Smithson Company Manufacturers shirts. During June, Smithson made 1,500 shirts b

Question

Smithson Company Manufacturers shirts. During June, Smithson made 1,500 shirts but had budgeted production at 1,575 shirts. Smithson gathered the following additional data:

Variable overhead cost standard

$1.00 per DLHr

Direct labor efficiency standard

4.50 DLHr per shirt

Actual amount of direct labor hours

6,890 DLHr

Actual cost of variable overhead

$7,579

Fixed overhead cost standard

$0.40 per DLHr

Budgeted fixed overhead

$2,835

Actual cost of fixed overhead

$2,945

Calculate the variable overhead cost variance.

Select the formula, then enter the amounts and compute the cost variance for variable overhead (VOH) and identify whether the variance is favorable (F) or unfavorable (U).

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x

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VOH Cost Variance

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x

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Calculate the variable overhead efficiency variance.

Select the formula, then enter the amounts and compute the efficiency variance for variable overhead and identify whether the variance is favorable (F) or unfavorable (U).

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)

x

=

VOH Efficiency Variance

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x

=

Calculate the total variable overhead variance

The total variable overhead variance is BLANK, is it favorable or unfavorable?

Calculate the fixed overhead cost variance

Select the formula, then enter the amounts and compute the cost variance for fixed overhead (FOH) and identify whether the variance is favorable (F) or unfavorable(U).

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=

Fixed Overhead Cost Variance

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Now, select the formula, then enter the amounts and compute the fixed overhead volume variance and identify whether the variance is favorable (F) or unfavorable(U).

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=

Fixed Overhead Volume Variance

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Calculate the total fixed overhead variance.

The total fixed overhead variance is BLANK, is it favorable or unfavorable?

Variable overhead cost standard

$1.00 per DLHr

Direct labor efficiency standard

4.50 DLHr per shirt

Actual amount of direct labor hours

6,890 DLHr

Actual cost of variable overhead

$7,579

Fixed overhead cost standard

$0.40 per DLHr

Budgeted fixed overhead

$2,835

Actual cost of fixed overhead

$2,945

Explanation / Answer

Variable Overhead Cost Variance = (Standard Rate per hour - Actual Rate per hour) x Actual hours worked

......................................................= ($1 - $1.1) x 6,890 hours

......................................................= $689 Unfavorable

Variable Overhead Efficiency Variance = (Standard hours - Actual hours) x Standard Rate per hour

..............................................................= (6,000 hr - 6,890 hr) x $1 per hour

..............................................................= $890 Unfavorable

Total Variable Overhead Variance = $689 + $890

......................................................= $1579 Unfavorable

Fixed Overhead Absorption Rate = Budgeted Fixed Overheads / Budgeted Output

......................................................= $2,835 / 1,575 shirts

......................................................= $1.80 per shirt

Fixed Overhead Cost Variance = Actual Fixed Overheads - Budgeted Fixed Overheads

..................................................= $2,945 - $2,835

..................................................= $110 Unfavorable

Fixed Overhead Volume Variance = Budgeted Fixed Overheads - Absorbed Fixed Overheads

......................................................= ($2,835) - (1,500 x $1.80)

......................................................= $135 Unfavorable

Total Fixed Overhead Variance = $110 + $135

..................................................= $245 Unfavorable

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