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German Masks makes customized goalie masks
German Masks makes customized goalie masks.
Our variable overhead rate is $38 per Direct Labor Hour.
Our standard for production is 12 direct labor hours per custom hockey goalie mask produced.
Our fixed overhead budget is $89,000. Fixed overhead is applied per mask.
Budgeted production 800 masks.
Actual production 780 masks.
Actual costs:
Variable overhead $383,500.
Fixed overhead $87550.
Direct labor hours: 9285.
Calculate:
Variable overhead spending variance $ ____________________________
Variable overhead efficiency variance $ ____________________________
Fixed overhead application rate: $ ________________ per mask
Fixed overhead spending variance $ ___________________________
Fixed overhead production volume variance $ ________________________
Be sure to indicate whether each variance is F (favorable) or U (unfavorable).
Expert Solution
Variable overhead spending variance = Actual Hours * (Actual Rate - Budgeted Standard Rate)
= 9,285 * ((383,500/9285) - 38)
= 9,285 * (41.30318 - 38)
= 9,285 * 3.303177
= $30,670 (Unfavorable)
Variable overhead efficiency variance = Budgeted Standard Overhead Rate*(Actual Hours-Standard Hours)
= 38*(9,285-(780*12))
= 38*(9,285-9,360)
= 38*-75
= -2,850 (Favorable)
Fixed overhead application rate = Fixed Overhead / Total Production
= 87,550/9285
= $9.43 per mask
Fixed overhead spending variance = Actual Fixed Overhead - Budgeted Fixed Overhead
= $87,550 - $89,000
= $1,450 (Favorable)
Fixed overhead production volume variance = (Actual Units Produced - Budgeted Production Units)*Budgeted Overhead Rate per Unit
= (780-800)*(89,000/800)
= 20*111.25
= 2,225 (Favorable)
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