E11-27A (book/static) Question Help Aloha Foods processes bags of organic frozen

Question

E11-27A (book/static) Question Help Aloha Foods processes bags of organic frozen fruits sold at specialty grocery stores (Click the icon to view additional information.) Read the requirements Requirement 1. How much variable overhead would have been allocated to production? How much fixed overhead would have been allocated to production? The variable overhead allocated to production is $ 6 More Info The company allocates manufacturing overhead based on direct labor hours Aloha has budgeted fixed manufacturing overhead for the year to be $626,000 The predetermined fixed manufacturing overhead rate is $16.20 per direct labor hour, while the standard variable manufacturing overhead rate is $0.70 per diredct labor hour. The direct labor standard for each case is one quarter (0.25) of an hour The company actually processed 158,000 cases of frozen organic fruits during the year and incurred $682,460 of manufacturing overhead. Of this amount, $636,000 was fixed. The company also incurred a total of 40,400 direct labor hours Print Done Requirements 1. 2. 3. How much variable overhead would have been allocated to production? How much fixed overhead would have been allocated to production? Compute the variable MOH rate variance and the variable MOH efficiency variance. What do these variances tell managers? Compute the fixed MOH budget variance and the fixed overhead volume variance. What do these variances tell managers? PrintDone

Explanation / Answer

Req 1. Actual labour hours: 40400 labouor hours Vriable OH rate: 0.70 per DLH Fixed Oh rate: 16.20 per DLH Actual Variable OH allocated: 40400 hours@0.70: 28280 Actual Fixed OH allocated (40400 hours@16.20): 654480 Req2 Std labour hours: 0.25 hour per unit Std hours allowed (158000 units @0.25 hours): 39500 hours Actual Hours: 40400 hours Std rate per hour: $0.70 per hour Actual Variable oH rate per uniit (6460/40400)= $1.10 per hour Variable OH rate: Actual hours (Std rate-Actual rate) 40400 hours (0.70-1.10) = $16,160 U Variable OH efficiency Variance= Sstd rate (Std hours-Actual hours) 0.70 (39500-40400) = $ 630 U Req 3: Std fixed OH rate: $ 16.20 per DLH Actual fixed OH rate (636000/40400 hours): 15.74 per hour Fixed OH Budget variance: Budgetd Fixed OH - Actal OH 626000 -636000 = $10,000 U Fixed OH Volume variance: Std fixed OH for actual output - Budgeted OH 39500*16.20 - 626000 = 13900 F

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