Presented here are the original overhead budget and the actual costs incurred du

Question

Presented here are the original overhead budget and the actual costs incurred during April for Piccolo, Inc. Piccolo's managers relate overhead to direct labor hours for planning, control, and product costing purposes. The original budget is based on budgeted production of 16,400 units in 4,100 standard direct labor hours. Actual production of 18,000 units required 5,000 actual direct labor hours. Required: a. Calculate the flexed budget allowances for variable and fixed overhead for April. b. Calculate the direct labor efficiency variance for April expresses in terms of direct labor hours. c. Calculate the predetermined overhead application rate for both variable and fixed overhead for April. d. Calculate the fixed and variable overhead applied to production during April if overhead is applied on the basis of standard hours allowed for actual production achieved. e. Calculate the fixed overhead budget and volume variances for April.

Explanation / Answer

Requirement a:

Calculation of Flexed Budget Allowances for Variable and Fixed Overhead for April:

Particulars

Flexed Budget

Variable Flexed Budget

24600 * 18000/16400

$27000

Fixed Flexed Budget

30750 * 18000/16400

$33750

Requirement b:

Calculation of Direct Labor Efficiency Variance:

Standard Hours = 4100 * 18000/ 16400 = 4500 hours

Actual Labor Hours = 5000 hours

Direct Labor Efficiency Variance = Standard Hours – Actual Hours

= 4500 – 5000

= 500 F

Requirement c:

Calculation of predetermined overhead application rate:

Particulars

Variable

Fixed

Predetermined Overhead application rate per hour

$5.4 (27000/5000)

$6.75 (33750/5000)

Requirement d:

Calculation of predetermined overhead application rate based on standard hours allowed:

Particulars

Variable

Fixed

Overhead Applied

$6(27000/4500)

$7.5 (33750/4500)

Requirement e:

Calculation of Fixed Overhead Budget and Volume Variance:

Particulars

Fixed Overhead Budget Variance

$1350 [32100 - 30750]

Unfavorable

Fixed Overhead Volume Variance

$3000 [(18000*30750/16400) – 30750]

Unfavorable

Calculation of Over/ (under) applied fixed overhead:

Applied Fixed Overhead = 18000*30750/16400 = $33750

Actual Fixed Overhead = $32100

Since Applied Overheads > Actual Overheads, we can say that the fixed overheads are over applied.

Over applied Fixed Overheads = Applied Overheads – Actual Overheads

= $33750 - $32100

= $1650

Particulars

Flexed Budget

Variable Flexed Budget

24600 * 18000/16400

$27000

Fixed Flexed Budget

30750 * 18000/16400

$33750

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.