Norwall Company’s budgeted variable manufacturing overhead cost is $1.35 per mac

Question

Norwall Company’s budgeted variable manufacturing overhead cost is $1.35 per machine-hour and its budgeted fixed manufacturing overhead is $101,568 per month.

The following information is available for a recent month:

The denominator activity of 29,440 machine-hours is used to compute the predetermined overhead rate.

At a denominator activity of 29,440 machine-hours, the company should produce 12,800 units of product.

The company’s actual operating results were:

Required:

1. Compute the predetermined overhead rate and break it down into variable and fixed cost elements. (Round your answers to 2 decimal places.)

2. Compute the standard hours allowed for the actual production.

3. Compute the variable overhead rate and efficiency variances and the fixed overhead budget and volume variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Round your intermediate calculations and final answers to 2 decimal places.)

Number of units produced 13,490 Actual machine-hours 30,190 Actual variable manufacturing overhead cost $ 36,228 Actual fixed manufacturing overhead cost $ 102,200

Explanation / Answer

Answer

Total variable overhead = $1.35 per machine hours x 29440 machine hours = $39744

Total fixed manufacturing overhead = $101568

Total Overhead (fixed and variable) = 39744 + 101568 = $ 141312

Predetermined Rate = $141312 / 29440 machine hours = $4.8 per machine hours

Variable element = $1.35 per unit
Fixed Element = $3.45 per unit [4.8 – 1.35]

Standard hour for 1 unit of production = 29440 hours / 12800 units = 2.3 machine hours per unit.

Standard hours for actual 13490 units = 13490 x 2.3 machine hours per unit = 31027 machine hours

---Variable variance

Note: Standard hours = 31027 machine hours, Rate $1.35 per machine hours
Actual hours = 30190 machine hours, rate $1.2 [36228/30190]

Variable Rate Variance = (Standard rate – Actual Rate) x Actual hours
= (1.35- 1.2) x 30190 = 4528.5 Favourable

Variable Efficiency Variance = (Standard hours – Actual hours) x Standard rate per hour
= (31027 – 30190) x $1.35 = 1129.95 Favourable

---Fixed Variance

Fixed Budget Variance = Budgeted overhead – Actual Overhead
= 101568 – 102200 = 632 Unfavourable

Fixed Volume variance = Standard fixed overhead for actual production – Budgeted Fixed Overhead

= 104155.5* – 101568 = 2587.5 Favourable

*$3.45 per machine hours x 30190 machine hours = 104155.5

Related Questions

Navigate

• Browse (All)
• Browse N
• Subjects

---

---

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