Question

# Maxwell Company uses a standard cost accounting system and applies production overhead to products on the...

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: \$7.50

Standard fixed-overhead rate per hour: \$12.40

Planned activity during the period: 19,000 machine hours

Actual production: 12,200 finished units

Machine-hour standard: Two completed units per machine hour

Actual machine hours worked: 22,200

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?

Calculate the budgeted fixed overhead for the year.

Compute the variable-overhead spending variance. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance). Do not round intermediate calculation.)

Calculate the company’s fixed-overhead volume variance. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance). Do not round intermediate calculation.)

What was the difference in actual and anticipated overhead?

Was variable overhead underapplied or overapplied during the year? By how much? (Do not round intermediate calculations.)

1.

Budgeted fixed overhead for the year = Planned activity x Standard fixed overhead rate per hour = 19,000 x \$ 12.40 = \$ 235,600.

2.

 Variable Overhead Spending Variance \$ 13,320 F

Variable Overhead Spending Variance = (Actual hours worked x Standard variable rate per hour) - Actual Variable Overhead = 22,200 x \$ 7.50 - \$ 153,180 = \$ 13,320 F

3.

 Fixed Overhead Volume Variance \$ 159,960 U

Fixed Overhead Volume Variance = \$ 235,600 - 12,200 x 0.5 x \$ 12.40 = \$ 159,960 U

4. a. Maxwell spent more than anticiapated for fixed overhead by \$ ( 432,900 - 153,180) - \$ 235,600 = \$ 44,120.

5.

 Variable Overhead is underapplied by \$ 107,430

Actual variable overhead : \$ 153,180.

Applied variable overhead = 12,200 x 1/2 x \$ 7.50 = \$ 45,750

Variable overhead underapplied : \$ 45,750 - \$ 153,180 =

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