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Homework answers / question archive / Exercise 11-26 Straightforward Computation of Overhead Variances (LO 11-5) The following data are the actual results for Marvelous Marshmallow Company for October

Exercise 11-26 Straightforward Computation of Overhead Variances (LO 11-5) The following data are the actual results for Marvelous Marshmallow Company for October

Management

Exercise 11-26 Straightforward Computation of Overhead Variances (LO 11-5)

The following data are the actual results for Marvelous Marshmallow Company for October.

 

   Actual output 12,000cases

Actual variable overhead$401,000 

Actual fixed overhead$160,000 

Actual machine time 41,200machine hours

  

Standard cost and budget information for Marvelous Marshmallow Company follows:

  

   Standard variable-overhead rate$9.00per machine hour

Standard quantity of machine hours 3hours per case of marshmallows

Budgeted fixed overhead$153,000per month

Budgeted output 17,000cases per month

 

Required:

Use any of the methods explained in the chapter to compute the following variances. (Indicate the effect of each variance by selecting "Favorable" or "Unfavorable". Select "None" and enter "0" for no effect (i.e., zero variance).)

 

Variable-overhead spending variance 30,200 U

Variable overhead efficiency variance 46800 F

Fixed overhead budget variance 7000 U

Fixed overhead volume variance ???? 

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Variable-overhead spending variance = Actual variable overhead - (Actual hours * Standard variable overhead rate)

= 401,000 - (41,200 * 9.00)

= $30,200 Unfavorable

 

Variable-overhead efficiency variance = Standard variable overhead rate * (Actual hours - Standard hours)

= 9.00 * (41,200 - (3*12,000))

= 9*(41,200-36,000)

= $46,800 Favorable

 

Fixed-overhead budget variance = Actual fixed overhead - Budgeted fixed overhead

= 160,000 - 153,000

= $7,000 Unfavorable

 

 

Fixed-overhead volume variance = Budgeted fixed overhead - Applied fixed overhead

Here,

Applied fixed overhead = Pre determined fixed overhead rate * standard allowed hours

= (153,000/(17,000*3))*(12,000*3)

= 108,000

 

Fixed-overhead volume variance = $153,000-$108,000 = $45,000 Unfavorable

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