Exam 10: Compute and Interpret the Fixed Overhead Variances

The following data for August has been provided by Mirabelli Corporation. Denominator level of activity........................... 3,700 machine-hours Budgeted fixed manufacturing overhead costs \8 5,840 Actual level of activity..................................... 4,00 machine-hours Standard machine-hours allowed for the actual output.............................................................. 3,800 machine-hours Actual fixed manufacturing overhead costs...... \8 8,080 -The budget variance for August is:

Mzimba Sofa Company has developed the following manufacturing overhead standards for its sofa production. Standard Cost Per Sofa Variable overhead (0.9 machine-hours @\ 32.00 per machine-hour)..... \2 8.80 Fixed overhead (0.9 machine-hours @\ 58.00 per machine-hour)..... \5 2.20 Manufacturing overhead at Mzimba is applied to production on the basis of standard machine-hours.The above standards were based on an expected annual volume of 20,000 sofas.The actual results last year were as follows: Number of sofas produced ........... 21,400 Machine-hours incurred .............. 19,800 Variable overhead cost ................. \ 625,086 Fixed overhead cost .................... \ 1,105,000 -What was Mzimba's variable overhead rate variance?

One cause of an unfavorable overhead volume variance would be increases in cost for fixed manufacturing overhead items.

Wolle Corporation estimates that its variable manufacturing overhead is $11.60 per machine-hour and its fixed manufacturing overhead is $298,936 per period. -If the denominator level of activity is 4,400 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 was the variable overhead rate variance for the period to the nearest dollar?

The Moore Company produces and sells a single product.A standard cost card for the product follows: Standard Cost Card-per unit of product: Direct materials, 4 yards at \ 4.00 per yard .......... \ 16.00 Direct labor, 1.5 hours at \ 10.00 per hour .......... 15.00 Variable overhead, 1.5 hours at \ 3.00 per hour ..... 4.50 Fixed overhead, 1.5 hours at \ 7.00 per hour......... Standard cost per unit............................ The company manufactured and sold 18,000 units of product during the year.A total of 70,200 yards of material was purchased during the year at cost of $4.20 per yard.All of this material was used to manufacture the 18,000 units.The company records showed no beginning or ending inventories for the year. The company worked 29,250 direct labor-hours during the year at a cost of $9.75 per hour.Overhead cost is applied to products on the basis of standard direct labor-hours.The denominator activity level (direct labor-hours)was 22,500 hours.Budgeted fixed manufacturing overhead costs as shown on the flexible budget were $157,500,while actual fixed manufacturing overhead costs were $156,000.Actual variable overhead costs were $90,000. Required: a.Compute the direct materials price and quantity variances for the year. b.Compute the direct labor rate and efficiency variances for the year. c.Compute the variable overhead rate and efficiency variances for the year. d.Compute the fixed manufacturing overhead budget and volume variances for the year.

If the denominator activity used to compute the predetermined overhead rate is equal to the standard activity allowed for the actual output of the period,then there is no volume variance.

Sheeder Corporation bases its predetermined overhead rate on variable manufacturing overhead cost of $18.70 per machine-hour and fixed manufacturing overhead cost of $1,817,202 per period.If the denominator level of activity is 8,200 machine-hours,the fixed element in the predetermined overhead rate would be:

The fixed portion of the predetermined overhead rate is used for product costing purposes and has no significance in terms of cost control.

An outdoor barbecue grill manufacturer has a standard costing system based on standard direct labor-hours (DLHs)as the measure of activity.Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity................ 3,900 DLHs Fixed overhead cost............................. \4 9,530 The following data pertain to operations for the most recent period: Actual hours ................................................ 3,800 DLHs Standard hours allowed for the actual output............... 3,861 DLHs Actual total variable manufacturing overhead cost....... \ 50,230 -What was the fixed manufacturing overhead volume variance for the period to the nearest dollar?

Harris 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 company has provided the following data: $\begin{array}{c}\begin{array}{lll}\text { Denominator activity.....................................................}\\\text {Actual activity................................................................}\\\text {Standard hours allowed for the output............................}\\\text {Predetermined overhead rate \$(2 variable \( +\$ 3 \) fixed \( ) \)...}\end{array}\begin{array}{rr}5,000 & \text { DLHs } \\5,600 & \text { DLHs } \\5,500 & \text { DLHs } \\\$ 5 & \text { per DLH } \end{array}\end{array}$ The volume variance 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 was the fixed manufacturing overhead volume variance for the period to the nearest dollar?

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 budget variance is:

The volume variance represents the difference between actual fixed manufacturing overhead costs and budgeted fixed manufacturing overhead costs.

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 volume variance for the period to the nearest dollar?

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 -How much overhead was applied to products during the period to the nearest dollar?

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 was the variable overhead efficiency variance for the period to the nearest dollar?

Desormeaux Corporation applies manufacturing overhead to products on the basis of standard machine-hours.The budgeted fixed manufacturing overhead cost for the most recent month was $21,600 and the actual fixed manufacturing overhead cost for the month was $21,120.The company based its original budget on 5,400 machine-hours.The standard hours allowed for the actual output of the month totaled 5,850 machine-hours.What was the overall fixed manufacturing overhead budget variance for the month?

Hugh Corporation applies manufacturing overhead to products on the basis of standard machine-hours.Budgeted and actual overhead costs for the most recent month appear below: Fixed overhead costs: Supervision.......................... Utilities............................... Factory depreciation........... Total fixed overhead cost.... Original Budget Actual Costs \ 12,800 \ 12,650 5,300 5,470 The company based its original budget on 6,700 machine-hours.The company actually worked 6,810 machine-hours during the month.The standard hours allowed for the actual output of the month totaled 6,940 machine-hours.What was the overall fixed manufacturing overhead budget variance for the month?

Mzimba Sofa Company has developed the following manufacturing overhead standards for its sofa production. Standard Cost Per Sofa Variable overhead (0.9 machine-hours @\ 32.00 per machine-hour)..... \2 8.80 Fixed overhead (0.9 machine-hours @\ 58.00 per machine-hour)..... \5 2.20 Manufacturing overhead at Mzimba is applied to production on the basis of standard machine-hours.The above standards were based on an expected annual volume of 20,000 sofas.The actual results last year were as follows: Number of sofas produced ........... 21,400 Machine-hours incurred .............. 19,800 Variable overhead cost ................. \ 625,086 Fixed overhead cost .................... \ 1,105,000 -What was Mzimba's variable overhead efficiency variance?