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The following standard overhead costs were developed for one of the products of CLH Company: Variable overhead: 5 hours ´ P4 per hour 20
The following standard overhead costs were developed for one of the products of CLH Company:
Variable overhead: 5 hours ´ P4 per hour 20.00
Fixed overhead: 5 hours ´ P15 per hour 75.00
Total standard overhead cost per unit P95.00
The following information is available regarding the company's operations for the period:
Units produced 20,000
Direct labor 115,000 hours
Overhead incurred:
Variable P437,500
Fixed P1,320,000
Budgeted fixed overhead for the period is P1,350,000, and the standard fixed overhead rate is based on expected capacity of 90,000 direct labor hours.
Required:
A. Calculate the variable overhead spending variance and indicate whether it is favorable or unfavorable.
B. Calculate the variable overhead efficiency variance and indicate whether it is favorable or unfavorable.
C. Calculate the fixed overhead spending variance and indicate whether it is favorable or unfavorable.
D. Calculate the fixed overhead volume variance and indicate whether it is favorable or unfavorable.
Expert Solution
| (In P) | |||
| Variable Overheads Data: | |||
| Standard Rate of Variable Overheads per hour ,SR | 4 | ||
| Standard Hours allowed per unit | 5 | ||
| Units Produced | 20,000 | ||
| Standard Hours allowed for actual peroduction, SH | 5*20,000 | 100,000 | |
| Actual Hours Used, AH | 115,000 | ||
| Actual Cost of Variable Overheads | 437,500 | ||
| Actual Rate of Variable Overheads per hour, AR | 437,500/115,000 | 3.8043 | |
| Requirement A: | |||
| Variable Overhead Spending Variance, (AH*(SR-AR)) | 115,000*(4-3.8043) | 22,500 | Favorable |
| Requirement B: | |||
| Variable Overhead Efficiency Variance (SR*(SH-AH)) | 4*(100,000-115,000) | 60,000 | Unfavorable |
| (In P) | |||
| Fixed Overheads Data: | |||
| Standard Hours allowed per unit | 5 | ||
| Units Produced | 20,000 | ||
| Standard Hours allowed for actual peroduction, SH | 5*20,000 | 100,000 | |
| Budgeted Fixed Overheads | 1,350,000 | ||
| Standard Rate of Fixed Overheads per hour, SR | 1,350,000/100,000 | 13.5 | |
| Actual Hours Used, AH | 115,000 | ||
| Actual Cost of Fixed Overheads | 1,320,000 | ||
| Actual Rate of Fixed Overheads per hour, AR | 1,320,000/115,000 | 11.47826087 | |
| Requirement C: | |||
| Fixed Overhead Spending Variance, (AH*(SR-AR)) | 115,000*(13.5-11.47826087) | 232,500 | Favorable |
| Requirement D: | |||
| Fixed Overhead Volume Variance (SR*(SH-AH)) | 13.5*(100,000-115,000) | 202,500 | Unfavorable |
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