Overhead Variances, Two- And Three-Variance Analyses Oerstman, Inc., uses a stan

Question

Overhead Variances, Two- And Three-Variance Analyses Oerstman, Inc., uses a standard costing system and develops its overhead rates from the current annual budget. The budget is based on an expected annual output of 122,500 units requiring 490,000 direct labor hours. (Practical capacity is 510,000 hours.) Annual budgeted overhead costs total $769,300, of which $553,700 is fixed overhead. A total of 119,200 units using 488,000 direct labor hours were produced during the year. Actual variable overhead costs for the year were $241,200, and actual fixed overhead costs were $556,350

. 1. Compute overhead variances using a two-variance analysis.

Budget Variance:

Volume Variance:

2. Compute overhead variances using a three-variance analysis.

Spending Variance $

Efficiency Variance $

Volume Variance $

Explanation / Answer

Budget Actual Output 122,500 119,200 Direct labour hours 490,000 488,000 Fixed Overheads 553,700 556,350 Variable Overheads 235,600 241,200 Per hour Variable Cost 0.48 0.49 Hours required for each unit 4.00 4.09 Per hour Fixed Cost 1.13 1.14 1 Budget variance= Actual Factory Overheads-Budget allowed on standard hours Budget Variance=556350+241200-(553700+(119200*4*0.48)) Budget Variance= $14,986 (Unfavourable) Volume Variance=Budget allowed on standard hours-Standard Factory Overheads Volume Variance=(553700+(119200*4*0.48))-(119200*4*(.48+1.13)) Volume Variance= $ 14,256.78 2 Spending Variance=Actual Factory Overheads-Budget allowed on actual hours Spending variance= 556350+241200-((4,88,000*0.48)+5,53,700) Spending Variance= $9,211.633 Efficiency Variance=Budget allowed on actual hours-Budget allowed on standard hours Efficiency Variance=((4,88,000*0.48)+5,53,700)-(553700+(119200*4*0.48)) Efficiency Variance= $5,385.143 Volume Variance=Budget allowed on standard hours-Standard Factory Overheads Volume Variance=553700+(119200*4*0.48))-(119200*4*(.48+1.13)) Volume Variance= $ 14,916

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

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