Cost Management 6th Edition by Edward Blocher,David Stout ,Paul Juras,Gary Cokins

Exercise 32

Overhead at Two Activity Levels; Four-Variance versus Two-Variance Analysis Patrick Company applies factory overhead based on machine-hours. The company had the following budget for its operation in 2012, which was at 85% level of theoretical capacity:

Patrick budgeted its operation for 2013 at 90% of theoretical capacity. The standard calls for 2 machine-hours per unit manufactured. During 2013 Patrick used 23,000 machine-hours to manufacture 11,000 units. The company incurred $12,000 more factory overhead cost than the flexible budget amount for the units manufactured, of which $5,000 was due to fixed factory overhead.
Required
1. What is the budgeted fixed factory overhead at an 85% level of operation At a 100% level of operation
2. What was the standard variable factory overhead rate and the standard fixed factory overhead rate in 2013 (Assume no change in the variable overhead rate. For the variable overhead rate, round your answer to four decimal places.)
3. What is the total factory overhead flexible-budget amount for 2013 (Assume no cost change from 2012.)
4. Compute the following four overhead variances for Patrick Company:
a. Variable overhead spending variance.
b. Variable overhead efficiency variance.
c. Fixed overhead spending variance.
d. Fixed overhead production volume variance.
5. Compute the following two overhead variances for Patrick Company:
a. Total flexible-budget variance.
b. Fixed overhead production volume variance.