Problem 11-9A Hopkins Clothiers is a small company that manufactures tall-men’s
ID: 2474100 • Letter: P
Question
Problem 11-9A
Hopkins Clothiers is a small company that manufactures tall-men’s suits. The company has used a standard cost accounting system. In May 2014, 10,600 suits were produced. The following standard and actual cost data applied to the month of May when normal capacity was 14,500 direct labor hours. All materials purchased were used.
Cost Element
Standard (per unit)
Actual
Overhead is applied on the basis of direct labor hours. At normal capacity, budgeted fixed overhead costs were $53,650, and budgeted variable overhead was $36,250.
Compute the overhead controllable variance and the overhead volume variance
Explanation / Answer
Overhead controllable variance => Actual Overhead - Budgeted allowance based on standard hours allowed
Budgeted allowance based on standard hours allowed =>
Variable => (10600*1.43)*2.50 => 37895
Fixed => 53650
Overhead controllable variance => (49900 + 37000) - (37895 + 53650)
=> $4645 F
Overhead Volume variance => Budgeted allowance based on standard hours allowed* – Overhead charged to production**
Budgeted allowance based on standard hours allowed* => Budgeted fixed expenses + variable expenses (standard hours allowed for actual production × variable overhead rate)
=> 53650 + (10600*1.43*2.50) => $91545
Overhead charged to production** => Standard hours allowed × Standard overhead rate
=> Standard hours allowed * 6.20
As , Standard overhead rate not given, so volume variance can not be calculated
One more formula to calculate this varaince
Overhead Volume variance => Recovered Overhead* - Budgeted overhead
Recovered Overhead* => (Budgeted Overhead / Budgeted Units) * Actual Units
in this i need budgeted units to , which is also not given, so cant be calculate.