4. The data below relate to a product of AirWay Company. Standard costs: Labor,

Question

4. The data below relate to a product of AirWay Company. Standard costs: Labor, 3 hour at $15 pr hour suo per un Variable overhead at $8 per labor hour $24 per unit Budgeted fixed production costs $140,000 per year Budgeted production for the year 4,00o units Actual results were: Production Labor, 10,360 hours Overhead incurred ($142,700 fixed) 3,600 Units 160.580is50 $222,200 Required: (Be sure to indicate whether the variances are favorable or unfavorable.) a. What is the variable overhead efficiency variance? b. What is the variable overhead price variance? c. What is the fixed overhead budget variance? d. What is the fixed production volume variance?

Explanation / Answer

a) variable overhead efficiency variance ; (standard hours-actual hours)standard rate

                                                         = (3600*3-10360)8

Variable overhead efficiency variance = 3520 Favourable

b) Variable overhead price variance = (standard rate-actual rate)actual hours

                                                   = 8*10360-79500

Variable overhead price variance = 3380 Favourable

C) Fixed overhead budget variance = Budgeted fixed overhead-Actual fixed overhead

                                                   = 140000-142700

Fixed overhead budget variance = 2700 Unfavourable

d) Fixed production volume variance = (Budgeted fixed overhead-alocated fixed overhead)

                                                     = (140000-3600*35)

FIxed production volume variance = 14000 Unfavourable

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