You brought your work home one evening, and your nephew spilled his chocolate mi

Question

You brought your work home one evening, and your nephew spilled his chocolate milk shake on the variance report you were preparing. Fortunately, knowing that overhead was applied based on machine hours, you were able to reconstruct the obliterated information from the remaining data. Fill in the missing numbers below. (Hint: It is helpful to solve for the unknowns in the order indicated by the letters in the following table.) (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance). Round all overhead rates and "Actual machine hours" to 2 decimal places. Round all other calculations to the nearest whole number or dollar.)

You brought your work home one evening, and your nephew spilled his chocolate milk shake on the variance report you were preparing. Fortunately, knowing that overhead was applied based on machine hours, you were able to reconstruct the obliterated information from the remaining data. Fill in the missing numbers below. (Hint: It is helpful to solve for the unknowns in the order indicated by the letters in the following table.) (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance). Round all overhead rates and "Actual machine hours" to 2 decimal places. Round all other calculations to the nearest whole number or dollar.)

Budgeted fixed overhead $55,500 Actual fixed overhead X a Budgeted production in units 18,500 Actual production in units X c Standard machine hours per unit of output 5 hours Standard variable-overhead rate per machine hour $11 Actual variable-overhead rate per machine hour X b Actual machine hours per unit of output X d Variable-overhead spending variance $52,800 Unfavorable Variable-overhead efficiency variance $154,000 Favorable Fixed-overhead budget variance $16,500 Unfavorable Fixed-overhead volume variance X g X Total actual overhead $652,800 Total budgeted overhead (flexible budget) X e Total budgeted overhead (static budget) X f Total applied overhead $719,200

Explanation / Answer

Answer:

The formula is:

fixed overhead budget variance = Actual fixed overheads – Budgeted fixed overheads

                                            -$16500 = X - $55500

Actual Fixed Overhead = $39000

Actual fixed overhead = $39000

Therefore Actual Variable overhead = $652800 - $39000 = $613800

And actual variable overhead per unit = $613800/18500 = $33.178 per unit

So ,

Actual variable overhead rate per machine hour = $33.178/5 = $6.636 per hour

Therefore

Variable overhead efficiency = Actual Time x B Rate – {AO x BT/BO} x BR

154000 = 92945 x 11 – [AOx5x18500x11/18500]

AO = 18219 units

Therefore actual output = 18219 units

Now standard variable overhead rate per hour = $11

So Variable budgeted overheads = $11 x 5 X 18500 = $1,017,500

Therefore Total budgeted over heads = $1,073,000

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