Question

Draco, Inc. has the following overhead standards: Variable overhead: 4 hours at $8 per hour Fixed overhead: 4 hours at $10 per hour The standards were based on a planned activity of 20,000 machine hours when 5,000 units were scheduled for production. Actual data follow. Variable overhead incurred: $167,750 Fixed overhead incurred: $210,000 Machine hours worked: 19,800 Actual units produced: 5,100
Duncanville’s fixed-overhead volume variance is:
Duncanville’s variable-overhead efficiency variance is:
The amount of variable overhead that Duncanville applied to production is:

Answer 1

1). Fixed overhead volume variance = Absorbed fixed overhead - Budgeted fixed overhead
Absorbed fixed overhead = Std fixed overhead rate per hr * Std hrs for actual production
= $10 * 5100 * 4 hrs = $204000
Budgeted Fixed overhead = Std fixed overhead rate per hr * Budgeted hrs
= 10 * 20000 = 200000
Fixed overhead volume variance = 204000 - 200000 = 4000 F

2). Variable overhead efficiency variance = (Std hrs for actual production - Actual hrs)*Std rate
= (5100 units * 4 hrs * 19800 hrs) * 8 per hr = 4800 F

3). Variable overhead applied to production= 19800 hrs * 8 per hr = $158400