Kareena Company produced 2,200 buckets during October. The following variable ov
ID: 2577506 • Letter: K
Question
Kareena Company produced 2,200 buckets during October. The following variable overhead data pertains to October: (Don’t forget to designate if the variance is favorable or unfavorable)
Actual Budgeted
Production 2,200 units 2,400 units
Total Machine-hours 8,800 hours 9,000 hours
Variable overhead cost per machine-hour $6.25 $7.00
a) What is the flexible-budget amount?
b) What is the variable overhead spending variance?
c) What is the variable overhead efficiency variance?
Explanation / Answer
a)
Flexible budget amount=Actual production*Machine hrs per bucket*budgeted cost per hr
=2,200buckets*(9000 hrs/2400)*$7.00
=$57,750
b)
Variable overhead spending variance
=Actual m.hrs*(Actual cost per m.hr-Budgeted cost per m.hr)
=8,800*(6.25-$7)
=$6,600 Favorable
c)
Variable overhead efficiency variance
=[(Actual production*budgted m.hr per bucket)-actual m.hrs]*Budgeted cost per m.hr
=[(2200*9000/2400)-8800]*$7
=$3,850 unfavorable
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