Exercise 23-11 Computation of volume and controllable overhead variances LO P3 W

Question

Exercise 23-11 Computation of volume and controllable overhead variances LO P3 World Company expects to operate at 80% of its productive capacity of 56,250 units per month. At this planned level, the company expects to use 27,900 standard hours of direct labor. Overhead is allocated to products using a predetermined standard rate based on direct labor hours. At the 80% capacity level, the total budgeted cost includes $64,170 fixed overhead cost and $315,270 variable overhead cost. In the current month, the company incurred $340,000 actual overhead and 24,900 actual labor hours while producing 38,000 units. (1) Compute the overhead volume variance. (Round all your intermediate calculations to 2 decimal places.) Fixed Overhead applied Fixed OH per DL hr. Standard DL hours Fixed Overhead applied Volume variance Total actual overhead cost $340,000 Total variable overhead applied Fixed overhead volume variance

Explanation / Answer

Particular Standard Std/Unit Projected for 38000 Actual Variance Qty produced 45000 38000 38000 Labor Hour 27900 0.62 23560 24900 1340 Fixed Overhead 64170 1.426 54188 Variable Overhead 315270 7.006 266228 Actual Over Head 379440 320416 340000 19584 So Overhead Volume variance=19584

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