Question

Overhead information for Cran-Mar Company for October follows: $16,500 $4,900 Total factory overhead cost incurred Budgeted fixed factory overhead cost Total standard overhead rate per machine hour (MH) 4.99 Standard variable factory overhead rate per MH 3.90 Standard MHs allowed for the units manufactured 4, 700 Required: 1. What is the standard fixed factory overhead rate per machine hour (MH)? 2. What is the denominator activity level that was used to establish the fixed factory overhead application rate? 3. Two-way analysis (breakdown) of the total factory overhead cost variance: Using panel B in Exhibit 15.7 as a guide, calculate the following factory overhead cost variances for October and indicate whether each variance is favorable (F) or unfavorable (U). a. Total flexible-budget variance. b. Production volume variance. c. Total overhead cost variance. 4. Confirm your answer to 3b above by using the model at the bottom of Exhibit 15.6 to calculate the production volume variance and indicate whether the variance is favorable (F) or unfavorable (U). Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 What is the standard fixed factory overhead rate per machine hour (MH)? (Round your answer to 2 decimal places.) Standard fixed factory overhead rate per MH

Answer 1

Answer is given below

1 $4.99 Standard fixed overhead rate Total Standard OH rate per MH Standard variable OH rate Standard fixed overhead rate $3.90 $1.09 Denominator Activity level Budgeted fixed factory overhead Standard fixed overhead rate $4,900.00 $1.09 4,495.41 a) $18,330 Total Flexible Budget variance Standard Variable Overhead |(4,700 * $3.90) Budgeted Fixed overhead Total Overhead $4,900 $23,230 Actual Overheads Variance $16,500 $6,730 Favourable b) Production volume variance Overhead based on Flexible budget Standard cost applied (4,700 hours X $4.99) Variance $23,230 $23,453 $223 Favourable Total overhead cost variance Actual overheads incurred Standard cost applied to production $16,500 $23,453 Variance $6,953 Favourable Applying model at end of Exhibit 15.60 Production volume variance Standard MHS Standard rate Standard Fixed overhead applied Budgeted Overhead Variance 4,700 $4.99 $23,453 $23,230 $223.00 Favourable