Ch.11 Exercises
Norwall Company’s Flexible budget manufacturing overhead (in condensed form) is given below :
The following information is available for the recent period:1. The dominator activity is 60,000 hours was chosen to compute the
predetermined overhead rate.2. At the 60,000 standard machine hours Level of Activity, the company
should produce 40,000 units of product.3. The company’s actual operating results were:
Number of units produced 42,000 Actual machine hours 64,000Actual Variable Overhead cost $185,000Actual Fixed Overhead cost $302,000
machine Hours Overhead cost Cost formula (per machine hours) 50,000 60,000 70,000
Variable Cost 150,000 180,000 210,000 Fixed Cost 300,000 300,000 300,000 Total Overhead cost
$3
450,000 480,000 510,000
Required:
Required:1. Compute the predetermined overhead rate and break it down into variable
and fixed cost elements.2. What are the standard hours allowed for the year’s actual output?3. Compute the variable overhead spending and efficiency variances and the
fixed overhead budget and volume variances.
Overhead from theflexible budget for the
denominator level of activityPOHR =
Denominator level of activity
480,000POHR =
60,000
Solution (1)
Overhead from theflexible budget for the
denominator level of activityPOHR =
Denominator level of activity
480,000Total rate =
60,000= 8 per MH
180,000Variable rate =
60,000= 3 per MH
300,000Fixed rate =
60,000= 5 per MH
Solution (2)
2.The standard hours per unit of product are:
60,000 hours ÷ 40,000 units = 1.5 hours per unit
64,000 hours 63,000 hours × × $3 per M hour $3 per M hour
Solution (3) 1- variable overhead spending and efficiency variances
Actual Flexible Budget Flexible Budget Variable for Variable for Variable Overhead Overhead at Overhead at Incurred Actual Hours Standard Hours
$185,600 $192,000 $189,000
Spending variance$6,400 Favorable
Efficiency variance$3,000 Unfavorable
$3,400 Favorable flexible budget total variance$3,400 Favorable flexible budget total variance
Actual Fixed Fixed Fixed Overhead Overhead Overhead Incurred Budget Applied
60,000 63,000 hours x × $5 per M hour $5 per M hour
Budget variance$2,400 unfavorable
$302,400 $300,000* $315,000
Volume variance$15,000 favorable
SH × FR
Solution (3) 2- Fixed overhead budget and volume variances
*As originally budgeted. This figure can be expressed as: 60,000 denominator hours × $5 per hour = $300,000.
Top Related