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Pointe Claire Company applies overhead based on direct labour hours. Two direct labour hours are required...

Pointe Claire Company applies overhead based on direct labour hours. Two direct labour hours are required for each unit of product. Planned production for the period was set at 8,900 units. Manufacturing overhead is budgeted at $124,600 for the period (20% of this cost is fixed). The 16,830 hours worked during the period resulted in the production of 8,240 units. The variable manufacturing overhead cost incurred was $101,200 and the fixed manufacturing overhead cost was $28,900.

a.Calculate the variable overhead spending variance for the period.

b.Calculate the variable overhead efficiency (quantity) variance for the period.

c.Calculate the fixed overhead budget (spending) variance for the period.

d. Calculate the fixed overhead volume variance for the period.

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Answer #1

Budgeted manufacturing overhead = $124600
​Budgeted fixed manufacturing overhead = $124600 x 20% = $24920
Budgeted variable manufacturing overhead = $124600 x 80% = $99680

Budgeted hours = 8900 units x 2 = 17800 hrs
​Standard variable overhead rate = 99680 / 17800 = $5.60
​Recovery rate per hour of fixed overheads = 24920 / 17800 = $1.40

Standard hours = 8240 units x 2 hrs per unit = 16480 hrs
​Actual rate of variable overheads = $101200 / 16830 = $6.01

1. Variable overhead spending variance​ = (SR - AR) x AH
= [$5.60 - (101200 / 16830)] x 16830
= $6952 U

2. Variable overhead efficiency variance​ = (SH - AH) x SR
​= (16480 - 16830) x $5.60
​= $1960 U

3. Fixed overhead budget variance = Budgeted fixed overhead - Actual fixed overhead
​= $24920 - 28900
​= $3980 U

4. Fixed overhead volume variance = Recovered - Budgeted fixed overhead
​= (16480 x $1.40) - $24920
= $848 U

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