Question

Company manufactures one product. Its variable manufacturing overhead is applied to production based on direct labor-hours and its standard cost card per unit is as follows:

Direct materials: 5 pounds at $10 per pound	$	50
Direct labor: 4 hours at $16 per hour		64
Variable overhead: 4 hours at $7 per hour		28
Total standard cost per unit	$	142

The planning budget for March was based on producing and selling 20,000 units. However, during March the company actually produced and sold 24,600 units and incurred the following costs:

a. Purchased 164,000 pounds of raw materials at a cost of $7.50 per pound. All of this material was used in production.

b. Direct laborers worked 57,000 hours at a rate of $17 per hour.

c.Total variable manufacturing overhead for the month was $653,220.

What variable manufacturing overhead cost would be included in the company’s flexible budget for March?

What is the variable overhead rate variance for March? (Round the actual overhead rate to two decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.). Input all amounts as positive values.)

What is the variable overhead efficiency variance for March? (Round the actual overhead rate to two decimal places. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.). Input all amounts as positive values.)

Answer 1

Answer
Sr No	Particulars	Formula and Calculation
1	variable manufacturing overhead cost	= (Actual Units * standard hours) *standard rate
		= (24,600 *4) * $ 7
		= 98,400 * $ 7
		= $ 6,88,800
2	variable overhead rate variance	= (standard rate - Actual rate) * Actual hours
		= ($7-($ 6,53,220 / 57,000) * 57000
		= $ 2,54,220 (U)
3	variable overhead efficiency variance	= (standard hours -actual hours) * standard rate
		= ((24,600*4) - 57,000) * $ 16
		= (98,400-57,000) * $ 16
		= $ 6,62,400 (F)
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answered by: anonymous