Question

Melton Products uses standard costing. It allocates manufacutring overhead (both variable and fixed) to products on...

Melton Products uses standard costing. It allocates manufacutring overhead (both variable and fixed) to products on the basis of standard direct manufacturing labor hours (DLH). Melton develops its manufacturing overbead rate from teh current annual budget. THe manufacturing overhead budget for 2018 is based on budgeted output of 720,000 units requiring 3,600,000 DLH. The company is able to schedule production uniformly throughout the year. A total of 66,000 output unuits requiring 315,000 DLH was produced during May 2018. Budgeted hours allowed per unit of output is 5 hours. Allocated total MOH for May is $396,000.

The actual costs, compared with the annual budget and 1/12 of the annual budget are as follows:

ANNUAL MANUFCATURING OVERHEAD BUDGET 2018

Total Amount Per output unit per DLH input unit Monthly MOH Budget May 2018 Actual MOH Costs for May 2018
Variable MOH
Indirect Labor $900,000 $1.25 $0.25 $75,000 $75,000
Supplies $1,224,000    $1.70 $0.34 $102,000 $111,000
Fixed MOH
Supervision $648,000 $0.90

$0.18

 $54,000 $51,000
Utilities $540,000 $0.75 $0.15 $45,000 $54,000
Depreciation $1,008,000 $1.40 $0.28 $84,000 $84,000
Total $4,320,000 $6.00 $1.20 $360,000 $375,000

Required:

Compute the following variances:

1. The variable manufacutring overhead spending variance

2. The variable manufacutring overhead efficiency variance

3. The fixed manufacturing overhead spending variance

4. The fixed manufacturing overhead volume variance

Please show your work.

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Solution 1:

Standard rate of variable overhead = $0.34 + $0.25 = $0.59 per hour

Actual rate of variable overhead = ($75,000 + $111,000) / 315000 = $0.590476

Variable manufacturing overhead spending variance = (SR - AR) * AH

= ($0.59 - $0.590476) * 315000 = $150 U

Solution 2:

Variable overhead efficiency variance = (SH - AH) * SR = (330000 -315000) * $0.59 = $8,850 F

Solution 3:

Budgeted fixed manufacturing overhead = $360,000

Actual fixed manufacturing overhead = $375,000

Fixed manufacturing overhead spending variance = Budgeted fixed manufacturing overhead - Actual fixed manufacturing overhead

= $360,000 - $375,000 = $15,000 U

Solution 4:

Fixed overhead applied = SH * SR = 330000 * $1.20 = $396,000

Budgeted fixed overhead = $360,000

Fixed overhead volume variance = Fixed overhead applied - Budgeted fixed overhead = $396,000 - $360,000 = $36,000 F

