Actual Results Grand Display allocated fixed manufacturing overhead to productio

Question

Actual Results Grand Display allocated fixed manufacturing overhead to production based on standard direct labor hours. Last month, the company reported the following actual results for the production of 1,100 flower pots Direct materials Purchased 10,930 pounds at a cost of $3.20 per pound; Used 10,230 pounds to produce 1,100 pots Worked 2.2 hours per flower pot (2,420 total DLH) at a cost of $11.00 per hour $6.50 per direct labor hour for total actual variable manufacturing overhead of $15,730 $18,800 Direct labor Actual variable manufacturing overhead Actual fixed manufacturing overhead Standard fixed manufacturing overhead allocated based on actual production $22,000 Standard Price and Volume Direct materials (resin) 9 pounds per pot at a cost of $3.00 per pound Direct labor 2.0 hours at a cost of $12.00 per hour tandard variable manufacturing overhead rate $6.00 per direct labor hour $19,000 $10.00 per direct labor hour (DLH) Budgeted fixed manufacturing overhead Standard fixed MOH rate

Explanation / Answer

Ans:

1.       Fixed manufacturing overhead budget variance= Budgeted Fixed manufacturing overhead-Actual fixed manufacturing overhead

=$19000-$18800

        = $200 (F)

This variance indicate actual fixed overhead incurred is less than budgeted fixed manufacturing overhead.

Fixed manufacturing overhead Volume   variance= Standard Fixed manufacturing overhead allocated based on actual production-Budgeted Fixed manufacturing overhead

     = $22000-$19000

     =$3000(F)

This variance indicates standard allocated fixed overhead is more than budgeted fixed manufacturing overhead.

2.       Variable overhead rate variance= (actual overhead rate per hour- standard overhead rate per hour)*actual direct labor worked

                                             = ($6.50-$6.00)*2420=$1210 ‘’U’’

This variance indicates actual variable overhead is more than standard overhead for actual hours worked.

Variable overhead   efficiency variance

= (number of hours actually worked- Standard labor allowed)*standard variable overhead rate per hour

= (2420-2200)*$6 per direct labor hour

= $1320 “U”

This variance indicates actual manufacturing variable overhead is more than standard manufacturing overhead allowed.

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