Bonus Question (6 bonus points possible) Layt Clock Company has developed the fo
ID: 2574203 • Letter: B
Question
Bonus Question (6 bonus points possible) Layt Clock Company has developed the following flexible budget for its overhead costs. The standard hours allowed per unit is 1.2 hours. Manufacturing overhead at Layt is applied to production on the basis of standard machine-hours Budget Information Machine Hours Clocks produced.. Variable overhead cost per 26,400 22,000 $5.90 machine hour (standard) .. Fixed overhead cost per unit per machine hours (standard) $6.48 Total Fixed overhead cost... $171,072 The actual results for the year were as follows: Number of clocks produced Machine-hours incurred....24,940 Variable overhead cost. $145,899 Fixed overhead cost 21,500 $170,540 Required: 1. Compute Variable Overhead Rate Variance. 2. Compute Variable Overhead Efficiency Variance. 3. Compute Fixed Overhead Budget Variance. 4. Compute Fixed Overhead Volume Variance.Explanation / Answer
1 Variable Overhead Rate Variance $1247 Favorable (AH x AR) - (AH x SR) = ($24940 x $5.85) - (24940 x $5.90) = $145899 - $147146 = $1247 AR = $145899 / 24940 hours = 5.85 2 Variable Overhead Efficiency Variance $5074 Favorable (AH x SR) - (SH x SR) = (24940 x $5.90) - (25800 x $5.90) = $147146 - $152220 = $5074 SH = 1.20 x 21500 = 25800 3 Fixed Overhead Budget Variance $532 Favorable Actual fixed overhead - Budgeted fixed overhead = $170540 - $171072 = $532 4 Fixed Overhead Volume Variance $9461 Unfavorable Budgeted Overheads - Applied Overheads = $171072 - (24940 x $6.48) = $171072 - $161611 = $9461