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Overhead Variances, Four-Variance Analysis Oerstman, Inc., uses a standard costing system and develops its overhead rates...
Overhead Variances, Four-Variance Analysis Oerstman, Inc., uses a standard costing system and develops its overhead rates from the current annual budget. The budget is based on an expected annual output of 125,000 units requiring 500,000 direct labor hours. (Practical capacity is 520,000 hours.) Annual budgeted overhead costs total $830,000, of which $585,000 is fixed overhead. A total of 119,100 units using 498,000 direct labor hours were produced during the year. Actual variable overhead costs for the year were $261,100, and...
Oerstman, Inc., uses a standard costing system and develops its overhead rates from the current annual...
Oerstman, Inc., uses a standard costing system and develops its overhead rates from the current annual budget. The budget is based on an expected annual output of 120,000 units requiring 480,000 direct labor hours. (Practical capacity is 500,000 hours.) Annual budgeted overhead costs total $739,200, of which $532,800 is fixed overhead. A total of 119,400 units using 478,000 direct labor hours were produced during the year. Actual variable overhead costs for the year were $241,900, and actual fixed overhead costs...
Overhead Variances, Two- And Three-Variance Analyses Oerstman, Inc., uses a standard costing system and develops its...
Overhead Variances, Two- And Three-Variance Analyses Oerstman, Inc., uses a standard costing system and develops its overhead rates from the current annual budget. The budget is based on an expected annual output of 123,000 units requiring 492,000 direct labor hours. (Practical capacity is 512,000 hours.) Annual budgeted overhead costs total $772,440, of which $551,040 is fixed overhead. A total of 119,300 units using 490,000 direct labor hours were produced during the year. Actual variable overhead costs for the year were...
Chocolate, Inc., uses a standard costing system and develops its overhead rates from the current annual...
Chocolate, Inc., uses a standard costing system and develops its overhead rates from the current annual budget. The budget is based on an expected annual output of 145,000 units requiring 620,000 direct labor hours. (Practical capacity is 630,000 hours.) Annual budgeted overhead costs total $802,600, of which $585,800 is fixed overhead. A total of 143,400 units using 619,200 direct labor hours were produced during the year. Actual variable overhead costs for the year were $275,800, and actual fixed overhead costs...
Pratt, Inc., uses a standard costing system and develops its predetermined overhead rate from the annual...
Pratt, Inc., uses a standard costing system and develops its predetermined overhead rate from the annual flexible budget. The budget is based on an expected annual output of 40,000 units requiring total 160,000 budgeted direct labor hours. The company applied overhead based on direct labor hours. Annual budgeted overhead costs totaal $1,280,000of which $480,000 is variable overhead. A total of 30,000 units were produced during the year, using 100,000direct labor hours. Actual overhead costs incurred for the year were total...
Victory for MSU, Inc. manufactures huge MSU flags for tailgating. The company uses a standard costing...
Victory for MSU, Inc. manufactures huge MSU flags for tailgating. The company uses a standard costing system and applies overhead on the basis of direct labor hours. Victory provides the following information about this product: Standards: Direct material 18.0 yards of material per flag at $12.80 per yard Direct labor 3.0 hours per flag at $10.60 per hour Variable manufacturing overhead (MOH) standard rate $4.00 per direct labor hour Predetermined fixed MOH standard rate $11.00 per direct labor hour Total...
Patel and Sons, Inc., uses a standard cost system to apply overhead costs to units produced....
Patel and Sons, Inc., uses a standard cost system to apply overhead costs to units produced. Practical capacity for the plant is defined as 55,800 machine hours per year, which represents 27,900 units of output. Annual budgeted fixed overhead costs are $279,000 and the budgeted variable overhead cost rate is $3.90 per unit. Factory overhead costs are applied on the basis of standard machine hours allowed for units produced. Budgeted and actual output for the year was 21,700 units, which...
Patel and Sons, Inc., uses a standard cost system to apply overhead costs to units produced....
Patel and Sons, Inc., uses a standard cost system to apply overhead costs to units produced. Practical capacity for the plant is defined as 55,500 machine hours per year, which represents 27,750 units of output. Annual budgeted fixed overhead costs are $277,500 and the budgeted variable overhead cost rate is $3.80 per unit. Factory overhead costs are applied on the basis of standard machine hours allowed for units produced. Budgeted and actual output for the year was 21,600 units, which...
Crystal Glassware Company has the following standards and flexible-budget data.       Standard variable-overhead rate $...
Crystal Glassware Company has the following standards and flexible-budget data.       Standard variable-overhead rate $ 6.00 per direct-labor hour Standard quantity of direct labor 2 hours per unit of output Budgeted fixed overhead $ 120,000 Budgeted output 20,000 units    Actual results for April are as follows:       Actual output 14,000 units Actual variable overhead $ 252,000 Actual fixed overhead $ 111,000 Actual direct labor 40,000 hours Required: Use the variance formulas to compute the following variances. (Indicate...
The Brown Manufacturing​ Company's costing system has two​ direct-cost categories: direct materials and direct manufacturing labor....
The Brown Manufacturing​ Company's costing system has two​ direct-cost categories: direct materials and direct manufacturing labor. Manufacturing overhead​ (both variable and​ fixed) is allocated to products on the basis of standard direct manufacturing labor hours​ (DLH). At the beginning of 2014 Brown adopted the following standards for its manufacturing​ costs:  Direct materials 3 lbs. at $4 per lb. $12.00 Direct manufacturing labor 4 hrs. at $20 per hr. 80.00 Manufacturing overhead: Variable $6 per DLH 24.00 Fixed $7 per DLH...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT