Please calculate the Overhead Controllable Variance and the Overhead Volume Vari
ID: 2369809 • Letter: P
Question
Please calculate the Overhead Controllable Variance and the Overhead Volume Variance from the following information. I need to know HOW you came up with this info, so I can backtrack the solution.
Dinkel Manufacturing Corporation accumulates the following data relative to jobs started and finished during the month of June 2012.
Costs and Production Data
Actual
Standard
Overhead is applied on the basis of standard machine hours. Three hours of machine time are required for each direct labor hour. The jobs were sold for $400,000. Selling and administrative expenses were $40,000. Assume that the amount of raw materials purchased equaled the amount used.
Compute the overhead controllable variance and the overhead volume variance. PLEASE SHOW YOUR WORK! I am not just interested in the answer. I need to know how you got it.
Costs and Production Data
Actual
Standard
Raw materials unit cost $2.25 $2.00 Raw materials units used 10,600 10,000 Direct labor payroll $122,400 $120,000 Direct labor hours worked 14,400 15,000 Manufacturing overhead incurred $184,500 Manufacturing overhead applied $189,000 Machine hours expected to be used at normal capacity 42,500 Budgeted fixed overhead for June $51,000 Variable overhead rate per hour $3.00 Fixed overhead rate per hour $1.20Explanation / Answer
Definition and Explanation: of overhead controllable variance The controllable variance is the difference between actual expenses incurred and the budget allowance based on standard hours allowed for work performed. This variance may be favorable or unfavorable. If the actual factory overhead is more than the budget allowance based on standard hours allowed for work performed, the variance is called unfavorable controllable variance. If the actual factory overhead is less than the budget allowance based on standard hours allowed for work performed, the variance is called favorable controllable variance. Overhead controllable variance is calculated when overall or net overhead variance is further analyzed using two variance method. Other variance that is calculated in two variance method is volume variance. Formula: Following formula is used for the calculation of this variance: Controllable variance = Actual Factory Overhead - Budgeted Allowance Based on Standard Hours Allowed Example: From the following data calculate factory overhead controllable variance: Actual overhead $7,384 Actual hours used 3,475 Units produced during the period 850 Standard hours for one unit 4 Standard factory overhead rate: Variable $1.20 Fixed $0.80 $2.00 Normal Capacity in labor hours 4000 hours Solution: Actual factory overhead $7,384 Budgeted allowance based on standard hours allowed: Fixed expenses budgeted $3,200 Variable expenses (3,400* standard hours allowed