Help The following data are the actual results for Marvelous Marshmallow Company
ID: 2556341 • Letter: H
Question
Help The following data are the actual results for Marvelous Marshmallow Company for October Actual out put Actual variable overhead $409,000 Actual fixed overhead Actual machine time 12,000 cases $172,000 40,500 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 $168,000 per month 14,000 cases per month Required: Use any of the methods explained in the chapter to compute the following variances. (Indicate the effect of each variance b selecting "Favorable" or "Unfavorable". Select "None" and enter "o" for no effect (i.e., zero variance).) a. Variable-overhead spending variance b. Variable-overhead efficiency variance c. Fixed-overhead budget variance d. Fixed-overhead volume variance Unfavorable Unfavorable Unfavorable UnfavorableExplanation / Answer
Calculation of variances :
Variable overhead spending variance:
( also known as variable overhead rate variance and variable overhead expenditure variance )
We can calculate the variable overhead spending variance by using fallowing formula.
=Actual Hour (Standard variable overhead rate per unit-Actual variable overhead Rate per unit)
Hence
Actual hour =40500
Standard Variable overhead rate= $10 per Machine hour
Actual Variable overhead rate =Actual Variable Overhead/ Actual machine hour ( $409000/40500) = $10.098
Applying the formula
40500($10-10.098)= 3969 unfavourable
2) Variable overhead efficiency variance:
Standard rate (Standard Machine Hour-Actual Machine Hour)
Standard machine hour = (Stand. Hour P.U* Standard Output) > 3*14000 = 42000 Hours
$10(42000-40500)= $15000 favourable
3) Fixed Overhead Budget Variance
= Total Budgeted Fixed Overhead-Actual Fixed Overhead
=$168000-$172000= $4000 unfavourable
4) Fixed Overhead Volume Variance
= Standard Fixed Cost – Budgeted Fixed Cost
Standard Fixed Cost =Total Budgeted Fixed Cost/ Total Budgeted Unit*Actual Unit
$168000/14000*12000
Apply the formula
$144000-$168000= $24000 unfavourable
Hence
Variable overhead spending variance $3969 unfavourable
Variable overhead efficiency variance $15000 favourable
Fixed Overhead Budget Variance $4000 unfavourable
Fixed Overhead Volume Variance $24000 unfavourable
Part II
1) Variable Overhead Spending variance:
=Actual Hour (Standard variable overhead rate per unit-Actual variable overhead Rate per unit)
291000 Hour ( $12-18.763) =$1968033 Unfavourable
Actual variable overhead rate= (Actual Overhead/Actual labour hour)> 5460000/291000= 18.763
2) Variable overhead efficiency variance
= Standard rate (Standard Hour-Actual Hour)
$12(308000-291000) =$204000 Favourable
3)Fixed Overhead Budgeted variance
= Total Budgeted Fixed Overhead-Actual Fixed Overhead
Total Budgeted Fixed Overhead= Total Hours* Fixed OH Rate per hour
=308000*22= $6776000
Applying formula
$6776000-$8025000= $1249000 Unfavourable
4)Fixed Overhead volume variance
= Standard Fixed Cost – Budgeted Fixed Cost
Std. Fixed Cost= (Total Budgeted Fixed Cost/ Total Budgeted Unit*Actual Unit) > ($6776000/61600)*58600=$6446000
Applying Formula
$6446000-$6776000= $330000 Unfavourable
Hence:
Variable overhead spending variance =$1968033 Unfavourable
Variable overhead efficiency variance =$204000 Favourable
Fixed Overhead Budget Variance =$1249000 Unfavourable
Fixed Overhead Volume Variance =$330000 Unfavourable
Part iii
Calculation of total standard hour:
1) Field model require 7 Direct labour hour
Total Production 300 field model
Total labour hour required= 300*7= 2100 hours
2) Professional model required 9 hour
Total unit of professional model is manufacturer 400
Total labour hour required= 400*9 =3600 hour
Hence total standard hour allowed 2100 Hrs+3600 hrs= 5700 Hrs
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