4 variance analysis, fill in the blanks. Rozema Inc., produces chemicals for lar
ID: 2485866 • Letter: 4
Question
4 variance analysis, fill in the blanks. Rozema Inc., produces chemicals for large biotech companies. It has the following data for manufacturing ovehead costs during August 2015
Actual costs incurred: Variable $31,000--Fixed $18,000
Costs allocated to products: Variable $33,000--Fixed $14,600
Flexible budget: Variable $________--Fixed $13,400
Actual input X budgeted rate: Variable $30,800--Fixed ____________
Use F for favorable and U for unfavorable
(1) Spending variance: Variable $________ --Fixed $__________
(2) Efficiency variance: Variable ________--Fixed_____________
(3) Production-volume variance: Variable_______--Fixed _________
(4) Flexible-budgeted variance: Variable _______--Fixed_________
(5) Underallocated (overallocated) manufacturing overhead: Variable _____--Fixed _______
Questions: I need help on:
How to calculate the actual rate for VMO?
How to calculate the budgeted rate for FMO?
Explain: Why the variances are favorable or unfavorable?
Thank you
Explanation / Answer
1
Calculation of actual rate for Variable Manufacturing Overhead (VMO):
Actual rate for VMO = Total Actual Variable Overhead / Actual Units Produced
2
Calculation of budgeted rate for Fixed Manufacturing Overhead (FMO):
Budgeted rate for FMO = Total Budgeted Fixed Overhead / Budgeted Units Produced
3
Favorable Variance means when the Actual cost is less than Budgeted
And Unfavorable Variance means when the Actual cost is more than Budgeted
1
Calculation of actual rate for Variable Manufacturing Overhead (VMO):
Actual rate for VMO = Total Actual Variable Overhead / Actual Units Produced
2
Calculation of budgeted rate for Fixed Manufacturing Overhead (FMO):
Budgeted rate for FMO = Total Budgeted Fixed Overhead / Budgeted Units Produced
3
Favorable Variance means when the Actual cost is less than Budgeted
And Unfavorable Variance means when the Actual cost is more than Budgeted