Exam 10: Compute and Interpret the Fixed Overhead Variances

Hoops Corporation applies manufacturing overhead to products on the basis of standard machine-hours.The company's predetermined overhead rate for fixed manufacturing overhead is $1.30 per machine-hour and the denominator level of activity is 3,700 machine-hours.In the most recent month,the total actual fixed manufacturing overhead was $4,450 and the company actually worked 4,000 machine-hours during the month.The standard hours allowed for the actual output of the month totaled 3,880 machine-hours.What was the overall fixed manufacturing overhead volume variance for the month?

A manufacturer of industrial equipment uses a standard costing system in which standard machine-hours (MHs)is the measure of activity.Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity................................... 5,100 MHs Overhead costs at the denominator activity level: Variable overhead cost............................................. \1 2,495 Fixed overhead cost ................................................ \6 2,220 The following data pertain to operations for the most recent period: Actual hours ................................................ 5,300 MHs Standard hours allowed for the actual output............... 5,160 MHs Actual total variable manufacturing overhead cost....... \ 12,985 Actual total fixed manufacturing overhead cost \6 0,270 -What is the predetermined overhead rate to the nearest cent?

The fixed manufacturing overhead budget variance is more meaningful than the volume variance for cost control purposes.

The fixed manufacturing overhead volume variance is due to:

Mattern Corporation applies manufacturing overhead to products on the basis of standard machine-hours.Budgeted and actual fixed manufacturing overhead costs for the most recent month appear below: Original Budget Actual Costs Fixed manufacturing overhead costs: Supervision \1 6,470 \1 6,930 Utilities 14,030 14,030 Factory depreciation Total fixed manufacturing overhead cost. The company based its original budget on 6,100 machine-hours.The company actually worked 5,710 machine-hours during the month.The standard hours allowed for the actual output of the month totaled 5,540 machine-hours.What was the overall fixed manufacturing overhead volume variance for the month?

Wintersmith Corporation estimates that its variable manufacturing overhead is $11.60 per machine-hour and its fixed manufacturing overhead is $278,124 per period. -If the denominator level of activity is 4,300 machine-hours,the predetermined overhead rate would be:

A manufacturing company uses a standard costing system in which standard machine-hours (MHs)is the measure of activity.Data from the company's flexible budget for manufacturing overhead are given below: \begin{array}{llcc} \text {Denominator level of activity } &8,900\quad \text { \mathrm{MHs} }\\ \text { Overhead costs at the denominator activity level: } &\\ \text { Variable overhead cost } &\$86,775\\ \text {Fixed overhead cost } &\$137,950\\ &\\ \text { } &\\\end{array} The following data pertain to operations for the most recent period: Actual hours 9,000 MHs Standard hours allowed for the actual output. 8,977 MHs Actual total variable manufacturing overhead cost \8 8,650 Actual total fixed manufacturing overhead cost \1 36,850 -What is the predetermined overhead rate to the nearest cent?

The following data pertain to operations for the most recent period: Actual hours ................................................ 6,400 DLHs Standard hours allowed for the actual output............... 6,273 DLHs Actual total variable manufacturing overhead cost....... \ 58,110 -What was the fixed manufacturing overhead budget variance for the period to the nearest dollar?

The volume variance provides a measure of the utilization of plant facilities.

Wiley Corporation bases its predetermined overhead rate on variable manufacturing overhead cost of $13.90 per machine-hour and fixed manufacturing overhead cost of $944,300 per period.If the denominator level of activity is 7,100 machine-hours,the predetermined overhead rate would be:

Wintersmith Corporation estimates that its variable manufacturing overhead is $11.60 per machine-hour and its fixed manufacturing overhead is $278,124 per period. -If the denominator level of activity is 4,200 machine-hours,the fixed element in the predetermined overhead rate would be:

If the denominator activity (in hours)used to compute the predetermined overhead rate is equal to the actual activity (in hours)for the period,then there is no volume variance.

If all four of Argo Corporation's overhead variances are favorable,Argo's overhead will be overapplied.

Felux Corporation has provided the following data for October. Denominator level of activity........................ 1,300 machine-hours Budgeted fixed manufacturing overhead costs \4 9,790 Standard machine-hours allowed for the actual output ......................................................... 1,600 machine-hours Actual fixed manufacturing overhead costs.... \4 9,050 Required: a.Compute the budget variance for October.Show your work! b.Compute the volume variance for October.Show your work!

The following data pertain to operations for the most recent period: Actual hours ................................................ 6,400 DLHs Standard hours allowed for the actual output............... 6,273 DLHs Actual total variable manufacturing overhead cost....... \ 58,110 -What is the predetermined fixed manufacturing overhead rate to the nearest cent?

Mauve Company uses a standard cost system in which it applies manufacturing overhead to units of product on the basis of standard direct labor-hours (DLHs).The following data pertain to last month: Actual hours worked.......................................... Budgeted fixed manufacturing overhead costs.... Actual fixed manufacturing overhead costs........ Standard hours allowed..................................... Predetermined overhead rate............................ 2,400 DLHs \ 10,000 \ 10,400 2,500 DLHs \ 5 per DLH The fixed manufacturing overhead budget variance is:

Jessep Corporation has a standard cost system in which manufacturing overhead is applied on the basis of standard direct labor-hours.The company has provided the following data concerning its fixed manufacturing overhead costs in March: Denominator hours.................................... 15,000 hours Actual hours worked.......................... 14,000 hours Standard hours allowed for the output................... 12,000 hours Flexible budget fixed manufacturing overhead cost..... \4 5,000 Actual fixed manufacturing overhead costs................ \4 8,000 -The fixed manufacturing overhead volume variance is:

The higher the denominator level of activity:

The denominator activity represents the actual level of activity recorded for a period.

The Ferris Company applies manufacturing overhead costs to products on the basis of standard direct labor-hours.The standard cost card shows that 3 direct labor-hours are required per unit of product.For August,the company budgeted to work 90,000 direct labor-hours and to incur the following total manufacturing overhead costs: Total variable manufacturing overhead costs...... \9 9,000 Total fixed manufacturing overhead costs ........... \1 18,800 During August,the company completed 28,000 units of product,worked 86,000 direct labor-hours,and incurred the following total manufacturing overhead costs: Total variable manufacturing overhead costs...... \9 8,900 Total fixed manufacturing overhead costs ........... \1 15,300 The denominator activity in the predetermined overhead rate is 90,000 direct labor-hours. -For August,the variable overhead rate variance is: