Question

XYZ uses 1.5 pounds of wood to make baseball bats. The price of wood is $7.00 per pound. 2 direct labor hours are required to make a baseball bat and the direct labor rate is $11.00 per hour. Variable overhead is assigned based on direct labor hours at a rate of $1.50 per direct labor hour. Baseball bats selling price is $55.00. Fixed overhead (selling and administrative expenses) is budgeted to be $400,000.

At the end of year XYZ sold 30,000 units with sales ascending to $1,675,000. Materials used were 46,000 pounds and the materials cost were $7.05 per pound. Direct Labor hours used to produce 30,000 units was 59,800 hours and the rate paid was $10.95 per hour. Variable Overhead was $94,000 and fixed overhead (selling and administrative expenses) was 407,000 for a total overhead incurred of $501,000.

REQUIRED:

Compute Total Overhead Variance, Variable Overhead Spending Variance, Variable Overhead Efficiency Variance

Answer 1

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