The next twe questions are based on the following: information relates to produc

Question

The next twe questions are based on the following: information relates to production for last year uss a sandard cost system wih machine-hours as the activity base for overhead The following Variable Fixed Total budgcted overbcad (at the denominator level of activity) Total applied overhcad Total actual overhead 60,000 s 55.200 115,000 s 53,500 S 110,400 The standard machine-hours allowed for actual ouaput during the year were 4,600. The actual machine-hours incurred were 4,500 18 What was Topeka's VMOH Rate Variance? 5500 Favorable $500 Unfavorable A. B. C. D. E. None of the above $1,200 Favorable 1,200 Unlavorable 19 What was Topeka's FMOH Budget variance 4,600.00 Favorable 4,600.00 Unfavorable A. B. C 10,000.00 Favorable D. 10,000.00 Unfavorable E. None of the above

Explanation / Answer

Solution 18:

Standard rate of variable overhead = $55,200 / 4600 = $12 per hour

Actual rate of variable overhead = $53,500 / 4500 = $11.888 per hour

Variable manufacturing overhead rate variance = (SR - AR) * AH = ($12 - $11.8888) * 4500 = 500 Favorable

Hence option A is the right choice.

Solution 19:

Budgeted mahcine hours = Budgted variable overhead / Standard rate of variable overhead = $60,000 / 12 = 5000 hours

Predetermined fixed overhead rate = Applied overhead / Standard machine hours = $115,000 / 4600 = $25 per machine hour

Budgeted fixed overhead = 5000 * $25 = $125,000

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

= $125,000 - $110,400 = $14,600 F

Hence option A is the right choice.

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