Question

The standard costs and actual costs for factory overhead for the manufacture of 3,000 units of actual production are as follows:

Standard Costs
Fixed overhead (based on 10,000 hours)	3 hours per unit @ $0.72 per hour
Variable overhead	3 hours per unit @ $2.06 per hour
Actual Costs
Total variable cost, $18,000
Total fixed cost, $7,900

The fixed factory overhead volume variance is

a.$720 unfavorable

b.$0

c.$576 unfavorable

d.$576 favorable

The following data are given for Bahia Company:

Budgeted production	1,064 units
Actual production	919 units
Materials:
Standard price per pound	$1.938
Standard pounds per completed unit	10
Actual pounds purchased and used in production	8,914
Actual price paid for materials	$18,274
Labor:
Standard hourly labor rate	$14.80 per hour
Standard hours allowed per completed unit	4.9
Actual labor hours worked	4,732.85
Actual total labor costs	$72,176
Overhead:
Actual and budgeted fixed overhead	$1,108,000
Standard variable overhead rate	$24.00 per standard labor hour
Actual variable overhead costs	$132,520
Overhead is applied on standard labor hours.

The variable factory overhead controllable variance is

a.$150,996.24 unfavorable

b.$150,996.24 favorable

c.$24,445.60 unfavorable

d.$24,445.60 favorable

Which of the following conditions normally would not indicate that standard costs should be revised?

a.Actual costs differed from standard costs for the preceding week.

b.The average price of raw materials increased from $4.68 per pound to $4.82 per pound.

c.The Engineering Department has revised product specifications in responding to customer suggestions.

d.The company has signed a new union contract that increases the factory wages on average by $3.50 an hour.

Standards that represent levels of operation that can be attained with reasonable effort are called

a.normal standards

b.theoretical standards

c.variable standards

d.ideal standards

Answer 1

The fixed factory overhead volume variance is $720 U

Reason:- Fixed factory overhead volume variance = Budget Fixed cost allocation - Budgeted rate x Actual Hours = ($0.72 x 3 x 3,000) - ($0.72 x 10,000) = $720 U

The variable factory overhead controllable variance is

Reason:- ariable factory overhead controllable variance = Actual overhead expense - (budgeted overhead per unit x standard number of units) = $132,520 - ($24 x 4.9 hrs x 919 units) = $24,445.60 U

Which of the following conditions normally would not indicate that standard costs should be revised?

c.The Engineering Department has revised product specifications in responding to customer suggestions.

Standards that represent levels of operation that can be attained with reasonable effort are called

a.Normal Standards