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Item 6

Item 6

Bullseye Company manufactures dartboards. Its standard cost information follows:

	Standard Quantity		Standard Price (Rate)			Standard Unit Cost
Direct materials (cork board)	2.10	sq. ft.	$	1.10	per sq. ft.	$	2.31
Direct labor	0.90	hrs.	$	5.00	per hr.		4.50
Variable manufacturing overhead (based on direct labor hours)	0.90	hrs.	$	0.50	per hr.		0.45
Fixed manufacturing overhead ($21,250/85,000)							0.25

Bullseye has the following actual results for the month of September:

Number of units produced and sold		72,000
Number of square feet of corkboard used		157,200
Cost of corkboard used	$	159,000
Number of labor hours worked		78,000
Direct labor cost	$	96,000
Variable overhead cost	$	101,760
Fixed overhead cost	$	25,000

Required:
1. Calculate the fixed overhead spending variance for Bullseye. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)
2. Calculate the fixed overhead volume variance for Bullseye. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)
3. Calculate the total over- or underapplied fixed manufacturing overhead for Bullseye. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

Answer 1

Computation of Fixed overhead spending variance

= Actual fixed overhead - Budgeted fixed overhead

(25000-21250)= $3750 F

Computation of Fixed overhead volume variance

= (Actual units produced x Standard rate) - (Budgeted units x Standard rate)

=(72000*0.25)-(85000*0.25)= $3250UF

Part-3

Computation of Applied fixed overhead

= Actual units produced x Standard fixed overhead rate

=(72000*0.25)=$18000

Overapplied Overhead / (Underapplied Overhead )= Applied Overhead- Actual Overhead

$18000-$25000= $7000 Underapplied