Benjamin Inc. uses a standard cost system and has the following information rega

Question

Benjamin Inc. uses a standard cost system and has the following information regarding the labor and overhead used in the production of widgets. Standard labor input is 2.00 hours per unit. The variable overhead rate is $8.1 per hour; fixed overhead is budgeted to be $100,000 on budgeted production of 7,960 widgets. During August, Benjamin Inc. paid its workers $160,900 for 16,800 hours. Actual variable overhead incurred totaled $135,150, actual fixed overhead totaled $91,156. Benjamin Inc. produced 8,550 widgets during August.

a. Calculate the variable overhead rate variance. (Do not round your intermediate calculations. Indicate the effect of variance by selecting "Favorable", "Unfavorable", or "None" for no effect (i.e., zero variance).)



b. Calculate the variable overhead efficiency variance. (Indicate the effect of variance by selecting "Favorable", "Unfavorable", or "None" for no effect (i.e., zero variance). Round your answer to nearest whole dollar amount.)



c. Calculate the fixed overhead spending variance. (Indicate the effect of variance by selecting "Favorable", "Unfavorable", or "None" for no effect (i.e., zero variance).)

Explanation / Answer

a. Variable overhead rate variance = (Standard hourly rate - Actual hourly rate) x Actual hours
= {$8.1 - ($135,150 / 16,800)} x 16,800
= $930 Favorable

b. Variable overhead efficiency variance = (Standard hours - Actual hours) x Standard hourly rate
= {(8,550 x 2) - 16,800} x $8.1
= $2,430 Favorable

c. Fixed overhead spending variance = Actual fixed overhead - Budgeted fixed overhead
= $91,156 - $100,000 = $8,844 Favorable

Related Questions

Navigate

• Browse (All)
• Browse B
• Subjects

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