Question 2 Brailey Corporation, which makes helicopter rotors, has provided the

Question

Question 2 Brailey Corporation, which makes helicopter rotors, has provided the following data for October: Budgeted production 8,400 rotors 8,500 rotors Budgeted machine-hours (8.8 x 8,400) Standard machine-hours allowed for the 8.8 machine-hours 73,920 machine-hours 74,800 machine-hours actual output (8.8 x 8,500) 73,940 machine-hours Budgeted variable overhead cost per machine-hour: S5.90 per machine-hour $1.20 per machine-hour Actual total variable overhead costs: $484,305 $92,771 Required: Compute the rate variances and the efficiency variances for indirect labor and power and indicate whether they are favorable or unfavorable.

Explanation / Answer

Indirect labour: Std overhead rate per machine hour   5.90 per MH Std machine hours allowed for actual output 74800 MH Actual Machine hours used for actual production 73940 MH Actual Indirect labour cost incurred $ 484,305 Actual Indirect labour cost per hour (484305/73940) = $ 6.55 per MH Rate variance= Actual hours worked (Std rate per hour - Actual rate per hour) 73940 ( 5.90-6.55) = $ 48,059 Unfav Efficiency variance= Std rate per hour (Std hours allowed- Actual hours worked) 5.90 (74800-73940) = $ 5074 fav Power: Std overhead rate per MH   $ 1.20 per MH Std machine hours allowed for actual output 74800 MH Actual Machine hours used for actual production 73940 MH Actual Power cost incurred $ 92771 Actual power rate per MH (92771/73940) = $ 1.255 per MH Rate variance= Actual hours worked (Std rate per hour - Actual rate per hour) 73940 (1.20-1.255 )= $ 4043 Unfav Efficiency variance= Std rate per hour (Std hours allowed- Actual hours worked) 1.20 (74800-73940) = $ 1032 fav

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