Crystal Glassware Company has the following standards and flexible-budget data.

Question

Crystal Glassware Company has the following standards and flexible-budget data. Standard variable-overhead rate Standard quantity of direct labor Budgeted fixed overhead Budgeted output $ 6.00 per direct-labor hour 3 hours per unit of output $150,000 25,000 units Actual results for April are as follows: Actual output Actual variable overhead Actual fixed overhead Actual direct labor 16,000 units $384,000 $141,000 55,000 hours Required Use the variance formulas to compute the following variances. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "O" for no effect (i.e., zero variance).) 1. Variable-overhead spending variance 2. Variable-overhead efficiency variance 3. Fixed-overhead budget variance 4. Fixed-overhead volume variance

Explanation / Answer

1. Variable-overhead spending variance = (Standard rate - Actual rate) * Actual hours

= (6 - (384,000 / 16,000)) * 55,000

= (6 - 6.98) * 55,000

= (0.98) * 55,000

= $53,900 Unfavorable Ans.

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

= 6 * (55,000 - (25,000 * 3))

= 6 * (55,000 - 75,000)

= 6 * (25,000)

= $150,000 Unfavorable Ans.

3) Fixed-overhead budget variance = Budgeted overhead / budgeted production

= 150,000 / 25,000 = $6 per unit Unfavorable Ans.

4) Fixed-overhead volume variance = Actual Fixed Overhead - Budgeted Fixed Overhead

= 141,000 - 150,000 = $9,000 Unfavorable Ans.

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