Superior, Inc. uses a standard cost system and provides the following informatio

Question

Superior, Inc. uses a standard cost system and provides the following information. (Click the icon to view the information.) Superior allocates manufacturing overhead to production based on standard direct labor hours. Superior reported the following actual results for 2018: actual number of units produced, 1,000; actual variable overhead, $3,800; actual fixed overhead, $3,200; actual direct labor hours, 1,200 Read the requirements Requirement 1. Compute the variable overhead cost and efficiency variances and fixed overhead cost and volume variances Begin with the variable overhead cost and efficiency variances. Select the required formulas, compute the variable overhead cost and efficiency variances and identify whether each variance is favorable (F) or unfavorable (U). (Abbreviations used: AC actual cost AQ actual quantity; FOH foxed overhead; sc-standard cost SQ = standard quantity: VO-variable overhead.) Formula Variance VOH cost variance VOH efficiency variance Now compute the fixed overhead cost and volume variances. Select the required formulas, compute the fixed overhead cost and volume varianoes, and identify whether each variance is favorable F) or unfavorable u Abbreviations used: AC actual cost Aa " actual quantity: FOH-fixed overhead; SC . standard cost SQ standard quantity) Formula Variance FOH cost variance FOH volume variance Requirement 2. Explain why the variances are favorable or unfavorable. The variable overhead cost variance is Data Table Y because the actual cost __M because managem The variable overhead efficiency variance is applied (incurred) based on direct labor Static budget variable overhead Static budget fixed overhead Static budget direct labor hours Static budget number of units Standard direct labor hours 2,300 S 2,300 The fixed overhead cost variance is | because the total fixed over The fxed overhead volume variance is[ 1,150 hours 575 units because total fixed overt cost 2 hours per unit Choose from any list or enter any number in the input fields and then cont Print Done Save for Later

Explanation / Answer

1) Variable OH cost and efficiency variance:

Variable OH cost variance = AQ*(AC-SC) = 1200*(3.167-2) = $1400.00 adverse
Variable OH efficiency variance = SC*(AQ-SQ) = 2.00*(1200-1150) = 100 adverse

For variable OHs:
AC = Actual Variable OH/Actual direct labour hours = 3800/1200 = 3.167
SC = Standard Variable OH/Standard direct labour hours = 2300/1150 = 2.00

Fixed OH cost and efficiency variance:

Fixed OH cost variance: (SC*AQ) - (AC*AQ) = (2*1200)-(3200) = 800 adverse
Fixed OH volume variance: SC*(SQ-AQ) = 2*(1150-1200) = 100 adverse

For Fixed OHs:
SC = Standard Fixed OH/Standard direct labour hours = 2300/1150 = 2.00

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