17.18. Sedona Company set the following standard costs for one unit of its produ

Question

17.18.

Sedona Company set the following standard costs for one unit of its product for 2017.

The $3.70 ($2.50 + $1.20) total overhead rate per direct labor hour is based on an expected operating level equal to 70% of the factory's capacity of 55,000 units per month. The following monthly flexible budget information is also available.

During the current month, the company operated at 65% of capacity, employees worked 678,000 hours, and the following actual overhead costs were incurred.

AH = Actual Hours
SH = Standard Hours
AVR = Actual Variable Rate
SVR = Standard Variable Rate
SFR = Standard Fixed Rate

18.1 1. Compute the variable overhead spending and efficiency variances.

18.2  Compute the fixed overhead spending and volume variances and classify each as favorable or unfavorable

18.3 Compute the controllable variance

Direct material (30 Ibs. @ $2.00 per Ib.) $ 60.00 Direct labor (20 hrs. @ $4.50 per hr.) 90.00 Factory variable overhead (20 hrs. @ $2.50 per hr.) 50.00 Factory fixed overhead (20 hrs. @ $1.20 per hr.) 24.00 Standard cost $ 224.00

Explanation / Answer

Compute the variable overhead spending and efficiency variances.

Compute the fixed overhead spending and volume variances.

Compute the total overhead controllable variance.

(1) Compute the predetermined overhead application rate per hour for variable overhead, fixed overhead, and total overhead at 70% of capacity. Predetermined OH Rate Variable overhead costs $2.50 Per DL hr Fixed overhead costs $1.20 Per DL hr Total overhead costs $3.70 Per DL hr (2) Compute the total variable and total fixed overhead variances and classify each as favorable or unfavorable. --------At 65% of Operating Capacity-------- Predetermined OH Rate Standard DL Hours Overhead Costs Applied Actual Results Variance Fav./Unf. Variable overhead costs $2.50 Per DL hr 715000 1787500 1715000 72500 Fav Fixed overhead costs $1.20 Per DL hr 715000 858000 999200 141000 Unf Total overhead costs $3.70 Per DL hr 2645500 2714200 68700 Unf 18.1

Compute the variable overhead spending and efficiency variances.

Actual Variable OH Cost 1 Flexible Budget 1 Standard Cost (VOH applied) AH x AVR AH x SVR SH x SVR 6,78,000 x $2.53 6,78,000 x $2.50 7,15,000 x $2.16 $17,15,340 $16,95,000 $15,44,400 $20,340 2 $1,50,600 1 Variable overhead spending variance $20,340 Unfavorable Variable overhead efficiency variance $1,50,600 Unfavorable Total variable overhead variance $1,70,940 Unfavorable 18.2

Compute the fixed overhead spending and volume variances.

Actual Fixed OH Cost 1 Budgeted Overhead 1 Standard Cost (FOH applied) AH x AFR SH x SFR 6,78,000 x $1.47 715000 x $1.20 $9,96,660 $9,24,000 $8,58,000 $72,660 2 $66,000 1 Fixed overhead spending variance 72660 unfavorable Fixed overhead volume variance 66000 unfavorable Total fixed overhead cost variance $1,38,660 unfavorable 18.3

Compute the total overhead controllable variance.

Overhead Controllable Variance Variable overhead spending variance $20,640 Unfavorable Variable overhead efficiency variance 1,50,600 Unfavorable Fixed overhead spending variance 72,660 Unfavorable Total overhead controllable variance $2,43,900 Unfavorable

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

---

---

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