The condensed form of Nordstrop Company’s flexible budget for manufacturing over

Question

The condensed form of Nordstrop Company’s flexible budget for manufacturing overhead follows:

The condensed form of Nordstrop Company's flexible budget for manufacturing overhead follows: Cost Formula Machine-Hours 9,000 $ 11,200 12,600 $14,000 Overhead Costs (per machine-hour) 8,000 10,000 1.40 Variable cost Fixed cost 16,800 16,800 16,800 Total overhead cost $ 28,000 $29,400 $30,800 The following information is available for a recent period a. The denominator activity of 8,000 machine-hours was chosen to compute the predetermined overhead rate b. At the 8,000 standard machine-hours level of activity, the company should produce 4,000 units of product c. The company's actual operating results were as follows Number of units produced Actual machine-hours Actual variable overhead costs Actual fixed overhead costs 4,300 8,800 $12,500 $17,000 Required: 1. Compute the predetermined overhead rate and break it down into variable and fixed cost elements (Round your answers to 2 decimal places.) Predetermined overhead rate Variable rate Fixed rate per MH per MH per MH

Explanation / Answer

Fixed overhead volume variance = Actual output * FOAR - Budgeted output * FOAR

Answer to 1 At the 8,000 standard machine hours level of activity, Variable cost = $ 11,200 Standard level of machine hours = 8,000 Pre determined variable overhead rate = $11,200 / 8,000 = $1.40 machine hour Fixed Cost at 8,000 machine hours = $ 16,800 Machine hours = 8,000 Pre determined fixed overhead rate = $ 16,800 / 8,000 = $ 2.1 machine hour Predetermined overhead rate $3.50 Variable rate $1.40 Fixed rate $2.10 Answer to 2 Standard machine hours = 8,000 Machine hours At the 8,000 standard machine-hours level of activity, the company should produce 4,000 units of product. Standard machine hours per unit = 8,000 / 4,000 = 2 machine hour per unit The standard hours allowed for the actual production of 4,300 units = 4,300 units * 2 machine hour per unit = 8,600 machine hour Answer to 3 Variable overhead efficiency variance = Standard Rate (Actual Hours - Standard Hours) = $ 1.4 per machine hour ( 8,800 hours - 8,600 hours) = $ 280 Unfavouable Variable overhead spending variance = Actual hours * ( Actual overhead rate - standard overhead rate) = 8,800 ($ 12,500/8,800 - $ 1.4) = $ 180 Unfavourable Fixed Overhead Budget Variance = Actual Fixed Overhead Cost - Budgeted Fixed Ovberhead Cost = $ 17,000 - $ 16,800 = $ 200 Unfavourable

Fixed overhead volume variance = Actual output * FOAR - Budgeted output * FOAR

= 4,300*($16,800/4,000) - $16,800 = $18,060-$16,800 = $ 1,260 Unfavourable

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

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