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Homework answers / question archive / Superior Fender uses a standard cost system and provide the following information: E: (Click the icon to view the information
Superior Fender uses a standard cost system and provide the following information: E: (Click the icon to view the information.) Superior Fender allocates manufacturing overhead to production based on standard direct labor hours. Superior Fender reported the following actual results for 2018: actual number of fenders produced, 20,000; actual variable overhead, $5,800; actual fixed overhead, $35,000; actual direct labor hours, 400. Read the requirements Requirement 1. Compute the overhead variances for the year: variable overhead cost variance, variable overhead efficiency variance, fixed overhead cost variance, and fixed overhead volume variance. Begin with the variable overhead cost and efficiency variances. Select the required formulas, compute the variable overhead cost and efficiency variances, and identify whether each variance is favorable (F) or unfavorable (U). (You may need to simply the formula based on the data provided. Abbreviations used: AC = actual cost; AQ = actual quantity; FOH = fixed overhead; SC = standard cost; SQ = standard quantity; VOH = variable overhead.) Formula Variance VOH cost variance VOH efficiency variance Now compute the fixed overhead cost and volume variances. Select the required formulas, compute the fixed overhead cost and volume variances, and identify whether each variance is favorable (F) or unfavorable (U). (Abbreviations used: AC = actual cost; AQ = actual quantity; FOH = fixed overhead; SC = standard cost; SQ = standard quantity.) Formula Variance FOH cost variance FOH volume variance
Superior Fender uses a standard cost system and provide the following information: (Click the icon to view the information.) Superior Fender allocates manufacturing overhead to production based on standard direct labor hours. Superior Fender reported the following actual results for 2018: actual number of fenders produced, 20,000; actual variable overhead, $5,800; actual fixed overhead, $35,000; actual direct labor hours, 400. Read the requirements. Data Table Formula Variance VOH cost variance VOH efficiency variance $3,640 Now compute the fixed overhead cost and volume variances. Select the required formulas, compute the fixed overhead cost and volume = actual cost; AQ = actual quantity; FOH = fixed overhead; SC = standard cost; SQ = standard quantity.) (U). (Abbreviations used: AC Static budget variable overhead Static budget fixed overhead Static budget direct labor hours Static budget number of units Standard direct labor hours $29,120 728 hours Formula Variance 26,000 units FOH cost variance 0.028 hours per fender FOH volume variance Requirement 2. Explain why the variances are favorable or unfavorable. Print Done The variable overhead cost variance is because management spent than budgeted for the actual production. The variable overhead efficiency variance is because management used direct labor hours than standard and variable overhead is applied (incurred) based on direct labor. The fixed overhead cost variance is because management spent than the amount budgeted for fixed overhead. The fixed overhead volume variance is because management allocated fixed overhead to jobs than was budgeted.
as per standards, 0.028 hours make 1 unit
thus 20000 units take 0.028 x 20000 = 560 hours
1)
standard variable overhead cost = static variable overhead / static direct labour hours
standard variable overhead cost = 3640/728
standard variable overhead cost = 5 per labour hour
actual variable overhead cost = actual variable overhead / actual direct labour hours
actual variable overhead cost = 5800/400
actual variable overhead cost = 14.5
Variable overhead cost variance = (standard cost - actual cost) x actual quantity
Variable overhead cost variance = (5 - 14.5) x 400
Variable overhead cost variance = 9.5 x 400 = 3800 (A)
VOH efficiency variance = (standard quantity - actual quantity) x standard cost
VOH efficiency variance = (560 - 400) x 5
VOH efficiency variance = 800 (F)
2)
standard fixed overhead cost = static fixed overhead / static direct labour hours
standard fixed overhead cost = 29120/728
standard fixed overhead cost = 40 per labour hour
actual fixed overhead cost = actual fixed overhead / actual direct labour hours
actual fixed overhead cost = 35000/400
actual fixed overhead cost = 87.5
fixed overhead cost variance = (standard cost - actual cost) x actual quantity
fixed overhead cost variance = (40 - 87.5) x 400
fixed overhead cost variance = 47.5 x 400 = 19000 (A)
FOH volume variance = (standard quantity - actual quantity) x standard cost
FOH volume variance = (560- 400) x 40
FOH volume variance = 6400 (F)
variable overhead cost variance is adverse because management spent more than budget
variable overhead efficiency variance is favourable because management used less labour than budget
fixed overhead cost variance is adverse because management spent more than budget
fixed overhead volume variance is favourable because management used less labour than budget
thanks if you have any doubts please leave a comment and let me know
