Please Help Accounting 2: World Company expects to operate at 80% of its product
ID: 2497955 • Letter: P
Question
Please Help Accounting 2:
World Company expects to operate at 80% of its productive capacity of 55,000 units per month. At this planned level, the company expects to use 27,500 standard hours of direct labor. Overhead is allocated to products using a predetermined standard rate based on direct labor hours. At the 80% capacity level, the total budgeted cost includes $66,000 fixed overhead cost and $313,500 variable overhead cost. In the current month, the company incurred $360,000 actual overhead and 24,500 actual labor hours while producing 39,000 units.
(1) Compute the overhead volume variance. (Round all your intermediate calculations to 2 decimal places.) Fixed Overhead applied Fixed Overhead applied Volume variance Fixed overhead volume variance (2) Compute the overhead controllable variance Overhead controllable variance Overhead controllable varianceExplanation / Answer
Budgeted Fixed 66000 Variable 313500 Units produced 44000 ( 55000 * 80%) Variable overhead rate 7.125 ( 313500 / 44000) 1) Fixed Overhead volume variance = Applied Fixed overhead - Budgeted Fixed overhead Applied Fixed overhead = standard Fixed overhead rate * standard hours allowed standard fixed overhead rate = Budgeted Fixed overhead / Budgeted units = 66000/ 55000*80% = 66000/44000 = 1.50 Applied Fixed overhead = 1.50 * 27500 = 41250 Fixed overhead volume variance = 41250 - 66000 = -24750 UF 2) Overhead controllable variance = Actual overhead expense - ( Budgeted overhead rate per unit * standard number of units) Actual factory overhead 360000 Budgeted allowed on standard hours allowed Fixed expenses budgeted 66000.00 Variable expenses 173671.88 239671.88 ( 24375 * 7.125) ( Refer Note) variance (Actual - Budgeted ) 120328.13 UF Note standard hours allowed = 39000 *27500/44000 = 24375 Variable overhead rate = 7.125