Alpha company makes a single product and uses a standard costing system that app

Question

Alpha company makes a single product and uses a standard costing system that applies overhead on the basis of direct labor hours. For the most recent period, the VOH spending variance was $80,000 F, and the VOH Efficiency Variance was $130,000 U. The company budgeted making 4,800 units at 3.5 hours each with $924,000 of VOH. The company actually produced 3,000 units. What was the actual VOH?

Li Pong company uses a standard costing system. Last year they incurred S100,000 of Variable Overhead and S305,000 of Fixed Overhead and had the following variances before closing entries. FOH Budget Variance $9,000 F FOH Volume Variance S9,000 U vOH Spending Variance 1,000F How much overhead was applied to inventory over the course of the year? (Answer in dollars)

Explanation / Answer

Budgeted Qty 4800 Units Direct Labour Hours required per unit 3.5 hrs total budgeted labour hours 16800 hrs Variable Overheads budgeted $924,000 Budgeted labour hour rate per hour $55.00 Budgeted Rate per unit $192.50 Actual Units produced            3,000 units VOH spending variance $80,000 F VOH Efficiency variance $130,000 U Variable overhead Variance Actual Flexible Standard Rate $50.83 $55.00 $55.00 Labour Hours(see note below)    19,163.64       19,163.64 16800 Total $974,000 $1,054,000 $924,000 $80,000 $130,000 F U (i)Spending Variance (ii)Efficiency Variance $50,000 U Total Variable OH Variance = Price Variance + Qty Variance                      Total Variance Note: Calculation of Actual labour hours incurred VOH Efficiency variance $130,000 Standard VOH Cost $924,000 Therefore :Flexible VOH cost shall be $1,054,000 As Standard labour hr rate is known $55.00 we can get the actual labour hrs    19,163.64 Hence Actual VOH cost incurred = $974,000

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