Question

Glavine & Co. produces a single product, each unit of which requires three direct labor hours...

Glavine & Co. produces a single product, each unit of which requires three direct labor hours (DLHs). Practical capacity (for setting the factory overhead application rate) is 42,000 DLHs, on an annual basis. The information below pertains to the most recent year:

Standard direct labor hours (DLHs) per unit produced 3.00
Practical capacity, in DLHs (per year) 42,000
Variable overhead efficiency variance $ 11,000 unfavorable (U)
Actual production for the year 12,500 units
Budgeted fixed manufacturing overhead $ 840,000
Standard direct labor wage rate $ 20.00 per DLH
Total overhead cost variance for the year $ 110,000 favorable (F)
Direct labor efficiency variance $ 22,000 unfavorable (U)

Required:

1. What was the actual number of direct labor hours (DLHs) worked during the year?

2. What was the standard variable overhead rate per DLH during the year?

3. What was the total overhead application rate per direct labor hour (DLH) during the year?

4. What was the total actual overhead cost incurred during the year?

5. What was the Production Volume Variance for the year? Was this variance favorable (F) or unfavorable (U)?

6. What was the total Overhead Spending Variance for the year? Was this variance favorable (F) or unfavorable (U)?

Business   Accounting   
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Answer #1

FIRST FOUR SUB PARTS ANSWERED

Ans-1

Actual DLH for the years

Direct Labour efficiency varfiance = (Actual DLHrs - Budgeted DLHrs)*Standard rate

22000 = (Actual - 12500*3)*20

Actual DLH = 38600

Ans-2

Variable OH efficiency varfiance = (Actual DLHrs - Budgeted DLHrs)*Standard rate

11000 = (38600 - 12500*3)* Std rate

11000 = (1100)*Std rate

Standard Rate OH/DLH = 10

Ans-3

Total Overhead application rate (budgeted) = Total Budgeted OH / Total Planned DLH

Budgeted Fixed Manufacturing OH = 8,40,000

Total Variable Manufacturing OH = 42000*10 = 420000

Total Budgeted OH = 12,60,000

Total DLH = 42000

Total OH/DLH budgeted = 1260000 / 42000 = 30

Ans-4

Total OH cost Var = Actual OH - Absorbed OH

-10000 = Actual OH - 30*12500*3

-10000 = Actual OH - 1158000

Actual OH = 1148000

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