The following data are the actual results for Marvelous Marshmallow Company for

Question

The following data are the actual results for Marvelous Marshmallow Company for October. Actual output Actual variable overhead Actual fixed overhead Actual machine time 12,000 cases $422,000 $110,000 40, 100 machine hours Standard cost and budget information for Marvelous Marshmallow Company follows: Standard variable-overhead rate Standard quantity of machine hours Budgeted fixed overhead Budgeted output $ 10.00 per machine hour 3 hours per case of marshmallows $ 108,000 per month 18,000 cases per month Required: Use any of the methods explained in the chapter 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).) a. Variable-overhead spending variance b. Variable-overhead efficiency variance c. Fixed-overhead budget variance d. Fixed-overhead volume variance

Explanation / Answer

Computation of variable Overhead   Rate & Efficiency & Spending   Variance Direct Variable Overhead Spending Variance ( SR-AR)*AH ($10-$10.52)*40100 ($20,852) Un Favourable Direct Variable Overhead Efficiency Variance (SH-AH)SR (36000-40100)*10 ($41,000) Un Favourable Computation of Fixed Overhead Rate & Volume & Spending   Variance Direct Fixed Overhead Spending   Variance Budgeted OH- Actual OH $108000-$110000 ($2,000) Un Favourable Direct Fixed Overhead Volume Variance Standard Rate applied on standard Hour for actual Qty- Budgeted OH (12000*$6)-$108000 ($36,000) Un Favourable Working Note-1 Working Note-2 Working Note-2 Computation of Actual Variable Overhead Rate Computation of Standard MAchineHour Computation of Standard Rate of OH Actual variable overhead=$422000 Standard Qty =3 Hour/case Budgeted Fixed Overhead=108000 Actual machine Time=40100 Machine Hour Total Standard Hour for 12000 Cases Standard Rate of Overhead Actual Rate=($42000/40100)=$10.52 (3*12000=36000 Hour) ($108000/(18000=$6

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