Maxwell Company uses a standard cost accounting system and applies production ov
ID: 2589037 • Letter: M
Question
Maxwell Company uses a standard cost accounting system and applies production overhead to products on the basis of machine hours. The following information is available for the year just ended:
Standard variable-overhead rate per hour: $7.30
Standard fixed-overhead rate per hour: $12.60
Planned activity during the period: 20,000 machine hours
Actual production: 12,700 finished units
Machine-hour standard: Two completed units per machine hour
Actual variable overhead: $164,500
Actual total overhead: $462,950
Actual machine hours worked: 23,500
Required:
1. Calculate the budgeted fixed overhead for the year.
2. Compute the variable-overhead spending variance.
3. Calculate the company’s fixed-overhead volume variance.
4-a. Did Maxwell spend more or less than anticipated for fixed overhead? How much?
4-b. What was the difference in actual and anticipated overhead?
5. Was variable overhead underapplied or overapplied during the year? By how much?
Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4A Required 4B Required 5 Calculate the budgeted fixed overhead for the year. Budgeted fixed overheadExplanation / Answer
1 Budgeted fixed overhead: $252000 Budgeted fixed overheads = 20000 machine hours x $12.60 = $252000 2 Variable overhead spending variance: $7050 Favorable Variable overhead spending variance = ($7.30 x 23500) - $164500 = $171550 - $164500 = $7050 Favorable 3 Fixed overhead volume variance: $44100 Favorable Fixed overhead volume variance = ($12.60 x 20000) - ($12.60 x 23500) = $252000 - $296100 = $44100 Favorable 4-a. Maxwell spent more than anticipated 4-b. Fixed overhead budget variance: $46450 Unfavorable Actual fixed overheads = Actual total overhead - Actual variable overhead = $462950 - $164500 = $298450 Anticipated overhead = 20000 x $12.60 = $252000 Difference = $252000 - $298450 = $46450 5 Variable overhead is overapplied by $25550 Budgeted variable overhead = 20000 x $7.30 = $146000 Applied variable overhead = 23500 x $7.30 = $171550 Overapplied variable overhed = $171550 - $146000 = $25550