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

Explanation / Answer

SOLUTION

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

= $422,000 - (40,100 * $10)

= $422,000 - $401,000

= $21,000 (U)

2. Variable-overhead efficiency variance = Standard variable rate * (Actual Hours - Standard hours)

= $10 * (40,100 - 36,000)

= $41,000 (U)

Standard hours = 12,000 cases * 3 hours = 36,000 hours

3. Fixed-overhead budget variance = Actual fixed overhead - Budgeted fixed overhead

= $110,000 - $108,000

= $2,000 (U)

4. Fixed-overhead volume variance = Budgeted fixed overhead - Applied fixed overhead

= $108,000 - $100,800

= $7,200 (U)

Applied fixed overhead = Pre-determined Fixed over head rate *Standard allowed hours

= $2.8 * 36,000 = $100,800

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