Corporation uses a standard cost system in which it applies manufacturing overhe
ID: 2444821 • Letter: C
Question
Corporation uses a standard cost system in which it applies manufacturing overhead (MOH) on the basis of direct labor- hours (DLH). The company's standards call for 2 DLHs for each unit produced. For the most recent period:
Budget
Actual
Units Produced
9,000
8,500
DLH
18,000
17,200
Variable MOH
$ 108,000
$ 108,500
Fixed MOH
$ 27,000
$ 28,000
The variable overhead rate variance for the period was closest to:
The variable overhead efficiency variance for the period was closest to:
The fixed overhead volume variance for the period was closest to:
Budget
Actual
Units Produced
9,000
8,500
DLH
18,000
17,200
Variable MOH
$ 108,000
$ 108,500
Fixed MOH
$ 27,000
$ 28,000
Explanation / Answer
Solution:
(A0. Overhead Rate Varience Caluculation:
Actual O.H = 1,08,500 / 17,200
= 6.30
Budjeted O.H = 1,08,000 / 18.000
= 6
Actual O.H Rate- Standard / Budjeted O.H Rate
= 6 - 6.30
Rate Varience Per Hour = 0.30
Rate Varience * Worked Hours
= 0.30 * 18,000
= 5,400
OR
= 0.30 * 17,200
= 5,160
(B). Variance Efficiency Caluculation:
Variable Overhead Efficiency Variance = 6.30 ( 17.200 - 18.000)
= 6.30 * 800
= 5,040
(C). Fixed O.H Variance Caluculation:
Fixed O.H Varience = 17,200 - 18,000
= 800
Variable Overhead Efficiency Variance = Standard Overhead Rate x (Actual hours - Standard hours)