2) At 60,000 machine hours, Clark Company\'s static budget for variable overhead

Question

2) At 60,000 machine hours, Clark Company's static budget for variable overhead costs is $180,000. At 60,000 machine hours, the company's static budget for fixed overhead costs is $300,000. Machine hours are the cost driver of all overhead costs. The static budget is based on 60,000 machine hours. At 60,000 machine hours, the company produces 40,000 units. The following data is available: Actual units produced and sold Actual machine hours Actual variable overhead costs Actual fixed overhead costs 42,000 64,000 $185,600 $302,400 What is the fixed overhead spending variance? A) $2,400 Favorable C) $2,400 Unfavorable B) $1,000 Unfavorable D) $1,000 Favorable 3) The following information is available for Maher Manufacturing Company Direct materials price standard is $3.25 per pound. Direct materials quantity standard is six pounds per finished unit. Budgeted production is 25,000 finished units. 175,000 pounds of direct materials were purchased for $525,000. -175,000 pounds of direct materials were used in production. -25,600 finished units of product were produced. What is the direct materials quantity variance? A) $69,550 Unfavorable C) $21,400 Favorable B) $21,400 Unfavorable D) $69,550 Favorable

Explanation / Answer

2.C.$2,400 unfavourable

fixed overhead spending variance = actual - budgeted fixed overhead

=>$302,400 - $300,000

=>$2,400 .....(unfavorable)....(unfavorable since actual spending is more than budgeted spending).

3.A.$69,550 Unfavorable.

direct material quantity variance

=> standard price * (actual quantity - standard quantity)

here,

standard quantity = 25,600 units * 6 pounds per unit

=>153,600 pounds.

now,

quantity varince = $3.25 * (175,000- 153,600)

=>$69,550..(unfavourable)

since the actual quanitity used is greater than the standard quantity, we have an unfavorable variance.

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