machine hours 2,550

Explanation / Answer

Solution:

(1) Variable OH spent variance for the month:

Actual Quantity(Actual Price - Standard Price)

= 10,500 (12.835 - 13.2) = - 3,832.5

Actual price = $134,767.5 / 10,500 jeans = 12.835

Standard price for per jeans = $52.80/4 = 13.2

(2) Variable Overhead efficiency variance:

Standard price (Actual Quantity - Standard Quantity)

= 13.2 (10,500 - 10,000)

= $6,600

(3) Fixed MOH Applied in December:

     = Actual Overhead - Budgeted

     = $988,000 - $1,000,000

     = $12,000

5. Fixed OH dpending variance:

     = Actual Overhead - Budgeted OH

     = $988,000 - $1000,000

     = $12,000

6. Fixed Overhead Volume Variance:

    = Standard rate (Actual production - Budgeted producion)

    = $100 (10,500 - 10,000)

    = $5,000

Standard rate = $1000,000 / 10,000 units.

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