Presented here are the original overhead budget and the actual costs incurred du
ID: 2438531 • Letter: P
Question
Presented here are the original overhead budget and the actual costs incurred during Apil for Piccolo, Inc. Piccolo's managers relate overhead to direct labor hours for planning, control, and product costing purposes. The onginal budget is based on budgeted production of 10 labor hours. Actual production of 11,200 units required 6,200 actual direct labor hours ,400 units in 5,200 standard direct Variable overhead Fixed overhead $17,680 39,520 $20.280 42.900 Required a. Calculate the flexed budget allowances for variable and fixed overhead for April (Do not round intermediate calculations.) Variable flexed budget Fixed flexed budget b. Calculate the direct labor efficiency variance for April expressed in terms of direct labor hours (Indicate the effect of each variance by selecting "F" for favorable, "u" for unfavorable, and None" for no effect (i.e., zero variance).) c. Calculate the predetermined overhead application rate for both variable and fixed overhead for Apri Round your answers to 2 decimal places) Predetermined overhead application rate per hour d. Calculate the fixed and vaniable overhead applied to production during April if overhead is applied on the basis of standard hours allowed for actual production achieved (Do not round intermediate eaiculations.) Overhead applied e. Calculate the fixed overhead budget and volume variances for April. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance)) Fixed overhead budget varlance Fixed overhead volume varlanceExplanation / Answer
a. Flexed budget Variable Flexed budget = $ 19,040 Fixed Flexed budget = $ 39,520 b. Direct labor efficiency variance = 600 hours Unfavourable c. Variable Fixed Predetermined overhead application rate per hour = $ 3.40 $ 7.60 d. Variable Fixed Overhead applied = $ 19,040 $ 42,560 e. Fixed overhead budget variance = $ 3,380 Unfavourable Fixed overheadVolume variance = $ 3,040 Unfavourable Workings: Budgeted Production = 10,400 units Standard direct labor hours = 5,200 hours Actual Production = 11,200 units Actual direct labor hours = 6200 hours Budgeted Variable Overhead = $ 17,680 Budgeted Fixed Overhead = $ 39,520 Actual Variable Overhead = $ 20,280 Actual Fixed Overhead = $ 42,900 a. Calculation of flexible budget variances: Variable Fixed 1 Budgeted Overhead $ 17,680 $ 39,520 2 Budgeted Production (units) 10,400 3 Budgeted Overhead per unit (1 / 2) $ 1.70 4 Actual Production (units) 11,200 5 Flexible Budget Allowance (3 X 4) $ 19,040 $ 39,520 b. Direct labor efficiency variance = Actual hours - Standard hours allowed for actual output = 6,200 - 5,600 = 600 hours Unfavourable Standard hours per unit = Standard direct labour hours / Budgeted production = 5,200 / 10,400 = 0.5 hours per unit Standard hours allowed for actual output = Actual production (units) X Standard hours per unit = 11,200 X 0.5 = 5600 hours c. Calculation of predetermined overhead rate: Variable Fixed 1 Budgeted Overhead $ 17,680 $ 39,520 2 Budgeted labor hours 5,200 5,200 Predetermined overhead per hour (1 / 2) $ 3.40 $ 7.60 d. Calculation of Overhead applied to production basing on standard hours allowed for actual output: Variable Fixed 1 Predetermined overhead per hour $ 3.40 $ 7.60 2 Standard hours allowed for actual output 5,600 5,600 Overhead applied (1 X 2) $ 19,040 $ 42,560 e. Fixed overhead budget variance = Actual fixed overhead - Budgeted fixed overhead = $42,900 - $39,520 = $ 3,380 Unfavourable Fixed overheadVolume variance = Budgeted fixed overhead - Fixed overhead applied to work in process = $39,520 - $42,560 = $ 3,040 Unfavourable