Bluecap Co. uses a standard cost system and flexible budgets for control purpose
ID: 2500129 • Letter: B
Question
Bluecap Co. uses a standard cost system and flexible budgets for control purposes. The following budgeted information pertains to 2013: Denominator volume - number of units 8,300 Denominator volume - percent of capacity 83% Denominator volume - standard direct labor hours 25,300 Budgeted variable factory overhead at denominator volume $107,400 Total standard factory overhead rate per direct labor hour $15.70 During 2013, Bluecap worked 29,000 direct labor hours and manufactured 10,070 units. The actual factory overhead was $14,600 greater than the flexible budget amount for the units produced, of which $6,200 was due to fixed factory overhead. In preparing a budget for 2014 Bluecap decided to raise the level of operation to 94.00% of capacity, to manufacture 9,400 units at a budgeted total of 27,800 direct labor hours. The total overhead variance in 2013 for Bluecap Co. is: Bluecap Co. uses a standard cost system and flexible budgets for control purposes. The following budgeted information pertains to 2013: Denominator volume - number of units 8,300 Denominator volume - percent of capacity 83% Denominator volume - standard direct labor hours 25,300 Budgeted variable factory overhead at denominator volume $107,400 Total standard factory overhead rate per direct labor hour $15.70 During 2013, Bluecap worked 29,000 direct labor hours and manufactured 10,070 units. The actual factory overhead was $14,600 greater than the flexible budget amount for the units produced, of which $6,200 was due to fixed factory overhead. In preparing a budget for 2014 Bluecap decided to raise the level of operation to 94.00% of capacity, to manufacture 9,400 units at a budgeted total of 27,800 direct labor hours. The total overhead variance in 2013 for Bluecap Co. is:Explanation / Answer
Production Volume Variance = (Acutal Number of units produced -Denominoter volume) x Standard fixed overhead per unit
Actual No of units produced =10,700 units
Denominoter Volume units = 8,300 units
Standard Fixed overhead rate per units = $ 15.70/DLHx (25,300/8,300)
= 15.70 x 3.045= $ 47.85/unit
Production Volume variance = (10,700-8300) X 47.85
= $ 2400 x 47.85
= $ 114,840 ( F)