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FIXED OVERHEAD SPENDING AND VOLUME ARIANCES, COLUMNAR AND FORMULA APPROACHES A company provided the following information:...

FIXED OVERHEAD SPENDING AND VOLUME ARIANCES, COLUMNAR AND FORMULA APPROACHES

A company provided the following information:

Standard fixed overhead rate (SFOR) per direct labour hour    $7.00

Actual fixed overhead rate (AFOR) per direct labour hour        $6.95

Actual direct labour hours worked (AH)                                      36,100

Actual production in units                                                              12,000

Standard hours allowed for actual units produced (SH)          36,000

Required:

  1. Using the columnar approach, calculate the fixed overhead spending and efficiency variances.

  1. Using the formula approach, calculate the fixed overhead spending variance.

  1. Using the formula approach, calculate the fixed overhead efficiency variance.
  1. Calculate the total fixed overhead variance.

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Homework Answers

Answer #1

SOLUTION

1.

A. AH * AFOR

= 36,100 * $6.95 = $250,895

B. AH * SFOR

= 36,100 * $7.00 = $252,700

C, SH * SFOR

= 36,000 * $7.00 = $252,000

Spending variance = A-B

= $250,895 - $252,700 = $1,805 F

Volume variance = B-C

= $252,700 - $252,000 = $700 U

2. Fixed overhead spending variance = (AFOR - SFOR) * AH

= ($6.95 - $7.00) * 36,100

= 0.05 * 36,100

= $1,805 F

3. Fixed overhead efficiency variance = (AH - SH) * SFOR

= (36,100 - 36,000) * $7.00

= 100 * $7.00

= $700 U

4.

Fixed overhead spending variance $1,805 F
Fixed overhead efficiency variance $700 U
Total fixed overhead variance 1,105 F
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